InsurTech Ohio Spotlight with Michelle Bothe
Michelle Bothe is the CEO of Finsure, a group of experts who coach technology and data teams at insurtechs on how to launch and scale digital insurance programs. Michelle was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Co-Founder at PolicyFly, Inc.
Michelle, how frequently do insurers choose the wrong policy admin partner, and what are some of the root causes of these mistakes?
“While it's difficult to measure the number of insurance teams selecting subpar policy admin system (PAS). We do know that 50% of new business for PAS vendors originates from insurance companies with existing policy software.
Many insurance companies live with existing policy software, for better or for worse. This pertains to both homegrown policy software and purchased, off-the-shelf policy admin systems.
Some root causes of selecting the wrong tools include being oversold by the policy admin system sales team. Insurtechs sometimes under-appreciate the significance of policy software for an insurance company, and insurtechs evaluate different tiered policy systems. One tool might cost forty grand to do a few things well and another cost 4 million dollars; these tools are on different playing fields.
There are several reasons why an insurance team might want to change policy admin systems including technology. Many policy systems, unfortunately, lack current or public APIs (Application Program Interface). Another reason is related to cost. Many PAS tools tie their cost to gross written premium (GWP), and this can get cost prohibitive. Other reasons deal with response times as insurance teams can work with policy systems that have slow or sluggish response times when an issue arises. Fixes to common problems often take some teams two months to resolve. When policy admin system teams take a long time to resolve simple issues, it can result in critical issues in the relationship. But, the number one reason why insurance teams leave their policy admin systems is the time it takes to launch a new digital product or new state.
A separate reason insurtechs and insurance teams may also want to deviate away from off-the-shelf policy software is so they can own their journey and build in house. This can happen at the beginning of the insurtech or after already using external software.
It’s becoming more commonplace for insurance teams to explore better fitting tools. This is because companies are investing in digital insurance programs.”
When debating between buy vs. build, what are the most important considerations?
“The first is to be clear on what you need. A policy admin system includes a rating engine, a quoting engine, policy lifecycle, forms or document generation and data-carrier reporting.
Each insurance team does not need the entire suite of tools. White-labeled products, embedded insurance, brokers, carriers and MGAs (managing general agent) all have different needs.
For teams who wish to build: Do you have the skill sets, time, funding and knowledge to complete this?
Insurtech teams who buy: Your team will implement a multi-vendor architecture. The real question your team may face is should you buy a tool that can do it all or pick the best of breed?”
What advice do you stress with carriers in terms of communicating across business and technical stakeholders, during the process of vetting a policy admin partner?
“Get different stakeholders from your insurance value chain involved in the process. This can get expensive because a lot of teams evaluate many policy tools concurrently. You’ll need engineers, insurance, product owners and somebody from data represented.
Think about five years from now. What are our best and worst-case scenarios? Where do we think that this is going to line up? Are we going to be a single mono-line or multiline product? Do we want to be direct-to-consumer and broker? If we're going to have multiple agencies we're working with, what is our growth strategy, and what do we need from our tech?
There are policy admin systems that take eight months to launch a new state. The insurer has everything ready to go, and their tech is acting as a handcuff as opposed to new enablement. Insurance teams need their technical stack, especially policy admin, to enable them not to handcuff them.”
How is Finsure trying to influence greater transparency and effectiveness into the carrier and policy admin matchmaking process?
“We work with insurtechs that are at critical growth points. They're either trying to get started and are selecting a tool, or they're reevaluating their tech stack to scale.
So far, I've worked on 14 different insurtechs. Many of these were buying, implementing or migrating systems. I've seen projects go smoothly and some have bumpy journeys. Many insurtechs reach out to gut check to make sure they’re not making the same, wrong mistakes.
I get frustrated when I see bad actors in the policy vendor space, and to combat this, one of the projects my team is working on is to interview different policy admin systems. Twenty-seven of them!
Our interviews include everything from their APIs to out-of-sequence endorsements. We ask these questions, and then have teams prove they're capable of doing these functions.
These interviews help our current clients understand the landscape, but more than this, we believe in the value of being transparent.
We're going to be publishing these findings, and we want to make this available to the insurtech community. Check out Finsure.us for more details.
We want companies to spend insurtech innovation dollars toward tools that are going to help them get where they want to go.”