A growing set of tools largely enabled by cloud computing has lowered the barrier to entry both technologically and financially for insurtech companies looking to enter the sector, industry sources say.
Cloud computing and advancing analytical capability allows insurtech companies to move faster and do more with less while security remains the chief challenge.
“The fact that there are so many insurtechs coming online is because it’s become so much easier to create applications,” said Asha Vellaikal, managing director and global head of Marsh Digital Labs, Menlo Park, California. “The advent of cloud computing is making it easier to create applications.”
Insurtech firms can thus be “cloud native,” and their entire software architecture will be “very amenable to cloud use,” she said.
“You have technology stacks,” which exist within the large cloud vendors, “on which you can build business propositions” because the tools and technology exist in a way they previously didn’t, said Andrew Johnston, global head of insurtech for Willis Re in New York.
Insurtech firms require a toolbox to build a stack, which is a combination of software and programming languages used to create applications and the foundation on which a new technological engine can be built.
“You don’t have to build something from scratch anymore,” Mr. Johnston said.
The time it takes to “spin up” a hosting and development environment has been drastically reduced, said Alex Schwarzkopf, co-founder and CEO of Pillar Technologies Inc. in New York.
He said Pillar uses a vendor technology in an entirely managed ecosystem to take what was previously done by a “dev ops” person, an infrastructure manager to “spin up or spin down” resources, and have it done automatically, “instead of hiring that person.”
“The barrier to entry from a cost perspective is significantly reduced, which is I think one of the largest hurdles,” Mr. Schwarzkopf said. Previously, “you had to buy all these servers and put them in your garage. Now you can have a managed environment.”
CoverWallet Inc., an online insurance platform and marketplace serving mainly small and medium-size enterprises, utilizes cloud deployment, said Amanjot Khaira, senior vice president of product at CoverWallet in New York.
“We would consider ourselves off-premises, completely serverless,” Mr. Khaira said. “Everything we’ve built, we’ve built in the cloud — and not just what we’ve built, but all the tools we use, all the technologies that help run the business, are also cloud-based.”
Systems also work more easily and completely with each other, allowing technology companies to take an almost “modular” approach to cloud vendors, selecting the most suitable offerings from each and working across a few or several at once, sources said.
“That’s the beauty of this, the way these technologies have evolved. Plug and play,” Mr. Khaira said, adding that moving resources between vendors from one cloud or system to another has also become easier, and “it could be a matter of a few weeks to move a cloud infrastructure from one cloud provider to another.”
“The cloud is really an enabler,” said Mark McLaughlin, global insurance director for IBM in Chicago. “Large volumes of data live in the cloud, and cloud computing offers interoperability across multiple clouds.” Any single insurer, he said, may be utilizing upward of half a dozen clouds at once for different capabilities.
Many tools are browser-based, and “everything just works,” Mr. Khaira said.
The cloud also allows technology companies to access capabilities, such as artificial intelligence, which might not be financially feasible otherwise depending on their stage of development.
“If you look at many of the cloud vendors today, they are providing basic functionality like artificial intelligence or creating a managed blockchain service, so it’s very easy and accessible,” Ms. Vellaikal said.
“Instead of the insurtechs having to set up all these infrastructures and then having to manage servers, nodes, AI modules, the cloud vendors are making things simpler and simpler,” Ms. Vellaikal said.
“We offer Watson as a service,” Mr. McLaughlin said. “Insurtechs can only afford to invest so much in their own AI, but we sell AI across industries and customize it within industries.”
Mr. Khaira of CoverWallet said that unit costs for data and operations have continued to drop, but notes that as a technology company grows, its data and computing needs grow along with it, and thus cloud expenses will rise.
Mr. Schwarzkopf said cloud costs for a startup technology company can reach the low-to-mid five figures monthly.
The enhanced interoperability and increased data sharing do lead to new questions and concerns about privacy and security, Mr. McLaughlin said: “How do I secure and encrypt across all that. How do I protect all the sensitive data?” Computing advances, however, are yielding a more informed view of business, he said.
“I can see risk a lot better than I used to,” Mr. McLaughlin said.
