Having established themselves in the European market, edge IPK and Earnix are expanding into the US property and casualty market. Both vendors have compelling offerings that should succeed in the US market, however, new regulations in the US insurance market and cost restrictions brought on by the current economic climate will not make it easy for either company.
US property and casualty (P&C) insurers are squarely focused on the customer, and improving the customer relationship is hugely important in today's market. This focus on the customer is gaining attention from overseas vendors, such as UK-based edge IPK and Israel-based Earnix, which are both well positioned to succeed in the US market. However, they will face their own set of challenges.
edge IPK is primarily focused on the UK P&C market but is making a push into the US. It offers edgeConnect, which enables insurers to write one application and have it delivered over many channels. As a result, not only does the total cost of development decrease but so does the cost of maintenance. In addition, the solution meets two strategic initiatives dear to insurers: improving the customer and/or agent experience, and reducing application development and maintenance costs.
edge IPK's first win in the US was the Willis Group and its primary go-to-market strategy for expansion will be leveraging existing clients that have operations in the US; for example, Zurich Financial Services and Allianz. The company will also target second tier insurers through direct sales.
edge IPK is well positioned to succeed in the US market. For one, the company has a proven track record with large insurers in Europe. By leveraging those customers to quickly win business in the US, edge IPK should be able to achieve marketplace credibility in a very short time. edge IPK will also benefit from its partners that are entrenched in the insurance industry, namely CSC and IBM.
However, the company's launch into the US market could be slowed as insurers take a 'wait-and-see' approach on channel investments due to the uncertain regulatory future. At the moment, the US is considering creating a national regulator to supplement state-based regulators. If a national regulator prevails, a greater number of insurers will be able to gain the scale required to sell direct, which could lead to fewer dollars spent on the agent channel. If a federal regulator does not prevail, insurers may be more inclined to invest into their existing agent channels. In short, the future of US insurance regulations will impact channel investments, so vendors offering channel solutions may experience a temporary lull.
Earnix is an Israel-based price optimization specialist that has over 25 customers, the majority of which are in Europe. For the most part, insurers price policies solely on a risk basis, but Earnix enables insurers to incorporate a customer's lifetime value alongside their risk composition, by scenario testing the profitability of products and pricing options on each customer. Lloyds TSB Group recently began using Earnix and reported that its $6.3 million investment in analytics is yielding $23.8 million per year.
Earnix is currently retooling its message to the market; having realized that information is of little value if it is not readily available, the company has developed Integrated Customer Value Optimization, a middle layer that improves real-time integration between the back office and core insurance systems.
Earnix is going to market in partnership with key players in the insurance vertical, most notably IBM and Towers Perrin. Long term, the company aims to original equipment manufacture its product with vendors that are moving fast and furiously into the insurance vertical. One vendor that immediately comes to mind is Oracle, which purchased Skywire and AdminServer in 2008.
Over the long term, Earnix has a bright future in the US market, as US insurers that find themselves in a fierce competitive landscape realize that they need to reduce customer acquisition costs through higher retention and improve profit per customer. However, Earnix is selling a top-line benefit, which in today's market, is far more difficult to sell than hard cost savings that can be realized quickly. As the market rebounds and insurers return to normal profit levels, benefits realized through better customer management should become more appealing than offerings focused on tactical cost savings.
Jonathan Steiman