We are at the 2023 Guidewire Connections conference and surprisingly, the word on everyone’s lips isn’t “Ai”, it’s “Profitability”. The industry is suffering its second brutal profit year in a row in what has already been a terrible decade for earnings. And the consensus of customers, service providers and vendors I’ve spoken with is that the real problem is a failure of the industry to focus their transformation efforts on improving bottom line results.
“Implementing insurance core systems is like replacing the hull on your boat“, one senior attendee from a major Guidewire implementation partner observed, “The old hull worked but was leaky and covered in barnacles but the truth is that once you’ve implemented the new one you’ve still got the same boat: it doesn’t do anything that the old boat didn’t do before”.
Yet if you look at P&C carrier P&Ls you conclude very quickly that the key to profitability is improving insurance loss results. But that has not been the industry’s focus. They have been replacing their core system “hulls”, not upgrading their engines or improving navigation.
Most carriers simply assumed that replacing their core systems would yield greater profitability via efficiency and speed because they made the mistake of assuming that Personal Lines insurance was a “commodity”. But in a business where a thousand-dollar premium can yield a one-million-dollar loss, more speed and efficiency can simply make it faster and easier to write bad business.
Carriers need much better real time, in transaction risk selection capabilities. Or as we put it: ‘Pick the risks you want, avoid those you don’t”. In our work with major carriers, we have already seen a 5-point loss ratio gains across all channels and far greater digital direct channel gains. The key is treating every lead, quote, application, endorsement, billing and renewal as
a point at which risk can be evaluated and action can be taken. And then reading the digital signals during those transactions and intervening in real time to eliminate the excess risk. All executed by carrier business teams composing their own rules and interventions in minutes, not months. Without IT.
And that’s what we help them do.