My name is Brian Desmond and I serve as the CMO at Guidewire, which provides an industry platform for property and casualty (P&C) insurers. In a previous blog post, I defined what an industry platform is and why it’s such a big idea for the P&C industry. In this blog post, I outline why the cloud—in terms of its technology and business model definitions—is critical for an industry platform to perform at scale. I appreciate the fact that you may be skeptical, given my company’s role. I’ve tried to write a substantive and useful piece. You will be the judge of that.
In my previous post, I stated that an industry platform combines three elements—software, services, and ecosystem—that insurers can rely upon to run, differentiate, and grow their business. Each element requires cloud technology and business model in order to deliver optimal value to insurers. Let’s explore each one, starting with “services.”
Services
In the conventional “self-managed” approach, an insurer licenses software from a vendor. The insurer’s team implements the software, often with help from a system integrator (“SI”). As part of the implementation, the IT team must decide on and invest in the architecture, unseen by end users but required for the software to work. Architectural elements include the application server, database and systems to support integration and security. The implementation can be done on the insurer’s network, on premises, or in an environment provided by a third party. Once the software is implemented, the IT team is responsible for supporting it every day, with post-production responsibilities including:
Uptime: Making sure systems are always available when the business needs it
Security: Ensuring that confidential data is protected and that users can access the systems they need
Performance: Ensuring that the systems aren’t slow for users, regardless of capacity fluctuations
Updates: Applying and testing improvements provided by the software vendor
In the cloud approach, the industry platform host, assisted by SI partners, is accountable for implementing the software and is also responsible for the ongoing hosting, management, and updates to the software in accordance with defined service-level agreements (SLAs). This presents a new division of labor, involving a transfer of IT risk and responsibility to the platform host in exchange for which insurers pay a subscription fee determined by usage. This model enables the following benefits to insurers:
Freedom to accelerate: In the self-managed model, IT is often seen as holding the business back. For example, when the business team creates new products or refines processes, it requires significant involvement of the IT department. In the cloud model, insurers can move much faster as the platform host provides the scale and responsiveness to meet its SLAs. The insurer’s IT department still has responsibilities, of course, but its work is much less complex and onerous. This increases the freedom of the insurer’s business and the ability for IT teams to partner together to focus on the meaningful insurance projects and products to achieve their mission.
Faster time to value: The point about increased agility obviously leads to faster time to value, but there are several other contributors. With more frequent and smaller updates in the cloud model, insurers will have access to new features much faster than in the self-managed model, where the software is often several releases old. Most importantly, the cloud enables platform hosts to invest their R&D efforts in developing new features, rather than having to invest resources in supporting customers that use prior versions of software.
Elimination of upgrade complexity: A consequence of the self-managed approach is that insurers tend to be on versions of software that are dated and, when they do upgrade to the newest version, the upgrade projects are complex and costly. The cloud model eliminates this pain with updates that are included in the cost of subscription, are delivered more frequently, and are the responsibility of the platform host.
Increased quality: With the cloud, the platform provider is hosting and managing the software for its customers, meaning that it receives user feedback quickly and continually. It has a much deeper understanding of how the software is really used and where the most significant sources of value are. This in turn leads to a more informed R&D engine that is equipped to provide more valuable improvements over time.
Software
In the cloud business model, where a host manages the software in exchange for a subscription fee, more responsibility is put on the provider to use technology that is cloud-optimized. This is due, in part, to self-interest so that the provider can lower its operating costs. It also leads to faster provisioning of new capabilities, whether that be configuration support, user experience, or new features that increase business agility and lower IT complexity for insurers.
One example of cloud-optimized technology is the design of features or a collection of features as micro-services that can be accessed by other programs and applications. This leads to a scenario where capabilities can be more easily grouped together to enable insurers to better address specific problems and opportunities. As a result, I predict that an important characteristic of the industry platform era will be an increased focus on solutions that bundle several of these services together to solve a specific problem, such as claims servicing.
Ecosystem
The third element of an industry platform—an ecosystem—provides access to value-add applications and content provided by established companies and insurtechs. This is an increasingly important source of value for insurers as they seek to continually improve processes and experiment with innovative distribution models.
Cloud technology makes it much easier for all partners to engage in an ecosystem or marketplace model. The key enabler is creating application programming interfaces (APIs) that define the contract for how systems exchange and process data and rules. By providing a complete set of APIs, the platform host makes it simple for partners to connect to the platform without needing to know how the core applications work. The cloud, in terms of business model and technology, provides the platform host with the scale needed to make the development and management of APIs far faster than the conventional approach. Insurers use a cloud-powered marketplace to discover new partners (both insurtechs and established players), use APIs to make partners’ solutions work in their environments, and provide seamless feedback on their experience.
We believe that we have the credentials to succeed in being the leading industry platform for P&C insurers. With Guidewire InsurancePlatform™ powered by Guidewire Cloud™—combining Guidewire software, services, and ecosystem in a scalable SaaS model—we believe that insurers have the optimal way to experience the power of Guidewire’s platform.
To learn more about our mission and industry platform journey, click here. Details about Guidewire Cloud are available on our website.