Davey's blog: The seven year itch

We’re all living through a period of exceptional change. And the change is getting faster and faster. In business and in our private lives, round the clock news and unprecedented connectivity mean we’re bombarded with news, calls, emails and text messages. In this always on society, it’s only on those occasions when we force ourselves (New Year and birthdays usually), or are forced by circumstances (redundancy or starting a new job) to take a step back and reflect, that we realise just how much has changed.

Last August was one of those occasions, as I returned to the insurance technology sector, joining SSP, after a seven year break.

OK I knew some of the team, but, as with any new job, you know that all eyes are on you from the moment you walk through the door. You want to get up to speed and make an impact fast. It’s only when I was going through the tried and trusted approach of a string of 1:1 meetings and reading every available document, that I realised how much had changed.

Like the rest of the industry, the technology sector has seen significant rationalisation through merger, acquisition or failure. Back in 2001 there were so many companies selling systems to the insurance community that they had their own association – the Insurance Technology Trade Association, with two conferences a year! How things have changed. Looking at the technology suppliers to the broking market now, there are really only a handful of serious players – bigger organisations, more financially robust, with the money to invest to meet the more sophisticated requirements of their customers.

And just how much more sophisticated are these customers? Well staggeringly so. Consolidation, networks, venture capital, insurer shareholders and a new market dynamic has created an environment where fewer but bigger brokers exist. With the average broker system being changed every 8-10 years many of these are now second or third generation IT purchasers and they are much more sophisticated in their selection processes and in understanding their requirements. The whole engagement is far more professional.

“Consolidation, networks, venture capital, insurer shareholders and a new market dynamic has created an environment where fewer but bigger brokers exist.

However, despite the increased stability, improvements in the technology and the greater sophistication of customers, the industry is still struggling to deliver a significant volume of SME business electronically, despite the wide range of trading options currently available.

Back in 2001 I was part of a team at Sirius (now SSP) that initiated Stargate, a comparative quote system for commercial package insurance. The other software providers had their own versions, but even with the advent of imarket, transaction volumes have remained disappointingly low.

Has this been a classic chicken and egg situation? Not enough products for brokers to gain critical mass and not enough volume for insurers to invest in at the expense of their own extranets? Are we just always doing what we always did - with a predictable outcome!?

Whatever the reasons, the result is that the SME insurance market remains inefficient for all the parties involved and a huge opportunity still exists to cut significant cost out of the industry. However, with direct writers, telebrokers and aggregators gaining momentum in this sector, this time we won’t have another seven years to resolve it.

Jonathan Davey is a director at SSP.