Distinguishing between insider and outsider firms is the key to gaining control of insurtech options, according to Wesley Todd, creator of CaseGlide, a collaboration, workflow, and analytics platform for insurance litigation departments.
In the second in a series of podcasts on Insights on Insurtech, he explains why innovation in insurance is different than in other industries.
One difference is regulation.
“There’s 50 different states that all have their hand in the different rules surrounding insurance,” said Todd.
Another thing that sets insurance apart from other industries is the delay in return on investment (ROI).
“In the claims litigation departments, you don’t really know what the ROI is until all the lawsuits are closed,” said Todd. “There’s a major delay in ROI, that probably isn’t as common in other industries where you do something and then you get immediate feedback.”
The plaintiff’s bar also set the insurance sector apart from other industries, he added.
“The plaintiffs’ bar…whose goal everyday they wake up is to find insurance company mistakes, and to expose them and to turn them into profit centers for their law firm,” said Todd.
That’s why outsiders, those without industry experience, can be problematic when it comes to insurtech. Todd emphasized the importance in making sure people understand what insurers are in control within departments and the technology that runs them.
“There are a lot of problems that are created when an insurance company delegates the operation of the technology to a company that doesn’t have anybody that understands the insurance industry,” said Todd.
During his work with insurers, he saw software and technology firms so big that it was very hard for insurers to say no to them.
“Those companies came in as outsiders,” Todd said. “They don’t understand the process enough to enable it. They only know how to control the people or control the process.”
He added that outsider companies tend to have trouble innovating off an original idea.
“It’s very hard for them to talk about customizing,” said Todd. “Especially in the claims litigation department, nothing’s changed in years. And it’s because of this exact reason. It’s because they’re outsiders.”
Todd said that when insurers use outsider insurtech firms, the insurers end up doing a lot of the work.
“They don’t have the time and they don’t have the expertise. As the insurtech provider, if you’re an insider and you really understand how you’re going to succeed, you have to provide those professional services. You have to be there training. You have to be there suggesting improvements,” said Todd.
The former insurance defense attorney said insurers have gone out of business trying to implement new claims technology.
“Took them [one insurer] five years, cost them five times as much as they expected,” Todd said. “And by the end of it, because they hadn’t done anything else in other departments because they had to wait, they were underreserved, they were writing bad business, and they were three, four years behind their competitors.”
He added that choosing the right firm to partner with impacts speed, outcome and the overall success of the chosen technology.
Listen to the first podcast in the series: Shut Up Already, Insurtech!
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