The changing frontier of insurance with Dan Watt

If there is an industry in need of transformation, it’s insurance. Current legacy systems, disparate technology, and antiquated processes cause insurance carriers to lose out on millions of dollars each year — this is pure profit leakage.

Even worse, the market is under attack from nonstandard startups, which has increased customer expectations. It forces these long-standing giants to rethink their business.

Dan Watt: Digital transformation in the insurance industry

On this episode of the Transform It Forward podcast, we welcomed Dan Watt, VP of Product Management at FINEOS. A leading provider of core systems for global life, accident, and health insurance. His perspectives on the changes hitting the industry are incredible.

At Transform It Forward, we are naturally huge nerds when it comes to the transformation of many industries. But insurance is interesting. As an industry, insurance is 100% data-based and is ripe for digital disruption. We asked Dan to describe the pockets within the industry where traditional insurance companies may look to transform.

“I think it’s a combination of looking for it as well as having the market kind of force it on you.”

Dan points to several areas of disruption, including life and accident insurance. Absence management has also transformed, as states and cities are requiring companies to offer various types of pay leaves and disability insurance.

Another area of disruption is the increase in employee-funded products. While these changes are impacting every major player in the market, Dan feels we should see them as opportunities.

Meeting the consumer where they are

Most of these transformations seem to be driven by the covered population and their desires to live or act differently, plus new third-party developments in compliance or reporting. Dan says, “both factors have impacted driving change, but the industry as a whole has been slow to catch on.”

“I think it’s kind of that tipping point. We really need to meet the consumer where they are because they’re paying attention now much more.”

Meanwhile, nonstandard competitors, like Ladder and Bestow, are offering more tailored products that might potentially change the way an employee looks at life insurance. At FINEOS, Dan and his team offer core solutions that help these types of carriers access their data and bring these new products to market quickly and effectively.

He says that “for transformation to be profitable, insurance carriers need to look at their core solutions to drive a better consumer experience, a better product, and a better digital experience.”

This is forcing older companies to create new business models. Innovative products are now becoming a partnership with IT, which makes them far less siloed.

Companies are adopting a culture where business users are embedded with technology teams and thinking about how they do everything in spreads. This trickles out to the external and allows companies to better support their consumer.

Question to ask: How is legacy impacting your business?

FINEOS’s value proposition is somewhat similar to Axway’s: How do you build brilliant digital experiences largely based on some of the heritage infrastructures you already have? To begin, in those conversations with businesses, Dan stated, “it’s important for them to understand how legacy platforms are impacting their business at large.”

The first point of impact is premium leakage, which is when top-line revenue is lost because of inefficiencies, older legacy systems, and error-prone scenarios and processes.

“How do all these small leaks across the organization end up turning into a significant amount of dollars and loss that affect your overall ability to drive business?”

Secondly, companies need to be thinking about how these homegrown legacy platforms impact the consumer experience. As Dan says, “the claimants that carriers represent are not having enjoyable experiences. Life insurance, disability, and critical illness are all incredibly difficult for the consumer. As a carrier, your job is to make the insurance process as simple as possible.”

“You’re not going to change what happened. But you should make it so easy, that dealing with the insurance company is the last thing that they’re worried about.”

So, how much is the renewal process changing towards experience as opposed to just the raw economics of it? Dan stated, “there’s a point where price stops being the primary issue, and the decision to renew comes down to services.”

Customers will ask, what are you doing to administer our business for us? What services are you offering to make the insurance process quicker and easier? Prices can be matched, but customer experience is how you truly differentiate.

Keep this in mind — your data needs to be in the right spot

Apart from premium leakage and consumer experience, carriers are also becoming better digital versions of themselves by having their data in the right spot. As Dan says, “everyone has APIs, but does everyone manage their data in a way to make those APIs worth anything? This has become a cornerstone for how Dan and his team talk about big transformational projects.”

At the same time, we’re moving into what is often called API 2.0. To meet the demand for experience and accessibility, companies let their developers go to town on API strategies.

Now, in this second generation, companies are left with not one API strategy, but 11. Suddenly, the digital transformation is stalled because it’s too complicated. Dan has noticed this happening in their customer base.

“We see it as an integration strategy. You’ve got all these various ways to pass data. How would you think about that from an API strategy — a true API strategy — where you’re actually creating a method or a level of accelerators and connectors that are purpose-built?”

The future of insurance

So, where does the industry go from here? Dan stated, “it’s all about taking bold action. Carriers need to make smart investments today instead of waiting on the periphery of transformation.”

“It’s about modernizing and bringing true data-driven platforms into your ecosystem to drive your operations. It actually can be quite easily adopted if you have a transformational culture at the executive level all the way down.”

Although it’s difficult to transform a culture that has been set in its way for decades, Dan says “the pressure from disrupters is inspiring change. These new digital players are proving that innovation can happen, which is motivating the traditional players to take action.”

As always, we asked our guest what genre of music he enjoys after a long day on the job. “If I had to choose one, my favorite artist is Bob Dylan.”

Five key takeaways

After our conversation with Dan, five things stood out:

1. Although the insurance industry may be considered a slow-moving, traditional industry, it’s reached a point where change is necessary. Today, insurance isn’t just about the ability of providers to be compliant. It’s about creating consumer-centric products that meet purchasers where they are.
2. Insurance is moving rapidly to a much more agile model. Access to data has allowed the industry to transform completely how they operate, with companies now moving towards real agile processes. Business and IT working hand-in-hand leads to improved customer experience and new revenue streams.
3. Speaking of customer experience, it has never been more important. Insurers are recognizing that their digital experience is now as important as their rates to customers.

5. Without having data in the right spot, you can’t do digital user data in a way that makes customers’ and employees’ lives easier. Whether that’s iterating on new products or connecting siloed systems. But as Dan cautions, “make sure you’re clear on the benefits, especially as you tie new technology and legacy systems together.”
6. Make investments part of your core solution. You can’t just put a digital wrapper on it. As Dan mentioned, “when transforming your organization, be ready to take bold action to modernize your processes from the inside out. Don’t be afraid to invest upfront and do it right.”