Commerce Platforms & The Insurance Industry

What are platforms?

A commercial insurance eTrade platform is first and foremost a platform. We are all familiar with mobile devices such as smartphones and tablets. Whether you use an Apple or Android mobile device, you are using a platform. Facebook is also a platform, albeit a software platform.

But what exactly is a platform?

Per platform expert Sangeet Paul Choudary, “a platform is a plug-and-play business model that allows multiple participants – producers and consumers – to connect to it, interact with each other, and create and exchange value.” Mr. Choudary is using the terms “producers” and “consumers” generically, rather than the way we use them in the commercial insurance industry.

Keep in mind that “consumers” and “producers” could be the same people or companies creating platform value, but it is the “consumers” who purchase value from the platform. (See Figure below of the major players and components of a platform.)

Platforms are interaction engines

More elegantly, Mr. Choudary states that “platforms are interaction engines that scale when they optimize the interaction flow.” The platform itself:

• could be a proprietary platform (as a commercial insurance eTrade platform owned by one insurance company would be) or an industry-wide platform (as a commercial insurance eTrade platform owned by Polaris or UK software houses and open to a panel of insurers would be)
• could be deployed in a public or private cloud
• should be accessible using mobile devices, whether smartphones or tablets
• can be connected to other businesses that build products and services on top of it, and by so doing, co-create value for all the stakeholders using the platform.

There is some pushback from people who believe the term “platform” is just another word for “market” because they think using the term “platform” for the same concept as “market” introduces unnecessary confusion. In a strictly limited, “markets-are-tied-to-on-the-ground-geographic-locations” sense (such as walking within a one or two-kilometer area carrying briefcases full of paper documents in London between broking firms, insurers, and SME clients), I agree with them.

But Mr. Choudary’s work, along with his colleagues logically shifts the concept of markets, as well as the myriad concomitant interactions between and among platform stakeholders, into the realities of the digital era. Because of this reasonable shift to conduct commerce in the mobile, digital marketplace, I used the following description of an eTrade platform (throughout the report this post is excerpted from):

SME commercial insurance eTrade platforms

With the description of platforms in hand from our discussion above, SME commercial insurance eTrade platforms include the following (see Figure below of major players and components of a commercial insurance eTrade platform):

• eTrade platform consumers encompass commercial insurance industry participants, including brokers/account executives/producers (discussed throughout the report and shown on the figures as “brokers”), CSRs, underwriting agencies and, we believe eventually, SME clients.
• eTrade platform producers encompass neutral industry participants such as Polaris and industry regulators; risk underwriting participants such as insurance companies and underwriting agencies; software house participants such as the technology firms providing systems of record (SoR), systems of engagement (SoE), or Broker Management Systems (BMS), and systems of insight (SoI); and third-party industry participants such as loss adjustors and loss assessors. BMS contain elements of both Systems of Record (SoR) and Systems of Engagement (SoE).
• eTrade platform owners encompass neutral industry participants, risk underwriting participants, and software-house participants.
• Value components include transaction capabilities encompassing business-process lifecycle functionality; interaction capabilities comprising integration functionality, communication and collaboration functionality; information resources, such as SME exposures and concomitant covers by industry; and analytical capabilities covering predictive analytics, reporting, dashboards and other types of visualization functionality.
• Commercial insurance eTrade platform value components are deployed in private or public clouds and accessible using mobile devices (whether smartphones or tablets) or laptops.

Conclusions

Progressing through my research, several conclusions crystallized for insurance brokers, (re)insurers, and other insurance industry participants involved with or planning to be involved with SME commercial insurance eTrade platforms:

• eTrade platforms need to be more than an efficiency play: eTrade platforms cannot be used only as an efficiency strategy by brokers (or carriers, for that matter). eTrade platforms must provide functionality beyond finding and binding cover to also support SME throughout the entire client insurance journey, from purchase to service to claim management.
• eTrade platforms created by insurers represent only part of a trade solution: Proprietary eTrade platforms – platforms created by insurance companies – are portals on steroids (that is, a strategy of silos). Commercial insurers may be positioning platforms as niche strategies offering hard-to-find covers or as experiments with this type of digital channel, but most of the benefits flow to the insurer rather than to the broker and, in turn, to the SME.
• eTrade public platforms represent the best way forward: Public or industry eTrade platforms – platforms created by neutral players such as Polaris or possibly regulators or associations of small businesses – offer the highest likelihood of providing the covers and concomitant functionality brokers need to support SME. 
• The more things change, the more things stay the same, Part 1: Brokers expecting the eTrade channel to evolve to an environment of one, two or, at most, three platforms are going to be disappointed. In 2020 and the years beyond, there will be an increasing number of eTrade platforms in the UK created by an expanding number of industry participants beyond insurers, software houses, and Polaris.
• The more things change, the more things stay the same, Part 2: It may seem like the perfect world for eTrade exists when SME commercial insurance trade is conducted entirely through digital connectivity paths (BMSs, eTrade platforms, and insurer SoR and SoE). However, brokers continue to invest too much time finding, binding, and bundling covers and support functionality, albeit using a keyboard to “click-and-pick,” to meet each SME’s client insurance cover and service requirements.
• Technology dysfunction still rules: I found that there is a spectrum of technological dysfunction regarding the support of commercial insurance trade throughout the client-broker-insurer industry value chain. This is due to the use of analog artifacts (e.g., pen and paper, documents, forms, fax machines) and the slow speed naturally attendant to people who are processing paper (in-and-out boxes, interoffice posting, walking to and from broking firms and SME client locations with briefcases replete with paper, and data entry/re-entry. 
• An immersive environment: eTrade platforms create an immersive environment of conducting trade and providing service. Platform owners are finding ways to keep clients from being thrown out of the environment due to weather-driven events or human error, (updating software or hardware that supports the platform), and to restore service quickly when required.

Final comments

The insurance industry, regardless of major line of business, seems like a perfect candidate to participate in, if not also create, commerce platforms. Perfection, of course, doesn’t exist for the insurance industry (or any industry for that matter) and their use or potential use of commerce platforms.

As I mentioned at the top of this post, I will write future articles about the insurance industry and its use, or future use, of commerce platforms. Maybe we can find a path that gets closer to ‘perfection’ for the insurance industry and its customers and other stakeholders.