Insurers in North America have always preferred vertically focused (e.g. insurance specific) vendors, and a majority of solution providers in Aite-Novarica’s insurance coverage over the last decade are companies dedicated solely to building and supporting insurance industry products.
There are many reasons for this, but the most prevalent are:
- Practical: Insurance is a complex, highly regulated, multi-faceted (e.g., driven by independent state bodies) industry with unique needs that does not lend itself to taking a system built for multiple uses and applying it to insurance problems, meaning that vendors who build systems solely for insurers do the best job.
- Cultural: Insurers don’t like being lumped into the “financial services” category, assuming that means a banking focus, and therefore tend to gravitate toward vendors who build their marketing and messaging around insurance-specific needs.
The “cultural” reason is, of course, a learned outcome of the “practical” reason: Insurers have been burned in the past by vendors who didn’t fully understand their domain.
Regardless of this historical, insurance-only leaning, recently we are seeing more horizontal technology vendors looking to build out their insurance vertical focus and messaging. There are also two primary reasons for this trend:
- Financial: Insurers, when taken as a group, spend a lot of money on technology! Horizontal technology players focusing more on the insurance vertical is the flip side of all those venture capital dollars going into insuretech startups: non-insurance vendors and external investors are looking to capture more of the insurance industry IT marketshare.
- Technological: Many of the emerging technologies that are critical to insurer plans rely on massive amounts of data and scale. This means that, by necessity, tech like machine learning, machine vision, RPA/IPA, document extraction, and advanced analytics often start from a horizontal approach before being applied to specific industry problems. When it comes to these technologies, industry-agnostic platforms or multiple-industry platforms might be better suited to support insurers than a single-industry vendor.
Regardless of the “why,” it’s important to think about the “how” of horizontal vendors selling to insurers. Insurance companies will benefit from understanding how a horizontal vendor is catering to their specific needs, and horizontal vendors will benefit from having a plan for their vertical approach.
There are three ways that a horizontal technology vendor can choose to build out verticalized offerings for the insurance industry. Each of these three approaches is fine, as long as both the insurer and the vendor are clear about what it means and how it’s communicated.
- Marketing/branding only: A horizontal vendor can choose to sell to the insurance vertical by creating a targeted message. This means hiring insurance subject matter experts; creating a dedicated insurance area on their website; cataloguing insurance-specific use cases and how a solution can solve/improve those use cases; gathering case studies from existing insurer clients; and creating some industry thought leadership in the form of blogs posts, white papers, and webinars. (It also means avoiding lumping insurance into the “financial services” option in the “industries” drop down on the website. Give insurers their own link!) There’s no building of any insurance features in this approach; it’s about helping insurers understand how to use the existing horizontal system for their own purposes.
Yes, this is about sales expertise and website content, but that’s okay. Not every horizontal vendor needs to build specific insurance product features to be of use to the industry. Taking the time to understand the industry and to organize specific information for potential clients can be a big help toward making sure insurers understand how and why to use a solution. It can also help make clients more successful in the long run. It’s a relatively low-cost way of boosting presence in the vertical.
- Building an insurance community: It’s possible (and encouraged) to build tools and offerings specifically for insurers without creating an entirely vertical offering. A real vertical community includes user groups, events, community-sourced reusable components, and sharing across members. Horizontal vendors can build and maintain insurance-specific templates and accelerators; the difference between the template approach and a product approach is that the vendor is not committing to long-term support of the templates.
This approach is a great way of providing value unique to insurers without moving away from the core mission of the horizontal technology platform offered. It allows insurers to work with the vendor and other insurer clients to go to market more quickly and use the horizontal tech in ways that are targeted to insurance industry needs.
- Build (or buy) and support insurance vertical products: One way for a horizontal technology vendor to take on a vertical approach to the insurance industry is to actually take a vertical approach to the insurance industry. Create products specifically (and exclusively) for insurers! Unlike the communicate approach with templates and accelerators, this approach has very clear lines about what constitutes the insurance offering, how it’s supported by the vendor, and the insurance industry messaging. For vendors who otherwise offer general platforms, this might mean building on top of their own platform and then selling an insurance solution that hides some of that core underlying platform configurability.
This is perhaps the most obvious way to go vertical, but also the most expensive. More importantly, it’s the most disruptive for the horizontal vendor, because it can mean sacrificing the horizontal vision and message in order to create customized solutions for insurers. But for a vendor who truly wants to be considered an insurance expert, this has historically been the way to break through those practical and cultural limitations to selling within the insurance industry.
All three of these approaches share a need for industry subject matter expertise, thought leadership, dedicated insurance space on the website, and optimized insurance messaging. Any horizontal vendors looking to sell to insurers should start from there and then build up toward their preferred strategy in the insurance industry.
Any insurers working with a horizontal technology vendor need to understand how that vendor is catering specifically to their needs in order to get the most out of the relationship. This also means avoiding confusion about what the ongoing support will cover.
One other thing for insurers to keep in mind: This is not the first time we’ve seen an increase in horizontal technology vendors building, buying, and/or marketing their way into an insurance vertical message. Will horizontal vendors continue to aggressively support the insurance vertical in the future? Or will they lose interest over time and devote resources elsewhere if the insurance revenues don’t pan out according to plan? We’ve seen that happen before as well. An insurance-only vendor doesn’t have the option of pivoting away from insurance, but a horizontal vendor can always go back to focusing on an “all industry” approach. If that happens, will they still be the right partner and the right solution? Insurers need to make sure their critical business is supported either way.
If you’d like to discuss this further, please reach out to me at [email protected].
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