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The Lean Insurance Carrier

  • Roy MillRoy Mill
  • January 2021

Rethinking insurance product development in the Digital Age

Joshu gives insurance professionals the superpowers that the Web gave software developers that allowed them to embrace Agile philosophies. In this post I will look at how Agile changed software development and discuss how Joshu can help insurance be more agile.

How Agile took over Software

In the early 1990s, experts in the software development industry recognized the “application delivery lag”: the three years it took to launch a software product from the moment a business need was validated. In February 2001, a group of software thought leaders published the Agile Manifesto. They called software developers to change how they organize and approach software development:

“We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value:

  • Individuals and interactions over processes and tools
  • Working software over comprehensive documentation
  • Customer collaboration over contract negotiation
  • Responding to change over following a plan

That is, while there is value in the items on the right, we value the items on the left more.”

—The Agile Manifesto

Concepts and methods of Agile took over more and more software development organizations around the world. From slower and more monolithic development cycles, companies transitioned to smaller teams, leaner specifications, and smaller, more granular and frequent releases. Everyone was looking to become Agile (and for good reason).

The revolution peaked in 2011 with Eric Ries’s book The Lean Startup. In the book, Ries proposes several principles and methods to improve software development and make it more efficient. Instead of three years to release an application, a software company today releases hundreds of updates each day. Startups and bigger software companies have since embraced this philosophy and changed the way Software was done.

Can Insurance be Lean?

“Well,” you might say, “software is one thing, but insurance is different. Insurance companies aren’t little fleeting startups.” Yes, working within a heavily regulated, compliance-driven, risk sensitive environment, insurance might not seem like the best industry for Agile or Lean Startup. As a safety net for people and businesses, there’s a good reason for insurance to be cautious and careful. But risk not unique to insurance products and software development had all the reason to be cautious and slow too. What made it possible to adopt Agile?

Like other industry-sweeping changes, the immediate suspect is new technology. The Agile revolution in software coincided with the rise of the World Wide Web. Software in the 1990s used to be packaged: published on portable media like floppy disks or CDs. In a sense, it was like publishing books. The web is different: every time a user loads a web page they download the code that runs the page. There’s no set number of copies you need to manufacture. Software developers can update the web server once and from that moment on all browsers work with the latest version of the site.

Moreover, since users are in constant communication with the web server, that server can record all their interactions, giving software developers unprecedented visibility of user behavior. It’s become so cheap to measure how users respond to changes. You can even conduct “split tests” between users and bring in scientific methods of experimentation.

These are only two of the advantages that the Web introduced making it easier for software companies to go Agile. The Agile revolution could not have caught on without them. When considering Agile in Insurance we need to ask ourselves if the people who lead insurance product development have the technology to be Agile.

It’s not that insurance companies haven’t discovered the web. It’s just that the insurance professionals — Product Heads, Chief Underwriting Officers, Actuaries — are usually one step removed from it. There’s usually a software development team that is in charge of the online flow. That team may be very lean and agile, but only in regards to the software product. The insurance product is treated as a given.

Insurance + Joshu = Speed

Joshu puts insurance professionals directly in charge of how they sell their products online. It lets them set up online distribution channels quickly and independently. With Joshu’s platform you can set up your product—application, auto-quote eligibility, rating, and document generation—and then set up “stores” that sell these products. Stores are basically websites, or portals, that sell the product that you set up online.

The basic premise of going Agile was that it should not take too long to launch a product that addresses a business need. Often the business need changed by the time the software was ready for release. To make sure the solution stays in touch with the need you need to break down that one big release into smaller releases. Smaller updates meant releases are more frequent and you can collect feedback earlier. Earlier feedback and quick course corrections meant you could find product-market fit faster. It also meant you do not need to go into long term, high commitment, costly custom software development projects.

Let’s apply a couple of Lean Startup concepts to insurance products and see how Joshu empowers insurance professionals to adopt them. We will be developing these concepts and others in the future on this blog, so stay tuned and keep following us.

Minimally-Viable Product (MVP)

My favorite quote in Product Management is this one by Reid Hoffman: “If you’re not embarrassed by the first version of your product, you’ve launched too late.” The MVP approach says that you should keep taking features off your product specification until you reach the bare minimum. The simplest thing you can build that will show if your product addresses the market need you set out to tackle. There’s a stark difference between the technology products you know and love today and their first version.

What’s your insurance product’s MVP? What do you need to prove that your new product is worth investing in? Can you limit the list of business classes and size of companies that you’re comfortable with automatically underwriting? Is there a simple way to rate or a smaller set of endorsements you can start with?

You can use Joshu to configure a full digital flow with your MVP in light of these questions and quickly change your configuration as you learn and gain confidence (and maybe some traction too). Joshu does not replace your Policy Administration System or your underwriters so you’re safe to experiment. You can set the system to refer anything outside the scope of your automatic underwriting segment to an underwriter. Reluctant to commit to hefty fees and months of joint development with a custom software developer? Use Joshu for your MVP instead and keep iterating on it.

Collect data and learn from it

After building your minimally-viable product it’s time to see how viable it really is. It’s time to measure and learn. Having a web-based form instead of a PDF means you can gain unprecedented insights on how painful your application is. Maybe only 60% of insureds end up submitting. You might find out that most of the 40% drop out after question 6, which you know is a bit problematic. You might learn that it takes 5 times longer to answer question 7 than to answer any other question on your form.

Can applicants really tell what % of their goods are vegetables vs. fruit? What about their predicted sales in EMEA in the next 12 months if they didn’t happen to break down their predictions geographically before? Sure, your clients can figure it out. But each question adds friction to the process of acquiring insurance and this friction is part of the cost of doing business with you.

With these data and insights at hand it’s easy to spot where you need to improve your product. Luckily, not only that Joshu offers you the data and insight to spot what needs to be fixed, it also makes fixing much easier. If you’re working with software developers who are coding up your application you may think twice before you tell them you actually need to change a couple of questions, but with Joshu you’re driving. You can change the application and you can change the rating accordingly. You can continuously improve your MVP in the true spirit of Agile.

What’s next?

This is a quick taste of some of the opportunities in adopting Lean Startup philosophy in insurance product development and we will continue to review these ideas in this blog as we go along. While it’s hard to imagine insurance carriers as very Lean today, we are confident that they can transform and we’re here to help them. Agile redefined how Software companies and teams work. It’s a change that does not require the whole organization to do at once: you can start with one insurance product.

Imagine you had the power to watch your customers, listen to them, measure how they interact with your product, and adjust it to make it better. Imagine cutting down each iteration from months to days. Imagine that setting up automatic underwriting isn’t so frustrating and hard to change. How good can your insurance product get? How much more business can you win?