Greg: Nearly all vendors talk about being ‘cloud’. How is your platform different?
Dan: Socotra is the only platform that’s built from the ground-up in a modern way. Lots of systems out there are refactored legacy systems, rather than built from scratch.
We see three main differences:
- We’re true–cloud. Here’s one simple way to determine if a vendor is true-cloud: if they have to tell you when the upgrades are happening, then it’s not true cloud.
- Productisation: it’s a true (software) product. When I started the company I realised that there’s not a single product on the market where you can ask the vendor for a licence and just try it out. Conversely, I can send anyone a login to their own ‘full stack’ Socotra sandbox in ten minutes.
- Flexibility to represent any insurance product. Classic systems have lists of supported products, and that means hard coding.
A good example of how this all manifests itself is with our APIs. Our APIs are truly open and integral to the core product. You can find the API documentation on our website. This is standard for true–cloud productised platforms. Many other platforms are secretive about their APIs. That’s not because the APIs are ‘special IP’. We believe it’s because they don’t have a true–cloud product and APIs are custom built for each client.
We made the, arguably brave, choice to build the platform from the bottom–up. When you build a platform, you can build top-down or bottom-up. Building top-down starts with a demo, a user interface and quick sales. This approach tends to be favoured by insiders and people who understand the front-end parts better. The other approach is bottom–up. This starts with the data model fundamentals. Top-down gets you in the market faster but the bottom–up approach is the only way that can lead to a truly industry changing platform.
Greg: Is the difference all in the technology?
Dan: The technology is crucial but to be a true-cloud platform it has to be in your DNA. To get that DNA we have hired our engineering team almost exclusively from industries that are further along technologically. Our engineers come from companies such as Oracle, Cisco, Google and Microsoft. To these companies, modern true-cloud approaches are second nature.
Of course, we have deep industry experience on the business side.
All we’re doing is taking principles that Silicon Valley has known for ten years and applying them to insurance. If you look back at the startup world of the 90s it was all about stealth startups. Now there are very few. That’s because you have to be open to become a great company. You have to subject yourself to the market as early and ruthlessly as possible. That’s how you learn what works and what doesn’t. Otherwise, you’re like an athlete practising at home on your own, and will never reach top performance. You have to open yourself up to scrutiny.
Greg: Did having no insurance expertise in your engineering team slow you down at first?
Dan: Not at all. Firstly, we had access to insurance expertise from the start. Our sister company, an insurance consulting firm, gave us complete access to expertise. Also, we strongly believe that if you hire insurance people and ask them to make something better they are too aligned to the current ways of thinking. That’s why the Tesla wasn’t made by GM or the iPhone made by Nokia.
Innovation happens when you have the right blend of insiders and outsiders.
Also, our Head of Product previously spent a decade leading product at Guidewire. This ensures we have the right blend. That’s critical. The business tells you what to build, the technical team tells you how to build it.
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Greg: Sometimes companies are nervous about bringing in ‘new tech’ vendors. What is your response?
Dan: It’s understandable but, we believe, a short term approach. If you’re buying a classical system your perceived risk in the short term goes down – well known, client credentials etc. We’re now getting to a point where this old approach is getting unbearable. We believe that there is a singularity coming in policy administration. People will go to a true-cloud platform that will last much longer than previous platforms as cloud enables it to continue improving seamlessly. A parallel example is email. If I were to ask a Gmail user when they plan to upgrade their email system – that question just doesn’t make sense for something that is true-cloud. When new advances come along, I don’t need to do anything and they will just work their way in.
That’s what Socotra means for core insurance IT.
The insurance industry, being risk averse, tends to lag in technology. However it’s not like a sled being pulled by a rope, it’s more like pulling with an elastic band. It will hold still and then it will leap. The whole InsurTech movement is one of those rare leaping moments.
Greg: It feels like you’ve really started to get traction at scale in the last 12 months. What’s changed?
Dan: A big factor is we built the platform bottom-up and it’s taken time to get to the tipping point where our product capability is market leading. We’re building it right and we’re not taking shortcuts. That just takes time. We’re now at a point where I believe we’re in the lead because we have the features but we also have the groundwork done. Incumbents may have the feature list but they would have to start over to achieve what we have.
Also, all of our sales so far have come from word of mouth and inbound requests. It’s been all that we can handle keeping up with the people that want to talk to us.
We’re now expanding as well. We already have a full-time presence in Australia and will have a full time presence in Europe as soon as the pandemic allows. There’s a lot of interest in other geographies but these are where we’re making significant investments.
We’re excited about the clients we’re getting on board. We already have AXA Group, IAG and Mutual of Omaha using the product in production. We just announced that MS Amlin has chosen us for a new digital SME initiative in Europe. (Read the full press release on Socotra’s website.) We’re particularly excited as the Socotra implementation for MS Amlin has kicked-off remotely. This is possible because we have open documentation and a true product. In a pandemic world that’s huge and absolutely necessary.
Greg: What does the future hold for Socotra?
Dan: Socotra’s business model is simple, and it’s not changing. We make and sell a great product. We’re not interested in selling customizations. We’re not interested in becoming insurers ourselves. We’re not interested in being acquired. The gap in the policy administration space is big enough to drive a truck through. It’s important, it matters, and nobody else is stepping up to meet the need.
We believe there’s a certain kind of platform that’s destined to exist in this space: true-cloud, open APIs, cohesive data model, and configurable by anyone to handle any insurance product.
Socotra already is the first truly modern platform in this space. There are features we’ve had to sacrifice to get there, and it’s time to add them. The market has responded. They’d rather have a modern system (even if it means bolting on some features themselves, using the APIs), as compared to a fuller featured classical system that is outdated on delivery and won’t meet future needs. As Socotra’s feature list grows, insurers will no longer need to even consider the trade-off between modern technology and rich feature sets.
Given our deployment model, there isn’t going to be a big bang of capability – insurers will notice it improving over time through quiet, continuous upgrades. To name a few specific things on the roadmap; we will be delivering enhanced claims capabilities, support for permanent life products, and enhanced billing.
The Oxbow Partners view
Cloud technology is increasingly becoming the norm for insurance technology. Data sovereignty issues aside, most (re)insurers and brokers want to avoid owning the underlying infrastructure. Most technology vendors offer at least a cloud option for deployment.
What is different with Socotra is that they’ve taken a much broader, and arguably more modern view of cloud. This means fully cloud based, instant login, online and open API documents. As consumers, and increasingly as businesses, we expect to be able to get instant access to technology – so why should policy admin be any different. N.B. based on a cursory review of other vendors that we consider to be at the forefront of technology, we couldn’t find any others that were as open as this.
This approach has clearly meant starting from the ground up, something that arguably slowed their journey in the early days. But they should reap the rewards now that the capability has reached a level of maturity. This is evidenced by the recent growth in client numbers.
As with all new ways of working there is always the concern that the market isn’t ready for it. I would argue that this challenge is declining rapidly. I think we are rapidly coming to the tipping point where insurers reach sufficient frustration with legacy technology to be willing to take what is perceived as a risk, and new technology vendors reach sufficient maturity to mitigate that risk.
Our advice? If it sounds compelling, take Dan up on his offer of a free trial.