5 Reasons Smart Insurers Adopt Modern Infrastructure in Recessive Market Conditions

This post is part of a series sponsored by AgentSync.

5 Reasons Smart Insurers Adopt Modern Infrastructure in Recessive Market Conditions

Stock markets are struggling. Venture capital financing is much drier than it has been in the past few years. Even as the midterm elections waver in the rearview mirror, caution will be the parable for insurers next year.

This wasn’t the flowing, adventurous atmosphere of the past, where “turbulence” was everyone’s favorite buzzword. Now, insurance technology companies are adapting to focus on legacy insurers, putting these insurers in a prime position to drive technology forward and meet their needs, changing insurers from instigators and liabilities to peers and confidants.

As this year’s InsureTech Connect conference in Las Vegas showed, more insurers are recognizing their need for modern insurance infrastructure, even as diehard insurers start copying the old insurance memos on how to grow and scale responsibly. Let’s examine current conditions that drive home the point that insurance companies and insurers should encourage blossoming romances in the spring and winter.

1. Market conditions will continue to drive the successes of insurance technology

Venture capital is down but not out

Venture capital funding may be down from the pandemic-era high, but it’s almost never completely dry up. This is not the Ogallala aquifer. An interesting post from the Ernst & Young blog, pulled from Crunchbase VC data, shows that the so-called slump in venture capital funding that we’ve seen in the last quarter or so is likely just a return to pre-pandemic levels. From this point of view, it is useful to view 2020 and 2021 as an exception, an anomaly rather than a trend.

So, while investors may not spend endlessly, insurance technology startups with a solid business plan are more likely than ever to find a path to success.

Mobile and remote options don’t go away

Funding aside, the pandemic pressures that led to a (maybe brief) bump in venture capital-backed startups are still real. White-collar workplaces look as if they will remain distributed, with a mix of personal, hybrid, flexible, and remote jobs. Workers and consumers alike are likely to order mobile options first (albeit not mobile-only).

A technology ecosystem that can take advantage of insurance consumer trends and help humans do their jobs better and faster will win market share.

Large producers are demanding tighter margins for insurance and management operations

The wave of retirements has also led to mergers and acquisitions of small agencies, and will likely lead to the emergence of “big producers” as the core of the industry, at least for a while before talent acquisition efforts catch up. This translates to producers having far less time to devote to any aspect of the business that isn’t strictly production-centric, and they leverage the value of tighter business enabled by technology that reduces distracting or unnecessary tasks. A technology ecosystem created to solve these tedious but critical value propositions, removing time-consuming administrative tasks, will be built to succeed.

challenges [shakes hand emoji] opportunities

The tough market itself is one of those opportunities within a challenge that is likely to serve as a springboard for smart (and fortunate) companies even as many others struggle or falter. As a 2016 blog post explains, the recent official recession was a catalyst for tech-enabled companies that have fueled the gig economy, and there’s good reason to believe the current market will do the same (although not necessarily based on the gig economy).

2. The projected increases in M&A activity underscore the importance of ease-of-business values

When a glut of startups meets a tighter market, it’s almost a norm that mergers and acquisitions heat up. If you are directly involved in the business consolidation, you will want to ensure that you can make the most of the opportunity. You don’t want to just cut high-value workers (and risk rehiring them at a higher cost later), and you don’t want to duplicate technology and tools across multiple parts of the business. Alternatively, legacy carriers that take advantage of better technology can help realize the M&A value proposition without sacrificing the characteristics that made the merger or acquisition attractive to begin with.

Even if the old insurer doesn’t have the inclination to snap up smaller businesses, investing in SaaS solutions that make it easier to operate is still crucial as downstream distributors are likely to face mergers and acquisitions. Tools that use smart data to automatically capture and update existing records go a long way to stopping “but this business used to have a name” and “oh, now they’re doing business” conversations.

Staying competitive in a world of high mergers and acquisitions means making it easier to keep working together, reducing employee turnover even when retirements or market consolidation require change.

3. Narrow margins necessitate more efficient technology groups

During tough markets, many insurance companies lose headcount by attrition over time. But in the current environment, talent acquisition has not kept pace with replacing overworked and overworked employees. If you work with a very small margin of people, you can’t necessarily post an ad and expect an experienced administrator to be greeted through the door.

Instead, insurance technology can reduce the burden on your human teams. In fact, many insurers might be surprised at how much they can benefit from consolidating their existing tech groups, giving them more flexibility and margin without even touching headcount. Even high-tech insurers may not be aware of the opportunities they are missing out on by not ensuring the integrity of data collection efforts across their isolated divisions.

When the markets cut your margins, you have to build your own buffers and expand your margins. Making better use of your existing technology through intelligent automation and efficient integration is one obvious way to do this.

4. Tough markets mean speed wins

As generations of technology become more experienced, speed equals confidence. Consumers think so. Producers and conditioners think so.

So how can insurance companies adapt?

Automation technology isn’t just about having a group of engineers at your disposal and calling – see above for the industry-wide problem of headcount retention. Instead, modern insurance infrastructure is increasingly being built on low-code, no-code platforms, which means that new functionality that used to take months to develop can now take weeks or days.

If you’re an insurance company that has been building custom in-house software for decades, it may be time to take stock of what the current in-house technology ecosystem can offer. Instead of clinging to the sunk cost fallacy, imagine if you or your competitors were more likely to capture market share in rolling out a new automated function.

5. Shared Learning – Someone will benefit from your pain solution and it could be you too

The nerve-wracking reality of building a modern insurance infrastructure to solve new (and old) challenges is that there is trial and error involved. You can’t continue to do things the way they always used to – paper and pen are left behind in an era when digital record-keeping is not only fun, but now organizational.

However, many solutions in the industry have not kept up with regulatory changes or consumer demands. This is the real proposition for insurers: offering new solutions to real, long-term industry problems. And this is where the involvement of insurance companies becomes essential. Without taking the time to help insurance technology companies understand and work through the needs of legacy insurers, the insurance industry as a whole will continue to carve its way into the 21st century.

There is no doubt that carriers that are involved in the process of sharing learning and resolving vulnerabilities along with emerging technology companies will benefit from their efforts; Early adopters get product functionality. Rather than allowing the word “legacy” to be a symbol of “old” or “old”, carriers that embrace advanced technological innovations will symbolize “legacy” as a nod to companies with a strong past and an even brighter future.

If you’re ready to set the industry pace for compliance and ease-of-work values, see how AgentSync can help you.


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