Insights into AM Best’s updated insurtech rating system
It was a decision that sent waves through the insurance industry: in March, AM Best announced that going forward their gold standard scoring system will include an “innovation score”. They explained in a white paper in September 2019 that “innovation is becoming increasingly critical to the long-term success of all insurers.”
With the rating agency’s decision to respond to the rapid social, climate-based and technological changes facing the industry in the 21st century, insurance companies are compelled to re-examine how they are innovating – this oh-so-inspiring, and terrifying process – in order to improve their method of open innovation.
The first question almost begs itself – what is innovation and how do we quantify it? AM Best chose to consider two factors: the “components of a company’s innovation process” (innovation inputs) and the “impact of a company’s innovation efforts” (innovation outputs).
Silos and other obstacles
This new rating – received with mixed feelings – pushes companies into critical introspection when it comes to their innovation processes.
In many cases, large established companies simply lack an innovation workflow – creative venues designed to encourage collaboration or tools to streamline the process of innovation across the organization. The lack of communication between departments creates silos – self-contained units, where initiatives get stuck and fail to turn into actual organization-wide innovation.
Many enterprises are breaking down these barriers by creating dedicated teams tasked to drive innovation across departments. They are accelerating the innovation process, and create an organizational mentality that nurtures new solutions and encourages research and innovation. They are also in the market for new tools that facilitate the innovation process.
On a company level, innovation begins with the sourcing of new ideas; which areas need updating, what kind of new solutions might be needed to make production faster and smarter – or give the company extra competitive edge.
Spoilt for choice
The next challenge is to find the right vendor or vendors through an abundance of market places, with the help of consulting companies, or just by using the company resources. Many corporates make the mistake of not opening their search wide enough. As Gil Arazi from FinTLV Ventures points out in his article about insurtech innovation, they fail to check solutions that might not list or target their industry on paper, but actually offer the right solution for the company.
After choosing the solution or solutions relevant for the process, companies arrive to the biggest obstacle of innovation: the proof-of-concept process (PoC). The new technology must be tested against the legacy system of the company to make sure the new puzzle piece can be inserted with ease, without causing damage like endangering sensitive data – and of course whether it performs according to expectations. There are bureaucratic as well as technical hoops to jump while keeping everyone participating on their toes for six months. Or more.
The proof of the pudding
Here comes prooV into the picture. We understand that proof-of-concepts should be to the point, fast and perfectly safe and compliant. They also should not happen on the company’s legacy system – but on a perfectly recreated copy of the environment (check out our deep mirroring tech), full with whitewashed data, APIs and the inner logic of the system maintained.
What prooV offers is all of the above: a PoC taking place on the perfectly recreated legacy environment on the prooV cloud, closely monitored through the prooV platform online. The new technology is not just tested against the legacy system, but actually integrated with it, producing true-to-life KPI measurements. Moreover, multiple vendors can be evaluated simultaneously – finishing in as little as 6 weeks.
The proof of the pudding is in the eating. The proof of a new software is actually seeing how it operates within the company eco-system. Be that a chatbot, video analytics or any other application dealing with sensitive information – only an actual integration to the environment (or a perfect copy of it) will tell a CTO, CIO or CISO what they are letting into their system so the PoC can end with successful deployment.
AM Best’s update was timely and necessary – a favor to the insurance industry if there ever was one. It resonates with the changes happening in all industries, everywhere. Innovation is beautiful. And, of course, innovation is hard. Here, at prooV we believe that innovation should only be the former. Beautiful, fast and easy – so enterprises will not scare away from becoming their best and highest rated selves, ever.