WICA2023: Nimble competitors ‘erode big insurers’ market share’

Big insurers are shrinking and have trouble competing with new, nimble market participants because their IT systems have not kept pace.

That’s a view insurtech underwriting agency Blue Zebra’s co-founder and managing director Colin Fagen will espouse when he participates in a panel session at the AIDA XVI World Insurance Congress Australia (WICA 2023).

The Australian Insurance Law Association (AILA) will host the international insurance law association AIDA’s flagship event on 30 August to 1 September 2023 at the Melbourne Convention and Exhibition Centre.

Mr Fagen, who had a lengthy career with a major insurer before launching Blue Zebra in 2017, said there was “much potential for Kodak companies” in insurance because big insurers were encumbered by legacy systems, often 20-30 years old. They were hard to upgrade and he questioned whether insurers had people with the skill sets to do that, which meant being reliant on expensive external consultants. He said melding evolving technology with legacy systems was almost impossible when older systems had not been created with any understanding of modern techniques. That was exacerbated by customisation over time.

Mr Fagen warned that regulators expected insurers to upgrade, but constant change was expensive, particularly when insurers were under pressure to make products more affordable. “As insurance prices go up, driven by reinsurance rates and inflation, more nimble competitors chip away at the big players. They have the ability to adapt and move quickly,” he said. The theme of the WICA 2023 panel session in which Mr Fagen will speak is “never hesitate to innovate” and that’s a philosophy behind Blue Zebra. “We have a small group of executives with extensive backgrounds and wide experience, so can make a decision in a day that might take months in a big organisation.”

Mr Fagen said many big insurers had difficulty innovating because middle managers “want to keep their kingdom and can’t or won’t change”. He admitted that, with the knowledge he now has from establishing and leading a startup, he would have made some different decisions when he previously worked within a large insurer. He also said running an agency was easily less stressful, because “you’re not managing constant internal politics and getting distracted from the core business”.

Mr Fagen said he and his team “understand the big players’ strengths and weaknesses so have the ability to compete effectively with them”. The agency’s platform, Blue Leopard, was built “with the end in mind” – his goal is to achieve a $1 billion annual turnover with 40-50 staff. Blue Zebra’s current turnover is $240 million with just over 40 staff, half of whom are IT specialists.

“Systems-based underwriting is more predictable and adaptable. Our referral rate is less than 3% but we want to further reduce that human interaction, whereas larger companies’ referral rate is usually above 10%.” Mr Fagen said Blue Leopard was continuously enhanced and Blue Zebra licensed the platform to other underwriting agencies.

“We have the systems, people and processes to make continual gains on cost and efficiency while concurrently delivering new products to market quickly. It’s a key strategic advantage. Our momentum will continue to build now we have a critical mass of GWP,” he said.

Registration is open for the World Insurance Congress with early bird offers available until 30 June.

WICA 2023 chair and AILA’s immediate past president Angus Kench says the congress is a unique opportunity to draw international visitors from AIDA’s global chapters to Australia.

The event starts with presentations from each of AIDA’s 13 working parties that dive into specific insurance issues from global and regional perspectives. Panelists and expert speakers will then present sessions on four key themes – climate, conflict, ESG, and innovation and careers. The speaker program is continually updated as more industry leaders commit to presenting at WICA 2023.

Australia has hosted the prestigious event – held every four years – only once before, in Sydney in 1994.