Electronic Chat with Sylvester Mathis, Chief Insurance Officer, Insurity
Laura Mazzuca Toops | September 13, 2021
Sylvester Mathis is Chief Insurance Officer at Insurity, a leading cloud-based software and analytics provider for insurance carriers, brokers, and MGAs. He has more than 30 years of insurance experience in every stage of the insurance lifecycle. In his current role, Mathis is a strategic leader, enabling carriers and MGAs to use technology to capture new and emerging market opportunities. Insurity’s acceleration of cloud-native configurable products results from massive internal development and several acquisitions over the past 18 months. Insurity has also helped implement more than 50 customer go-lives over the last 12 months.
The limitations of insurer legacy (non-platform) systems are well known in the industry, yet many still use them. How has the phaseout of legacy systems proceeded over the past several years, and what is accelerating it?
First, let’s define legacy systems: these are internally built, home-grown core systems that insurers have been leveraging for many years. The phaseout of these systems is still moving much slower than the market dictates. It’s a complex transformation. Accelerating the process is a response to continued pressures: If a carrier doesn’t have an agile system, and that system won’t allow the carrier to make changes, they’re at a standstill as new market entrants use data to create new products. It’s putting incredible pressure on carriers, bringing on more partners to help them through this process.
Carriers realize they have three main choices: 1) change their entire business and modernize overnight, which doesn’t work; 2) attempt to continue controlling partners like MGAs, who have increasing power; or 3) acquire an Insurtech and partner with them. Another option? To work with a proven technology partner with deep industry experience and make the investment needed in a data-driven, analytical, digital platform. The key to that path is ensuring that this platform has the capabilities required and allows carriers to start using the software and hit the ground running.
There’s also an uncertainty in the human element, specifically underwriters, because they are concerned about being replaced by technology. Carriers must determine what to do about replacing talent because many underwriters are retiring, resulting in lost expertise.
Most carriers are embracing the idea of pushing more accountability to their distribution partners. Big brokers have been consolidating for years and have grown more potent because they have direct access to risk. Also, carriers are increasingly rewarding intermediaries that use technology to create value, often by augmenting their internal IT capabilities through third-party vendors. One advantage MGAs bring is identifying and grouping certain “affinity groups” of similar buyers. These buying groups have better-than-average risk profiles, allowing insurers to target such groups for favorable risk classification, underwriting, pricing, and service. The data brokers have been collecting will enable them to leverage analytics as they create new products. And because these brokers are efficient at product development, they are redefining what loss control and claims look like today.
McKinsey and others have predicted that the commercial property/casualty insurance market will grow to an estimated $600 billion by 2028. When you dig into this, it’s clear that growth won’t come from traditional insurers, but also insurtechs and different MGA models.
How has the increased focus on the customer experience changed expectations for core system functions?
The consumer behavior shifts we see today are likely to remain. Some have been in motion for years, and the COVID-19 pandemic has accelerated many. Insurers are figuring out ways to take core systems and make them smarter, improving the customer experience. These experiences must respond to customers’ frequently changing needs and enable them to achieve their desired outcomes.
One way to do that is through data consortiums. The more data you have, the easier it is to evolve and improve experiences through personalized products. Whoever can do that fastest will dictate market behavior.
We’ve become desensitized to the fact that customers can perform some aspects of the insurance business, including navigating an AI-guided underwriting and claims process. Consumers having access to an intelligent First Notice of Loss (FNOL) solution can manage their claims from report through coverage verification, damages assessed through auto-assignment or an AI-powered photo evaluation, and estimate through payment. The insurance industry is transforming into something else – and there is more pressure today than ever to evolve insurance as we know it.
Everything that we witnessed in personal lines 25 years ago that folks said would never happen on the commercial side is happening. Business insurance consumers have even more leverage than personal lines consumers ever had because, in large part, they have the data.
What tech tools are driving most modern core systems – e.g., AI, telematics, etc.?
Digitalization is driving a lot of the changes. But CIOs or CUOs say the most significant barrier to achieving this is home-grown software. If they can’t keep pace with competitors when it comes to their core system, the one tool that allows them to compete long term, someone else will beat them. They will get smaller, and their partners will become more powerful. In-house system modernization can happen as part of the bigger-picture strategy on shifting to what’s next. Trying to catch up with insurtechs will not suffice; insurers must aim at where the industry will be in the next ten years.
Carriers are deconstructing the insurance lifecycle that was once held together by the core systems. Soon, the only thing they will need is a platform that doesn’t necessarily dictate what the lifecycle looks like, but does the heavy lifting of getting it in and out the door. Policy issuance will move from the carrier to 100% of issuance happening on the distribution side. Platforms must be able to capture enough information to make sure the process is managed effectively.
Does the rapid evolution of technology mean insurers will have more difficulty keeping their core systems current?
Modernization is happening, but core platforms won’t be pulled and replaced. Instead, carriers will continue to replace parts and pieces of the process with services that can be done elsewhere. Core platforms represent 40% of what they used to support. Carriers use APIs to bring different pieces into an open platform from third-party players, who need to be part of the carrier ecosystem.
What emerging trends in core systems are you seeing?
AI and ML will be applied to every process, which is why new insurtechs are popping up every day and taking on many core roles. You can apply AI and ML to every aspect of underwriting and claims. Insurtechs use technology to interface directly with buyers and agents, predict claims more accurately, lower operating costs, improve customer satisfaction, and build trusted relationships with the ultimate risk-bearers—insurers, reinsurers, and investors. Carriers will either adapt their business models to interact with the growth or be replaced. When the Insurtech wave emerged ten years ago, insurtechs didn’t understand the complexities of claims and underwriting. Now they increasingly do, and where they don’t, they augment with strategic partnerships. The imperative is more in the reskilling of insurance professionals, not just the technology.
Will outside events accelerate change?
COVID opened our eyes to what we need to understand. Remote work and learning that boomed during the pandemic lowered the expectation that we need an in-person experience for anything. That retraining of human behavior has a ripple effect on an industry that traditionally depends on face-to-face interaction.
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The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
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