The Struggle with Carrier IT

People will point to complexity and regulation, but as a technologist who understands every level of insurance now, I can tell you that there are no unique problems here.

There’s an interesting ritual that I go through when we bring a new engineer onto our team and they are brought in to work in a carrier-facing role. They could be working in claims, quoting, or really any other carrier-facing job we do.

The first time they’re on a call with a carrier’s IT group, they get off of the call and they always ask the same question: “Is this normal?” That’s because there’s a certain level of callousness you need to develop to not constantly be dumbfounded when working in insurance technology.

I remember asking the same question for the first time, back when I saw the first $100 million throwaway carrier project with absolutely nothing to show for it. In any other industry, in any other company, this would have been a fireable offense. For multiple people, probably. But here, it was accepted and glossed over. My mind was blown, and I had no idea that this is not uncommon in the insurance industry. The waste, the sluggishness, and the apathy are very common.

Why does carrier IT move so slow? Because there is an entire industry built around keeping it that way. Slow, and expensive. Multi-year, hundred-million dollar projects. Many people who just want to do their job or not rock the boat. Carriers sitting fat and happy because they have 90%+ retention. And lots of people who think they’re doing the safe thing, instead of what is in actuality the riskiest thing you can possibly imagine for the well-being of their organization.

The system looks pretty similar at many carriers. There’s a bureaucracy in place that’s accepted and promoted. Most (but not all!) carrier IT groups are run by a CIO who hires an analyst to tell them what to buy, and then hires armies of consultants to go implement the thing they bought. On average, 50% of the cost of a carrier IT project goes to the vendor, and 50% goes to system integrators and an army of programmers to customize the system. This is routine, and this is not questioned because it is routine. And many carriers still operate on 40-year old mainframes because they’re stuck in this cycle. Meanwhile, agents, policyholders, and reinsurers suffer. Agents are forced to deal with brittle workflows and unintuitive technology that’s unable to adapt to the needs of agencies who are just trying to scale their business. Policyholders are forced to deal with antique customer experiences that neither they nor the agencies are pleased with at all, which creates an opening for digital insurtech agencies to poach their customers. And reinsurers are running in place trying to get innovative new products to market for everyone’s benefit, but blocked by multi-year projects trying to get the products into the carriers’ policy systems.

Entrenched interests benefit from this system at the expense of everyone else. There are no valid technical reasons why it must be this way. People will point to complexity and regulation, but as a technologist who understands every level of insurance now, I can tell you that there are no unique problems here. They have all been solved before many times over. The only unique thing in insurance is the inability to grasp new technological concepts and take advantage of new tools. Many powerful new technologies and architectural patterns have emerged that could easily solve many of the problems faced by carriers, but there is so little curiosity in the industry that it goes untapped. Better safe than sorry, is the general attitude.

Under the guise of complexity, carrier IT is holding the entire industry back.

Thankfully, technology is slowly invading this space. The startups who are approaching these problems with a fresh set of eyes are quickly doing things that seemed impossible only a couple of years ago. This is shaking carriers to their core, and lighting a fire under the technology organizations. And there are companies that are pushing new generations of agile systems that are composable, based on microservices, and agile. Able to compete and meet changing customer expectations.

As agents, don’t accept this level of performance from carriers. They are responsible for providing products that you need to sell, and providing them in a way that enables you to sell them as efficiently as possible. Fight for your ability to effectively service your customers, and don’t take no for an answer. You shouldn’t accept the idea that the status quo is all you should expect — your customers certainly won’t.