Given the challenges that technology now poses in terms of innovation and investment, insurers can no longer be content to simply be solution buyers. They need to establish stronger partnerships – potentially extending to shareholding – with their software providers and solution integrators. This is the view of Christophe Burlot, co-founder and managing director of Apidata. He explains why.

“An unsuccessful tender process means three or four years and a great deal of money wasted. Meanwhile, the competition does not wait: it continues to innovate, develop and move forward… In particular, insurtechs, which are by nature required to update their technology to meet new regulatory, technical and competitive requirements.

Insurers’ legacy systems are still fit for purpose, but they naturally make them less agile. Above all, they require these companies to commit significant amounts of capital to evolving these tools, thereby confronting them with the limits of the long-term growth model theorised by economists Solow and Romer.

Stimulating endogenous innovation

Robert Solow’s endogenous growth model bases growth on the accumulation of labour and physical capital (IT infrastructure, for example). But in the long term, the productivity gains generated by an additional unit of capital diminish. Only exogenous technological progress can prevent stagnation: in this case, this could take the form of automation or AI.

For Paul Romer, however, this technological progress must be produced by the company itself. Unlike capital, human creativity has no limit when research and development, innovation and human capital are valued. Innovation can therefore offset the diminishing returns on investment and support endogenous growth. But it must be nurtured and stimulated.

What is the right model for the insurance industry? Insurers today face the same challenge as the European economy: not simply relying on exogenous technological progress, but capitalising on their own creativity and ultimately stimulating it through endogenous innovation. Unfortunately, they seem to be doing the exact opposite, relying on non-European players that are indeed capable of solving all their problems. But at what cost? Which insurer today is able to model its return on investment with any real clarity when it has no visibility on these providers’ pricing or on how they use data? How, ultimately, can they quantify the strategic impact on their own business?

Building sovereignty together

I increasingly hear people talking about digital sovereignty, but in vague and abstract terms. Yet this is an essential concept that must be built between an insurer and its technology provider through a partnership-based relationship. The tender model is reaching its limits: it does not allow the commissioning organisation to genuinely plan for the future, nor does it give the supplier the confidence to invest in tools that address all of its challenges. Innovation is now cross-functional and shared: it encompasses network architecture, data processing and AI integration, alongside regulatory, CSR and data security considerations…

To provide a relevant response to all these challenges, the provider must understand and become part of the insurer’s strategic thinking: this goes far beyond a simple contractual customer-supplier relationship.

This partnership could take several forms. Why not, for example, partnerships based on multi-year contracts, with each party committing to the long-term sustainability of pricing and services? The aim would be to include providers in strategic discussions and to make intelligent use of their capabilities, particularly when they are a critical partner, as Apidata is. We genuinely believe in this model and strive to implement it with all our clients. Of course, other models are possible, provided they are based on a win-win relationship, a long-term perspective and strategic thinking that enables both partners to grow and develop together.”