Most insurance companies can’t afford to develop solutions in-house
Insurance companies are stretched thin. With interest rates in the gutter, it’s much more difficult – near impossible, in fact – to profit from selling insurance products. As a result, many carriers have been forced to make difficult cost-cutting decisions, such as narrowing their product portfolios and laying off employees. In the current economic environment, they’re contracting rather than expanding.
Running on lean teams, insurers must choose where to focus: present or future. Because they must maintain their inforce business, delivering solutions to current customers with their current products, there’s no room to think about how to pivot and remain competitive in the years to come. It’s not that they are being obstinate and refuse to change; they simply don’t have the resources to innovate.
I know this because I held a leadership position at a prominent carrier. Our budget was tight and growing tighter. We couldn’t risk allocating already-limited funds to experimentation. If the experiment went awry – as is the nature of trying new things – not only would we not have any innovation to show for ourselves but we’d be taking money away from necessary, day-to-day business operations.
Of course, some companies have the budget to accommodate such innovation. As you might guess, Apple, with its healthy profit margins, leads the pack in innovation, according to PricewaterhouseCoopers’ Global Innovation 1000 Study. It’s not the least bit surprising to find out that it spent $6 billion in research and development in 2015. Yet not a single financial services company appeared in this list of the 10 most innovative companies, nor in the top 20 of money spent on R&D. Again, not because they don’t care to improve but because they can’t afford to.
Innovation is especially expensive within financial services because companies face one enormous cost that other industries don’t. And that’s operating within the confines of decades-old infrastructure. When insurance companies merge or buy blocks of business from failing companies, it’s a systems nightmare. If this happens a few times, which it can over the course of 100 years, it can take years for them to integrate these myriad legacy systems. This is an expensive barrier to overcome before any customer-facing innovation can take place.
The profitability struggle combined with the logistical ordeal leaves the belly of the insurance industry open to attack. New and agile Insurtech companies are making tech advances that the older companies can’t match.
But there is a way for insurers to survive – and thrive even — without hemorrhaging money. By partnering with an Insurtech company, they can quickly deliver consumer-centric solutions at a much lower cost and with much less risk.
LegacyShield is the one of very few options on the market developed by industry insiders. Each of us has worked in different facets of the industry and understands its subtleties, so there’s no learning curve. We know how to engage stakeholders, adding value to the roles of distributor, advisor and manufacturer while simultaneously enhancing the customer experience. LegacyShield is the plug-in-and-go solution for your tech-savvy customer base.