Ronny Reppe, chief executive officer of Norway-based insurance platform provider Noria, was on a panel on “Connected Policies” at the Marine Insurance London inaugural conference on July 5th 2018. Insurance Marine News caught up with him and asked him how he saw the current industry landscape, and how things would develop over the next few years.
The early days
Reppe observed that, even though he founded the group of companies, Noria has a long history, dating back to 1975.
The first customers of the production offering came on board in 1978, and those two customers, one a marine insurance broker and the other a marine and energy insurance company, have been on the platform since 1978. The broker was bought by Willis in the late 1990s and is now Willis Towers Watson, while the marine and energy insurer was Gjensidige. In 1982 Vesta started using the system and later became part of Gard. In 1985 the company was bought by Olivetti; Reppe says. “They didn’t believe that the software had any value so they kept the hardware part and gave away the software part to the founder of Noria in 1985. Then PARIS (Policy And ReInsurance Solution )1.0 – was established.
PARIS is a policy administration system, covering claims handling and reinsurance , a full package for insurance companies. From day one the company and software was delivered as a product solution with a shared cost model. For the 1980s that was a modern way of looking at software products”, observes Reppe.
Shared cost model
“Shared cost model is one of the trends that I believe is really important in insurance software now. You have the same source code for all customers and all the customers share the cost of delivering new versions and new technology. So we now have 25 insurance companies on board, and all of them are on the same source code. That means we can continuously develop the solution and continue to deliver new solutions to all our customers. Most of our competitors end up with a customized solution that is delivered as a standard package, where each broker or insurer has to pay all the costs of developing their own solution.”
“With PARIS, the cost is shared according to the size of the customer and that, combined with a cloud delivery model, is what we believe is the future way of delivering software to the insurance industry”..
“We have 25 customers and we have 18 developers.. If you do it properly you can deliver in a much more cost-efficient way than any other solution. That means, for example, that we have two customers in Latvia who think we have a cheap solution, even though we are producing the product in a relatively high-cost country (Norway) and they are consuming it in a relatively low-cost country (Latvia)”.
All of Noria’s developers of the core solution are in Norway, although the company also has a development centre in Vietnam for the web portal solution.
Reppe and two partners bought the company from the original founder almost five years ago and since then have invested heavily in technology. “The solution is now moving into a state of the art technology generation 5 and we believe that the lessons learned through four decades of development and refactoring the solution is our most valuable legacy”, he says.
“We have a strong position in the marine market and we are focusing on b2b insurance, employee benefits, marine, energy, builder’s risk, and our organization is confident about developing this type of solution”, Reppe says, while observing that moves by some P&C companies into the marine space could pose problems for their existing data modelling.
“What we also see is some P&C software companies moving into the marine and energy space and I believe that is a difficult transition, because the data model that is needed to handle the complex marine and energy products is not the one that is made for p&c products. He said that part of Noria’s core way of thinking is that it was really difficult to extend software that covered the retail part of p&c to risks such as marine and energy.
“For a p&c software company to move into marine and energy they need a different data model, and the data model is the core part of the solution. So they are not able to change their data model without changing their whole solution.”
Q How is the data model different?
“The fundamental difference from a business perspective for me is that they are completely different lines of business. It’s like a tool case, you should use the correct tool to handle the correct type of work. I don’t believe that insurance solutions built to handle retail and p&c is the correct tool for handling marine and energy business.”
Reppe said that while at a headline level, it might seem similar, once you got into the detail, marine and energy was completely different from a car, or a person.
“It’s not a piece of property owned by a private person, it’s a company that owns, say, 20 ships. So a company that owned, say, 20 properties, would be more similar to a company that owns 20 ships, but generally the nature of the insured customer and the nature of the item being insured, is completely different.”
“So, with ships, when you get into the detail about the factors, you have lay-up, war zones, all the special types of details that you do not have in the p&c space. So that’s where the difficulty with the pre-existing data model comes in. You have all these special types of occurrences in the marine space that a p&c solution will not be made for.
Insurance industry is not as conservative as reputation has it
Q: Where have brokers and insurers been resistant, and where have they been more forward-looking?
“I think that the rumour that the insurance industry is extremely conservative is overrated. I meet a lot of people in the insurance space who are innovative, who see new solutions coming in and see that the insurance business is changing a lot. So I am not in that group who stamp the insurance business as extremely resistant to change. The business will change more in the next 10 year than it did the last 300, so we need people who can adapt to change”
“I see a lot of changes happening and a lot of people who are willing to change. For the last couple of years I have seen the important changes starting to happen, so I am really positive about the situation in the insurance industry, both in the UK and globally. My opinion is that things are going to be really different, five, six, seven years from now.
“The most important part of the next couple of years is efficiency, doing what it takes to be more efficient than you were, and improving year by year. They are not going to improve by 5%, they are going to improve by 50%.
“I think the insurance industry has to reduce its running costs by at least 30% over the next five years. As everyone knows, the manual work in this industry is way too high. Integration of the value chain, reducing internal duplication of data input. I’m always repeating the saying – ‘one data entry’, and if you are in a company entering the same data several times, you should make that your primary focus. It is possible to have one-data entry through the whole value chain, but that requires a huge change. If producing brokers, placing brokers and insurers can use the same data throughout the chain, then you will have the efficiency needed to handle the future.”
The need is to prepare for change
Reppe observes that we do not know how the insurance industry is going to change, so what the insurance industry needs to do is to prepare for change. “They need to be prepared to change quickly, and very few are capable of changing quickly. They should be ready to launch new technology, new products, within months, and not years. And that is down to refining the core processes, having a flexible insurance solution that can adapt to change without development. For most it’s a lot better business to be early adaptors than trying to be first.”
Data is available that isn’t being exploited
Reppe notes that a broker with a long-term customer relationship will have a lot of data that can be analyzed to give advice to a customer on how to prevent future accidents and claims, but the situation today is that most are not using this data to provide business-specific analytics, either to add to their own business’s value, or to provide extra value to the customer with data on how they are running their operations and to reduce the risks in those operations”.
“‘Preparing for change’ is the difficult one, because you have to prepare for something, but you do not know what that ‘something’ will be. To be prepared you have to be change-driven within your company culture and also to have the technology that is prepared for change.”
So, pitch to me, why should I be your customer?
” I think our perfect customer is a forward-thinking customer who already knows that the industry is changing and wants to be able to adapt to these changes with a flexible and cost-efficient solution. That is the short sales pitch. I don’t really think that our next customer will be one who believes that the industry will stay roughly the same over the next five years. I believe our next UK customer will be one who believes that there will be a great amount of change over the next five years and wants our solution to adapt to those changes that will be happening.”