The majority of companies have the ambition of becoming world-renowned, however, breaking into a new market can be difficult for a variety of reasons – this is no different in the insurtech sector. But why does this happen and what can be done?
Brad Worth, Senior Vice President, Channels and Product Solutions at insurance core and digital platform provider EIS spoke to The Fintech Times to answer these questions:
Insurers who only sell products domestically already face significant challenges, whether that be regarding operational efficiencies, attempting to address changing customer demands, or leveraging data to attain competitive advantages. This is compounded for insurers operating across multiple countries due to the complexity of product distribution and regulation.
There are several key regional differences that insurers need to consider when expanding and introducing their product lines in other countries. The following four areas prove to be particularly challenging to multinational insurers.
- Linguistic barriers
The first and most obvious challenge that insurers face operating outside of their country is the language barrier. Changing the language changes the product in fundamental ways, such as how it is described, presented and documented. The products themselves must suit the new market, ensuring that carriers are able to communicate with consumers regardless of channel, in a manner that is culturally congruent with the region. Of course, terminology differs from one language to another, and simply translating text into another language may not be effective. The way you would describe a policy in one country might not convey the intended meaning in another, for instance.
2. Demographic differences
The second issue that insurers face is dependent on the target market’s demographic composition. Who is looking to buy the coverage, and through what channel are they buying policies? There are large variations in insurance culture from country to country. Some European countries, for instance, have a large gig economy or have embraced on-demand insurance, while others may follow a more traditional, heavily-regulated and very standard definition of what an insurance product is. Carriers may define a home insurance policy in one manner in the UK, but definitions may vary wildly in central and southern Europe.
3. Picking the right channel
The differences in sales and distribution of insurance products vary just as much. For example, the bulk of sales of certain insurance lines in some European countries take place through the bancassurance channel, whereas in the UK the bancassurance mode of distribution is nowhere near as popular. This issue also affects whether insurance products are sold, mostly online through aggregators, as in the UK, or through a mix of channels. The mix of channels — direct, broker, agent or third-party intermediary such as banks and retailers — and their role in the value chain affects how carriers must package, present and differentiate a product.
4. Regulatory irregularities
One of the biggest challenges for multinational insurers is tied to the regulatory and jurisdictional differences between nations. Environments will vary significantly. Governments have different modus operandi and definitions for insurance products, claims processing or ‘required’ versus ‘optional’ coverage. Insurance administration can also vary. Some countries require a 12-hour or six-hour acknowledgement of a claim event or first notice and payment within 36 hours, if not contested, for instance, while other countries might not have the same requirements.
Tech driven solutions
Whatever the geographical, cultural or regulatory differences an insurer faces, the right technology platform can help insurers navigate the changing landscape, to adapt as swiftly as possible.
The modular approach
Insurers operating across multiple countries can solve the challenges by moving away from ridgid, complex and often constraining processes associated with legacy systems, and adopting modular approaches. This allows carriers to not only more easily adapt their product definitions, sales strategies and meet local regulations, but also better meet customer needs for coverage across geographies and drive efficiencies.
However, many insurance platforms operate along business lines, with processes built to make internal, as opposed to external, operations efficient. Everything from the workflow to the screens to the data model to the rules were all built around the lines of business. If an insurer is using a system built around motor in the UK and wanted to offer the same in France, it would almost have to replicate all parts of its policy system to accommodate regional differences, because they weren’t created as services or delivered as different modules.
Furthermore, insurers’ systems are often closed platforms. This means that policies cannot be customised easily to suit regional differences and provide customer-centric, tailored solutions. When looking for tech solutions, multinational insurers need open platforms that are seamlessly adaptable to different geographies to be competitive.
Agility is key
Modern, cloud-based systems are key to achieving modularity. An API-first architecture — software design that enables applications to easily interface with one another — can help carriers roll out new offerings in weeks instead of months and reduce legacy system dependence. This way organisations can rapidly develop a new business process without needing to significantly rewrite their product and application, for instance.
A new generation of core platforms support this “one product for many countries” approach by enabling insurers to deconstruct a product — separating the definition of the product, such as the rules and workflow and different underwriting guidelines, from the core administration capabilities.
With a product-centric platform, upgrades are complex because insurers have likely customised parts of the system so even in a single-country model, upgrades can be cumbersome due to the complex environment, including upstream and downstream integrations. But by separating the carrier rules and products from the core system, carriers can use the continuous integration/continuous delivery model and do full regression testing for the whole platform and upgrade very quickly. Carriers have to make sure they have separated the business logic for the customer or the product from the core system capabilities. This reduces the potential risk and minimises the time to do upgrades.
Overall, the new generation cloud-based, API-first modular product platforms help multinationals reuse technology investments from one country to another in unprecedented ways. Having the right platform behind them will assist insurers in making the leap of faith into previous untapped markets.
EIS is an insurance software company, headquartered in San Francisco, that enables insurers to innovate and operate like a tech company. Founded in 2008, EIS provides a platform for high-velocity insurance. This open, flexible platform of core systems and digital solutions enables insurers to accelerate and scale innovation, launch products faster, deliver new revenue channels, and create new insurance experiences for customers. The platform also gives insurers the freedom to connect to a vast ecosystem of insurtech and emerging technologies.