The curse of 'legacy' is often blamed for lack of innovation in established insurance companies, but is that really the problem?
Instanda was founded seven years ago and has proved it can successfully build new systems for insurers and work alongside, and with, legacy and still deploy its solutions quickly and relatively cheaply.
With 40 companies drawn mostly from P & C, Instanda is now branching out into Life & Health. Trevor Davis joined Instanda last year from Swiss Re and in this episode he talks to Matthew Grant about the company successes, how it builds its products, the new opportunities arising in the Life & Health space and what the future for system integrators may look like.
This autumn our podcasts are being supported by Insurance Insider and they are offering a free issue to all of our listeners. Download it from http://campaigns.insuranceinsider.com/instechlondon/
Transcript for this podcast
00:19 Matthew Grant: Welcome to the InsTech London podcast. I am Matthew Grant. And in this episode, I am talking to Trevor Davis who is managing director Life and Health at Instanda. Instanda provides a SaaS, that's Software as a Service platform for brokers, MGAs, and insurers. It was only founded in 2015, but already has 40 clients. Now, speed-to-market is a common theme across many of the new entrants into this market space for platforms. And when I talked to Trevor, he describes what has made Instanda successful, including how they work with legacy systems and what the company is doing to give their clients more certainty about the costs and the time frame when deploying their solutions. We're delighted to bring you this podcast with the support of Insurance Insider. Take a look at the episode notes for a link to the free issue of their latest addition.
01:19 MG: Trevor, delighted to be having a chance to talk to you here, in your WeWork office. I did hear a rule actually that you're not allowed to build a building higher than the Tower of London. You've got a wonderful office here with a view over the Tower of London. I'm sure you could rain a few arrows down on them if you wanted to, but certainly, a great place to work. So, first of all, just very interested on your own career, we'll talk a bit about what you're doing at Instanda in a minute, but you've had a long history in insurance working for some large organizations. And now, you're working with a company, it's no longer a start-up but certainly, a much newer than many organizations you've worked with before. So what brought you over from the dark side into the world of innovation?
02:00 TD: First of all Matthew, welcome to our office. And as you've quite rightly said, we overlook the old, but if you, I hope, also look, we overlook the new. And in a lot of ways that's exactly the key reason why I've moved to where I am today. If you look back to your career, the last 20 years of insurance that I've been in life and pensions, it's been about big systems, a lot of products to be produced, but it's also given rise to a lot of challenges with legacy, the regulators forcing change, and candidly and inability to get products to people who really need it. So about three years ago, I met Tim and I was trying to bring Instanda into Swiss Re, my old organization. And it just got me thinking of, "Why there's a lot of different ways that you can actually do things." And so I got very interested in InsureTech as a way of not just bringing things to market, but actually reducing costs, managing risk and leveraging legacy.
03:03 MG: Well obviously, Instanda is doing something right been around since 2012 and you've got now over 40 companies. Say, you touch on a few of the challenges there, but could you just talk a bit more specifically about what it is that makes Instanda successful?
03:16 TD: Traditionally, we've looked at Instanda as a way of helping innovation. And in simple terms, enabling carriers, insurers, distributors to bring products to market, distribute them, and do it very fast and low cost. But as we engage more and more with larger companies, distributors, and new organizations, actually, it's more about getting an appropriate product to provide services to employees, to customers and to corporates. So, what we're trying to do is to expand on our traditional base of distribute, underwrite, and do it fast and quickly to actually providing a full end-to-end service for organizations to service their customers better.
04:03 MG: There'll be a number of people, there are a number of people out there who are offering arguably, similar solutions but to have had so many clients, real clients in such a short time. What is it you'd say that distinguishes Instanda from other people that are trying to do this?
04:17 TD: There's still a lot of organizations who really at the heart of it are software, modular, technology IT-build platforms that have put something on the top to try and enable a fast UX or a fast channel. That's not what Instanda is. Instanda is a true platform that enables business people to do what they need to do without the IT function having really to be involved. That, if you think about some of the challenges that the boards of large organizations, and the IT directors in particular, they've just got so many things to do and have lived with three, four-year programs 100, 200, 300 million that they're very skeptical about being able to do something without IT. And that change control process, requirement process, the waterfall process that we've all lived with and Instanda doesn't work that way. It is a platform that enables the business to create the solutions for the markets that is needed and to do it in a test way, a full delivery way, from my perspective now, more importantly, to be able to integrate with third-party solutions, data analytics and crucially, to be able to link and leverage legacy.
05:37 MG: Well, I'll come back to that in a minute 'cause that's definitely a theme I've seen more of and need to. But, talking a bit about the Life and Health. And Life and Health and P&C are two very different animals. Occasionally, they meet up somewhere. But can you talk a little bit about what you specifically see the opportunities in the life and health market, either the same as P&C or are there some distinct differences that you think Instanda can make an impact with?
06:02 TD: From our perspective, 80 90% of the core functionality that we offer is common across P&C and Life and Health. But the reason I joined Tim is Life and Health has struggled with how do you deal with the changing markets and what they need, and how do you address things like a younger population? How do you actually provide services for the gig economy, where people are not full-time employees, but are contractors? So I think that the Life and Health sector is going through a change of really who the customer is and what they need, and struggling with the legacy product base and a legacy infrastructure to being able to provide that. And if you bring that all together and couple it with a cost base and a claims ratio, it makes it very difficult to provide products in an affordable way.
06:57 MG: And we talk about Life and Health, but is there a balance... You know, bias towards one versus the other?
07:02 TD: We've got a retail proposition that is a combination of life protection and health. I've got a corporate proposition that is looking very much now at SMEs, large businesses and startups, that is now enabling a carrier to provide products, yes, to the corporate, but more importantly, to the employee and the contractor. So, if I can give you an example, if you take something like Deliveroo, where they've got a guy on a bike, he may want life cover, but actually what he's really worried about is if he gets knocked off on his bike and he can't pay his rent or he loses his watch and his mobile phone 'cause somebody steals it when he gets knocked off. So traditional corporates through a group policy don't provide that. So it is merging solutions for the corporation that, in your language, would be health, P&C, GI, and life two corporates for themselves and for their employees and contractors.
08:03 MG: A lot of the early funded companies were actually more life and health space, and I was talking to somebody the other day who, he said that you get to a certain stage in life, so he was just about to retire, and he was expecting to have something like $1,400 a month in medical insurance. And so you can start to see why it would make such sense in the US. But clearly there must also be drivers in the UK in terms of, as you said, some of the changing in the buying behaviors. But also, is there a clear cost saving for people when they are using some of these new applications in saving of medical insurance costs or are there other costs they might incur?
08:40 TD: The health sector is completely rife for new technology because if you look at the way traditional health companies provide it, it is phone, it's not very easy to use digitally, it's not easy to service. And if you come at it from an individual's perspective, they don't really understand the premium and what cover they're getting. So, the healthcare companies that we're working with in the UK are very much around, let's start with the basics of making what we do today much easier and simple using a platform like Instanda. As the next stage, it then becomes how do you actually enable people to buy the products that they want? So, for example, let's say I'm 65. I might not want to pay the £5,000 a year fee, but I might want something that covers knees, heart, hips and various specifics around that. Once you've got Instanda in place, being able to target those products in a different way and because it's actually cheaper to buy, it makes it easier for the company to provide it. And finally, actually, it makes it easier for people to make a claim and just a simple thing of, "Yes, your first £1,000 is made available for you right now without having to do anything," because that's the way the policy is written. If you overlay that with what happens today, none of those things are in place.
10:04 MG: Just thinking through the whole value chain of the insurance experience from when the original customer buys, or I guess, researches, and then buys their policy through to buying, through to claims, how does Instanda map into that value chain for insurers?
10:21 TD: Instanda is right from the beginning of how do you want to provide it? Is it via your phone, your watch? Which channel do you want? Is it direct? Is it B2B? Is it B2C? So, we're agnostic of tool. We support all channels and then we do all of that front-end question set rating documentation. That's our traditional space. Where we've worked really hard over the last 18 months is the post-sale support. A lot of people would call that administration, some people in that P&C would call it an MTA, but actually managing the policy for the customer by the broker by the carrier is exactly where we're now focused.
11:04 MG: So, MTA is?
11:06 TD: A mid-term adjustment. In our language, it would be change cover, change address, add extra beneficiaries on, that kind of thing.
11:14 MG: The monster of legacy. How do you tackle that and integrate it into existing systems?
11:21 TD: We have an open API framework. We're increasingly choosing to make ourselves pre-integrated using this framework into accounting systems, CRM-type systems. But I think more importantly going forward, the use of IoT, the use of data analytics and data pools, that's just got to be the framework for going forward. I think specifically for legacy, that's a slightly different one because a lot of these legacies are in the 70s, 80s, 90s. So we work with a range of integration companies, for example, MuleSoft, others are available, to actually do that integration into them or we can use our API framework directly.
12:10 MG: So the other side of that equation is, it is possible. So, this challenge of trying to get around legacy... So it sounds like what you're saying, there are ways, it may require a little bit of work, a lot of work, maybe bespoke to each client you're working with. But that is not of itself necessarily an entire barrier to integrate.
12:27 TD: No. And if I give you an example. We did a big project with a large carrier in the US and they wanted to launch two products across all 50 states. The work that we needed to do to get the product ready, the distribution, the documents, all of the portals etcetera, by and large was done in about 10 weeks. But we needed to use the integration to integrate into their invoicing, their finance system, and their CRM system. We had to work with a third-party partner and their IT guys. So in terms of making that work, the key thing was actually getting through firewalls as the big challenge, but we were completed on that by week 20. So it is absolutely possible. And if I compare that with some of the things that I've done in my old world, I wouldn't have actually done the requirements document by then.
13:20 MG: You applied your product to a whole range of different types of companies, from retail to brokers to corporates. How does that experience change and how does the technology differ when you're working for those different clients?
13:31 TD: The core of what we offer doesn't change, when we're dealing with the broker network, we again have launched our IMGA product, which is an MGA of a box ready to go because it cuts the cycle-time down and it gives MGAs a way of going, "Yes, use something that is ready to go" then use the Lego bricks in the analogy to build products that are appropriate for yourselves. We've signed a rather large UK carrier in the middle of the summer and we're nearly finishing the first phase. But, it's a group proposition with products from three parts of their organization and two carriers, bundled, to offer to the SME market that has come from a product that we've built, that is ready to go rather than configuring everything from start.
14:20 TD: And is that... That's a very typical way you'd work, so you've got your clients looking at new propositions, new offerings as opposed to their trying to replace some of the existing technology and solutions in there?
14:34 TD: Oh, that is a fantastic question. So again, two years ago, we would have said, it is about what you've just described. It's enabling organizations to create propositions. Our second stage was to link it and leverage it into third parties and to legacy where we're seeing a lot of organizations now go and I've got a big discussion in Japan. We're working with a client and a big discussion in Chile and that phasing in 2020, will be about replacing their existing business. The only caveat that I'd put on to that is that works extremely well where you've got products that renew every 12 months. We are yet to completely look at something where you've got a migration in a traditional way to go forward. But, it is definitely moving away from just the innovation launch create stuff to, how do you actually make it sit at the center of businesses and over the next 18 months to migrate traditional legacy products on to our platform?"
15:38 MG: And presumably part of that is you've now got the trust having been established for seven years and a large number of companies that people are willing to embark on a project that is replacing legacy as opposed to just testing you out for something along the sides.
15:51 TD: Yeah. I think from my personal perspective, there's two aspects of that is, "Yes we've got the trust and yes we've got the case studies." The second aspect is we've got propositions, but those propositions we're working very closely with our partners to deliver.
16:09 MG: What are the critical parts about what differentiates the standard to be able to do that versus some of the more traditional ways of building technology?
16:17 TD: I think there's three things. One is, the platform is geared for business people to do it. So, the whole idea of requirements document and an IT built on a... Typically an old platform say COBOL or something that doesn't exist. The second is because the whole process is, they're pre-built. So, channel ratings documents, there is no component integration that is required. So, the end-to-end solution is there and the third, which is what you've alluded to is the commercial model. A traditional one, is a big license fee but a big integration cost plus a big build cost. Our approach is, we have a certain amount of license fee that we need to cover our SaaS-based costs. And then as you grow and put business on to it, we share in your growth and it's success.
17:15 MG: So, as you play that trend out not only is it gonna be less cost for the insurance companies, but system integrators who are also making vast amounts of money out of this. If this trend continues, it seems like it's going to then that whole business around system duration is gonna significantly reduce in cost and scope.
17:33 TD: Yeah. And, that's an interesting discussion with our delivery partners because they're very used to 10 million, 20 million, 18-month, three-year programs, and we've all seen the horror stories of 100 million, 200 million programs being cancelled. Our total program would never get anywhere near to those. It may be that the initial engagement is, I don't know 300,000 but over a two-year period as you get the business going, it might come to, I don't know 5 million or something like that, but it will never be those 10, 20, 30, 40, 50, 100 million projects.
18:08 MG: So does that also changed the dynamic of who you're selling into in the company traditionally, it would've... These sales would have been into the head of IT or Chief Technology Officer, but because you're now able to deploy more rapidly at less cost, is there a different person driving the decision?
18:25 TD: The people that we are engaged with basically break into three categories. So it's the technology people, and they're really interested because certainly they can provide a service to the business and do all of the stuff that they need to do internally. So, it's actually persuading those guys that they understand how the platform works and how interfaces work. We've got the business people, and they get tremendously excited. And if, as an example, the one of the healthcare companies we're working with, we presented something that took us six days to do a first POC for them, that they were still working three months and hadn't done the requirements document. So the business people get tremendously excited. But the last group is the board 'cause they still don't... There's still a degree of skepticism that all of these claims actually work. So, giving the board confidence in a phased way of the risk that they're taking, the decision-making process and that they actually can see it being delivered rather than it being on paper. It gives a phased approach for the board to then sign-off, implement and if appropriate, turn it off.
19:41 MG: What do you find most encouraging about the drivers to change going forward?
19:47 TD: So there is a big mindset switch of, "Actually we need to meet the needs of what people are and recognize that those groups are changing." Younger generation, a gig economy, they have different demands. I think the second really exciting one is people are finally recognizing that, it doesn't have to be either or. The marrying of new technology with legacy because of the things that we've talked about is eminently possible and the one that really excites me the most is people want to now work to do stuff, whether it be a POC or an MVP or a total role out of a series of product, they actually want to see it working rather than PowerPoint slides in presentations, which the software industry for our space is done for many, many, many, many years and hence, you've had the 30, 40 million pound program. Those three things are tremendously exciting.
20:48 MG: Finally. Trevor you and the team are very regular visitors to what we're doing Instech London. You're also a corporate member, thank you for that. What is about what we've been doing that encourages you to come along and support us?
21:01 TD: Yeah, so we're delighted to be a partner with you. I think that's changed over time, 18 months, two years ago when I first started coming it was, what is out there and what is available. Now, I think it's more about potential for us to identify partners that we can work with and actually it's now seeing the organizations who really are using this stuff, are using it and actually it's now more about the stories of what people are doing, and how we can share successes and hopefully help other organizations do it. So, I think your journey is a tremendous one and we're delighted to be party to it and we look forward to the next series of things that come along.
21:51 MG: Trevor, it's been fantastic to have a chance to catch up.
21:55 TD: Thank you for coming and it's been a great pleasure.