In this episode of IT Leadership Insights, our host and guest talk about the struggles behind building software in the insurance industry.
Since technology is everywhere, people expect digitisation also in terms of insurance. Michał Grela and Jay Antonio, an Insuretech expert, discuss trends as well as problems with large systems and figure out why insurers are still reluctant to introduce innovative approaches. They also deliberate if software can be considered a tool to convince customers of the importance of insurance.
Jay Antonio: Founder and CEO of CJ Cube Technologies. Enterprise Architect with more than 20 years of experience in developing software solutions for the insurance industry. Skilled in Business Process Design, IT Strategy, Data Warehousing, Business Intelligence, DevOPs and Application Architecture. Strong engineering professional with a passion for finding the right solution and leading a team to implement it.
Michał Grela is Future Processing’s Relationship Manager, working within the marketing department to establish and nurture relationships with prospective customers and expand the company’s network of contacts. He strongly believes that business is about people and that, at the end of the day, it’s all about Human-to-Human rather than Business-to-Business.
The transcript of the episode
Michał Grela (MG): Hi my name is Michał Grela, and I’d like to welcome you to another episode of IT Leadership Insights by Future Processing. Today we’re gonna talk about the challenges of building software for the insurance industry. This industry, the sector is particularly heavily exposed to digital transformation. Technology’s everywhere already, and people, especially young people, do expect digitisation also in aspects such as, their insurance. Both in B2B and B2C reality of course. And in the meantime with trends such as AI, and blockchain and big data, they continue to disrupt technology industry after industry. At the same time, young insuretech companies are constantly trying to displace old enterprises and these global giant, and they’re keen on disrupting furthermore the landscape all together. I’ve ever heard a quote that insuretech is a threat that inspires, and I’m curious to find out what my guest Jay Antonio thinks about that. Hi Jay, it’s great to have you here today.
Jay Antonio (JA): Thanks for having me.
MG: Can you tell us something more about yourself before we start?
JA: 20 years in the insurance industry space. I worked for a global insurer as an enterprise architect. I was privileged enough to work in different parts of the globe. Started my career in Asia, did a lot of projects there, made my way to the UK, Ireland, where I look after UK EMEA projects with a bit of Australia and US. Privileged to be working in this industry.
MG: Wonderful, so the insurance industry and technologies is definitely your bread and butter and for sure harnessing benefits of technology, tapping into that benefit pool can really help replacing routines or taking business to the next level. So, from your experience and perspective, what are the trends when it comes to technology in the insurance industry.
JA: There’s a lot to do with improving distribution of insurance, improving customer engagement because ever since the only time we deal with there’s always a negative impact. When we’re dealing with insurance is mostly when we’re buying something we believe is not required. When we get into an accident, or something bad happens to our life, then that’s the only time we deal with insurance. So, there’s a lot of negative engagement, and I think there’s a lot of things done on that space on how can the industry improve their interaction with customers–
MG: It’s reception
JA: Yes, and the perception, making insurance relevant and nice, for consumers. And again, you alluded a while ago that there’s a lot of expectation from customers right now on how the industry should interact with them, and how they should consume the product. So, there’s a lot to do with that as well. It’s like frictionless insurance, meaning you’re insured without even you knowing about it. There’s a lot to do with that space, and then of course, you’ve got, the technologies like AI and machine learning. There’s trying to improve operations, trying to improve how underwriters look at risk and how they take on new insurance. There’s a lot to do with that space scenario.
MG: So tech wise, it sounds like there’s a lot going on, plenty of opportunity. Nevertheless looking at the state of art in the industry, I can sense that big insurers are still relatively reluctant when it comes to incorporating this, maybe not disruptive but innovative, approaches. They are not actively participating in ventures or incubators comparing to for example, the finance sector. Why is that so?
JA: I think it’s the whole nature of the industry. You’re in the business of taking risk, a lot of the leaders here are very risk averse. Not only in taking in policies and contracts, but also it manifests in software. Before a company adopts a very innovative and risky solution they want to see if this is proven. They tend to follow others. There is a level of hesitation. That’s one. Second is, we need to bear in mind that a lot of these organizations would have, a multitude of old systems. So, it’s difficult
to adopt this new cool solutions. How will that work with existing solution? Do I replace it? So there’s a bit of that as well. If you’re, I think coming from a young company, where you don’t have a lot of baggage, then, it’s kinda easy for you to be more agile, and adopt a lot of these new tech. I think there’s obviously a lot more reasons, but I think those are the main reasons why, it’s difficult to move into that.
MG: So, on one hand side, the big insurers are fearing of losing part of their business to disruptors, but on the other hand side, they just can’t allow themselves to be more flexible because of some restraints, and environmental questions when they are already functioning.
JA: I started my company last year so, I’m categorized, as a start up offering technical solutions to insurance industry. So, what I observed is that, there is starting to be more collaboration and partnership with the startups. I think the big companies are now starting to realize that the only way we can really innovate, and adjust is if we start looking at these small companies who are riskier and doing something different rather than going with the norm. Because if they go with the normal solutions that’s out there, then they’re no different to other insurance companies. Right? So, I think they’re starting to look at tech startups to say, okay, what value proposition are they doing? And is that something that I can collaborate with? I think there’s a bit of care that’s going on. I mean, a big company won’t, I think, directly work with a start up.
What they do is they put an accelerator program where there’s a bit of risking happening. The programs will vet the start ups first and then kinda risk the whole engagement. To be honest, that’s how I got my first, by the customer. It was through this incubator program. It’s really great for a startup because you get to explain and pitch your idea to a number of big companies who are already there to look at company such as yourself.
MG: Just say we’re dealing with situation because on one hand, they are not risking the core endeavor, and on the other hand side, they can allow themselves more formidable action.
JA: Exactly, they can have a sandbox, for example, try the solution there. And then, if that’s really good let me try to incorporate it into my core landscapes.
MG: Which is a very positive thing that the industry is getting there.
JA: Right, correct. The important thing is social recognition, right? And to be honest, I think where this is going to, it’s not insuretechs, taking over, it’s more of who can partner better with the big insurance companies, and offer something to the market. So, I think whoever can do that collaboration properly is the one who’s going to really thrive in the next coming days.
MG: And what are we to focus more on the software side of this market environment? What are the challenges? What’s the situation when it comes to building a software solution? What’s important for the industry of insurance?
JA: When it comes to software development industry, there’s really nothing specific to insurance. I mean, they could talk about regulations, and stuff like that, but just look at regulations as part of your requirements. Just build it and get on with it. I think the challenges would not be dealing with a new company but with a one with a lot of baggage. That’s where the challenge is. Right there. It’s a lot of baggage that you need to navigate your way through. And second thing is the mindset and mentality, they don’t have the same agility as startup, right? In the big company, you have to go through a lot of bureaucracy, and you have to go through a lot of process to get something done and even approved. I’ve been exposed into both worlds, and I’ve seen the difference.
MG: It’s hard to find balance.
JA: Exactly. So especially for a big company it is like “how do I operate like a startup”? It’s the main challenge. How do I ensure that what I’m building is maintainable and secure and everything while being as agile as possible. That’s a tricky thing to navigate your way through. But, back to your question, it’s the baggage that you have. That’s the most difficult part to navigate your way through, and the mindset, the mentality, the culture, right in that company. I think those are the two things. That’s something. That’s quite challenging when dealing with big companies.
MG: Okay, and only then you can talk about this level below of adapting to this all omnichannel distribution or maybe with the customer expectations that you’ve done.
MG: And then data security.
JA: Yeah, I mean figure out what you want to do with the systems that you have already, and what you want to bring in and how they would all interoperate properly. But, that’s all underpinned by your business vision. Where do you want to take your business? How do you want to be relevant to your customers? How do you want to be relevant to your partners? And where do you want to take your business? Your IT strategy should always match business strategy. Whether you’re going omnichannel, whether you want to improve your risk appetite, whether you want to explore new markets, that’s all there, right? You need to understand your business goals so that you can have the IT structure to support it. And I think the reverse as well. It’s like your business is understanding where IT is coming from, so that you can both navigate the waters properly.
MG: And when it comes to, well, further down the road of building this software, are there any specifics to consider meaning like best practices in the industry, meaning, architecture or infrastructure? Like standard to adopt?
JA: No, I don’t think there’s anything specific to insurance. You could again, talk about the fact that its highly regulated and everything. Requirements it’s understanding your business, understanding your constraints, and then building for that. I think, there are two top things that I saw, that make a successful project or program. One is, to make sure that your IT and business are going hand in hand. Proper partnership to deliver something, okay? I’ve seen projects, and I’ve been involved in projects, especially when I was young where I did not understand what I’m coding for. I understood the logic of that component, but, what’s the…
MG: Happens very often.
JA: There’s one story that I heard, and I’m gonna tell that. And I’m probably gonna screw this up.
MG: Go for it.
JA: So, Apollo 11 the one that went to the moon and everything. So, in this room in NASA, you have scientists, you have the astronauts, you had the engineers and everything all there.
MG: A lot of people.
JA: A lot of people. And then the general walks in, trying to oversaw what’s happening. And then he saw this man, a janitor, mopping the floor? And then he asked, “what are you doing here?” And then the man said, “I’m sending someone to the moon.” That’s a very inspiring story because everyone has that same vision. I’m cleaning the floor, I don’t care, I’m doing that code. I’m doing this but my vision is to get to that. We sometimes neglect that, right? Sometimes we neglect that we’re in. We’re so consumed on how to make this work, without understanding the bigger picture.
MG: Okay, so understanding the picture, and understanding why that’s the first thing.
JA: Right, that’s the first thing. Second thing is to stop building big systems. I mean, we are in this situation because we have a multitude of big systems, running in silo, and we’re trying to fix this by replacing it with another big system. It’s like definition of insanity, right? So, do the same thing, different results. Let’s start to break that cycle, and start building ecosystems versus systems. I mean, I’m always passionate about that ecosystems versus big systems, and data centricity versus application centricity. It’s like put data at the middle, that is your DNA. That is how you define your structure. That is how you define your solution, right? And build around that, so that you can easily recycle your systems, right? The reason why it’s difficult to recycle our systems is because, data is stuck there. If I get rid of this, guess what? You’re getting rid of your data as well.
JA: Which is your key asset. Ff you decouple data out of that, and make it as an independent solution, providing service to the other applications then guess what? You know what. “I don’t like your underwriting engine anymore”. “ I don’t like this rating engine anymore.” Get rid of it. Replace it with a new one. That’s easy because you don’t have data there. Just replace it and get a new one. Easier said than done but I think if you follow those principles you’ll have a better chance of succeeding. I think the third thing is surround yourself with smart people.
MG: I like that one.
JA: Surround yourself with capable people, right? Surround yourself with people who cares. If you have people in your team who does that, especially the leads in your team who does that, guess what? They will help rally the team for you. Towards that vision. You cannot do it on your own. You need people who can help you rally the team together, and if you have a group of smart individuals working together, then that’s your key to success, right? So again, it’s like nothing very specific. To insurance is just those key things that you need to get right first. And then the rest will follow.
MG: That’s an interesting approach. If you have first things first, if you have said the desired right, then you can think about implementing stuff like sustainability, scalability etc. But without the first level, the first layer, you can’t build the house on top of it.
JA: Exactly. The scalability, the security… I think it goes without saying that if you build something you need to ensure that it can accommodate the users. That you’re expecting that it’s not vulnerable to threats. These are all part of the understanding of the business, and understanding the requirements, and understanding what you’re building it for.
MG: Preparing this episode, I also found out that in the insurance industry particularly, there’s this thing with millennials and young people. They don’t perceive insurance as an important finance instrument. They just don’t see the value behind that. Whereas for our parents that would be a must have. And now it’s hard to convince them. And that’s a challenge the industry faces. And I’m wondering if software is one of the sort of ways out of this–
JA: Yeah, well, again, it’s back to business vision, is like how do you want yourself to be perceived by your customers. Software can support that. I think it’s the frictionless insurance we’re in. You’re buying a car without even knowing that it’s insured already, right? It’s like invisible insurance. I’ve got a car, I got into an accident and guess what, my car, the dealer that I got the car from, looks after everything. They look after this, without you being hassled right? And behind that it’s actually an insurance carrier making all of that happen, right? Without even you knowing about it.
I’m buying an expensive watch and if I lose it they’re gonna replace it. I’m a tech guy again. I’m just looking at the trends and looking at how. I’m a tech guy and a customer of insurance. Insurance is just looking after us, without even us knowing about it. Using technology to do that, of course.
MG: I’m just wondering if you have any interesting case studies or success stories, and maybe failure studies, that you would like to share with us when it comes to this bit we’re talking about.
JA: A lot of failures. Just using the top one. Well, success… I think your first project will always be, top of your heart, and it’s always close to you. So, I started my career in Southeast Asia. And my very first project was when I was really young. I looked after a policy admin of a and billing system in Hong Kong. It was with AIG. I went to Hong Kong and it’s a four month stint deploying the solution. It’s a client-server solution. I remember that one of my users was the toughest lady I’ve known in my life. It’s like she was really strict when it comes to her requirements. No bugs, no whatever.
So I was the one deployed. I was the lead programmer deployed. I looked after bugs and I mastered the software. It’s like, every time I saw an email, just looking at the subject, I already knew the bug. I already knew where to go to fix that. So anyway, the deployment went well with a lot of dramas. And then we did a bit of a party in the office. The toughly lady, complimented me and said, “Jay, you’re one of the smartest people I know.” And that really shocked me, and that really, stunned me.
MG: The success story.
JA: Yeah, because that was my start.
MG: For some reason I was afraid its gonna end up bad.
JA: Yeah, now I’m getting to the bad one.
MG: Alright. So, a quick bad story.
JA: So, this was just recently. I inherited a project. An old platform. Really old platform. We haven’t really looked at that. And now we’re upgrading it to a newer policy admin platform. Same software, but new version. What happened was that we inherited their project, and although the new platform was there, they could not bring the historical data from this version. It was a heavy data migration exercise. Whatever the previous team did, we kinda revisited that, and we did a lot of changes, because there’s a lot of issues on the old systems. Old data that we haven’t considered. So, that started October 2016 and it lasted until Feb. It was the worst Christmas I ever had: late nights, doing data migration, fixing bugs. Then I just realized that after all of that effort I just moved our data from one old person to a new person. And guess what? After many years, I’m gonna have to move that again.
MG: And that’s a nice Lesson learned.
JA: Application centricity versus data centricity. If you own your data, which you should, no application should dictate how to store your information.
MG: Not the other way around.
JA: Not the other way around. Then you can control the redundancy, you can control the structure that they need. You own your information, so you can recycle your applications quicker.
MG: Thank you, I really like that one. Quickly, wrapping this conversation up. Insurance industry is exposed to some level of disruption like any other industry. There are trends that are definitely positive, and the industry is getting there. And the trend of collaboration is very beneficial to basically older players in the market. Technology can definitely boost that up. When done right and when you have this insuretech mindset adopted, am I right?
JA: Yes, insuretech mindset adopted. I think we also need to focus on the problem rather than the solution, or what you want to get to. Sometimes, we’re throwing in like AI blockchains, just for the sake of it. The buzzwords rather than “okay, here’s the problem and here’s what I want to achieve. Let me look for a cool solution.”
MG: A whole idea. Thank you.
JA: Thank you so much, thanks.
MG: And thank you, our viewers for watching this episode of IT Leadership Insights by Future Processing. If you found it useful, please don’t hesitate to share it, and please drop us a line, if you have an idea for another interesting topic. Thank you.