The Cost of Doing Business-As-Usual? Dealing With Old Legacy (Systems)
Insurers today face a novel set of challenges. They have a wealth of prospective clients and, in some cases, a glut of available methods for collecting data to assess those clients. But absent some clear guidance or overarching vision of the future, they run the risk of failing to sort the wheat from the chaff.
It doesn’t help that many major insurers are still using cumbersome legacy systems. On its face, that fact isn’t particularly surprising—it can be expensive to modernize a software platform, train staff, and migrate data from old systems to new ones while still supporting and relying on the legacy environment during a transition. Though understandable, this has also hamstrung companies’ ability to assess risk in a digitally connected, fast-moving market. Relying on legacy systems to crunch the actuarial numbers on a prospective client in 2021 is a bit like trying to recreate a Van Gogh in Microsoft Paint. Whatever you get will be a crude rendering of the actual picture.
The view from 100km: Satellite data is entering the insurance scene
Innovative data collection methods have never been more readily available, but many insurers aren’t leveraging them. Insurance as an industry is constantly evolving, but some companies use a patchwork of disparate software or methodologies that have proven neither comprehensive nor cost-effective.
Technologically, the future is bright. Capabilities that were previously only available to governments can now be cost-effectively deployed by private insurers to meet the needs of the moment. While satellite imagery has been around for some time, companies like Satellogic are opening up new avenues for its use—thanks to their on-demand fleet of specialized satellites, armed with high-resolution cameras capable of capturing multispectral as well as hyperspectral data.
A far cry from the traditional 4-band (RGB + Infrared) cameras most satellites have today, Satellogic’s hyperspectral cameras use up to 29 bands on the electromagnetic spectrum. That’s enough fidelity to answer far more complex questions than before, such as, “What is the expected wheat crop output in the state of Iowa this season?”
Low costs, hi-fi benefits
Photographing a square kilometer of land with hyperspectral imagery costs less than the price of a cup of coffee, according to Theorem Orbital’s Nicolas Spurlock. Per The New York Times, “Today, a $3 million satellite that weighs less than 10 pounds can capture significantly sharper images than a $300 million, 900-pound satellite built in the late 1990s.” So, with a rapidly changing climate, it’s never been easier to assess the actuarial risk of a given flood plain or the prospective yield of an agricultural venture in a zone prone to drought, for example.
And satellite data isn’t just about assessing climate risks or groundwater analyses — with affordable, incredibly detailed satellite imagery, insurers can verify damage claims in remote, hard-to-reach locations and identify fraudulent claims quickly. Directed use of satellite technology can verify the regulatory and environmental compliance of a prospective customer before an insurer jumps into business with them. What previously required a half-dozen insurance investigators sorting through massive amounts of due diligence could now be achieved by a single investigator with a satellite capable of hyperspectral imagery. They just need to know what to look for and where to look.
A brave new world for systems integration
Satellite technology is revolutionary in the context of insurance, but it can’t work on it’s own. What good does reams of high fidelity data do if a company cannot integrate it smoothly into their existing claims and actuarial systems? An individual insurer is not going to engage with a satellite imaging company if they don’t have a plan for how to sort through satellite images and mine salient data from them. That’s where systems integration comes in.
This modernization may be a heavy lift for insurers still getting by on legacy systems, but the options are to integrate now or fall behind soon. An insurer with an integrated custom software system and cloud computing capabilities can take advantage of a wealth of low-cost, hi-tech options for collecting data on claims and prospective clients. They can fight fraud and assess commercial property risks, all before they become commercial or personal catastrophes.
By integrating existing claims and actuarial analyses with these new capabilities, insurers stand to save significant amounts of money for both themselves and their clients. These changes are as inevitable as the gravity that keeps satellites in orbit.
Thinking of making the leap and modernizing a legacy system? You don’t have to go it alone. Contact Theorem for a complimentary consultation, and we’ll cover everything from satellites to systems integration — to help your company determine its own future.