Do Large Insurance Companies Really Have a Technology Advantage? Agile, Adaptable Smaller Firms Cast Doubt

The End of Underwriting Tradeoffs

To many, the answer is an obvious yes. Larger companies have the financial resources to invest in bespoke solutions and technology build-outs, as well as the in-house talent to operate these systems. They can develop proprietary systems for policy management or natural language processing to help them ingest submissions or handle claims. But there is a major downside to this bespoke approach: slow time to value. Between unwinding legacy systems and processes, configuring the new systems and onboarding staff, it can take years before there is true adoption and change felt within the organization.

Small insurance companies can also derive major business benefits from technology, but they have a different starting point. They are lean, working with smaller teams, fewer financial resources and little to no technology support. But those are not negatives. With fewer systems and processes in place, small companies start with a relatively blank technology slate. And leaner teams mean faster decisioning, training and, ideally, time to value with technology. The key is getting started.

This requires a shift in mindset: small organizations need to realize that attainable technology exists in the market today. There are many available technology options that can fit insurance companies of all sizes and don’t require a large build-out. To truly maximize the value of these systems, small firms must evaluate how any potential technology investment would impact their employees – and where to best invest resources to improve their return.

Once a system is selected, smaller companies tend to be able to move faster. They can rapidly make and action decisions, giving them a time-to-market advantage. They can also change course more easily, making them more flexible to market changes. In contrast, larger companies tend to require additional time and processes to decide on specific business goals, identify how to achieve them and map out the best route for a multitude of stakeholders – and that’s before the technology vetting starts. It’s not that this is a faulty process – a lot of good comes from these conversations – but they take time. So, when it comes to agility, smaller companies take the win.

Merely having the latest and greatest technology doesn’t mean it will be impactful. The value that firms get from any system is defined in part by the market forces and pain points they face. In a dynamic industry landscape, one of the most important factors is an organization’s ability to change, or how well and easily it can get all employees to adopt new ways of doing things. Change management is no small feat in any organization, but smaller companies tend to have flatter organizational structures and fewer people, making it easier to adapt. This ability to embrace change is directly related to adopting technology. Technology that goes unused delivers zero value. Advantage goes to smaller companies here as well.

Then there is technology strategy, which for many organizations is still defined by the age-old question: buy or build? Large insurance companies tend to have considerable IT resources and thus greater bandwidth to take on more and bigger projects, such as proprietary builds. The problem is that building isn’t always the best option. Even after new technology systems are built out, they saddle companies with significant recurring costs to manage, maintain and enhance the product. These quickly become legacy systems that hamper agility and prohibit development in other emerging areas, especially over time.

In contrast, companies that buy a technology solution, specifically a cloud-based SaaS (Software as a Service), not only get the solution itself, but also ongoing product management, servicing and infrastructure at scale. Furthermore, these solutions have many more eyes on it because other companies are using them too – enhancement requests and ideas from individual clients benefit the entire client base. Unlike agility and change management, technology strategy is not tied to company size, making it a draw between small organizations and large ones. There are plenty of larger insurers who choose to buy or bolt-on wherever possible.

In the end, it’s hard to say if larger or smaller companies really have an absolute leg up when it comes to technology, but regardless, there is a compelling argument for small companies to get into the tech game. The success of any system comes down to how well the company uses it and integrates it into its target operating models.