An Investment Thesis, Revealed: ‘No-Code’ for Insurance
‘No-code’ is about to become a cornerstone of the technology stack, where non-engineers can assemble a product, a user experience, or a claims process using a set of software building blocks.
- Caribou Honig
- July 2022
After 15 years of investing in insurtech, fintech and other data-driven sectors, certain lessons become clear. Focus on world-class founders. Gross margins actually do matter. Don't mistake scalability for sustainability. And above all, pay close attention when a new technology begins to achieve mainstream adoption.
We are at a tipping point where “no-code” is about to become a cornerstone of the technology stack. Over the next five years we will see the no-codification for insurance similar to the API-ification of the past five years.
No-code is not perfectly well-defined. As a working definition, think of it as a set of intuitive tools and systems that non-engineers use to create software. While the engineers remain essential to write the atomic-level building blocks of software, a no-code platform enables the rest of the organization to snap them together like Legos.
No-code isn't new. It's been around for years, although many would say it failed to deliver on past promises. But a new generation of no-code platforms like Unqork, EasySend and CoverGo have recently emerged. Why should we believe no-code will become the cornerstone of insurance technology, and why now?
I'm not an artist, but I can appreciate good art when I see it. Likewise, I'm not a technologist, but I can appreciate good tech when I see it.
The first benefit of no-code is obvious but not profound. Put simply, it reduces the cost of tech spend. Alternatively, it enables the organization to build more with the same budget. It is a fundamentally more efficient way to construct the technology.
The second benefit is speed. Building from scratch is not only costly, but painfully slow. To assemble a product, or a user experience, or a claims process from building blocks is faster, perhaps by an order of magnitude for larger enterprises. And as organizations commit to digital transformation, speed matters.
The last benefit is profound but not so obvious: No-code takes the non-technical business people closer to the silicon and equips them to bring their vision directly to reality. Put another way, no-code promises to remove some of the garble that results in the handoff from “the business” to “the developers.” Without no-code, a product manager writes a so-called user requirements document in prose, and a developer writes the software as they interpret those requirements. With no-code, product managers can go directly into assembling the building blocks themselves.
To be fair, even with these benefits in mind, adoption will not be uniform. As an investor, I need to identify the early adopters of technology … and the laggards. In the realm of no-code, the middle market really stands out as early adopters. These are the insurers and brokers who know digital transformation is required to stay on pace with the competition, but also realize they lack the scale to build it all from scratch. No-code platforms give these midsize carriers the capabilities they need at a cost they afford.
In contrast, adoption may take years longer elsewhere. Startups, for instance, might only see incremental benefits of using a no-code platform. Startups also are likely to face cultural barriers, feeling obligated as a tech company to build everything internally and from scratch. Ironically, the very largest incumbents often adopt a similar mindset, believing they have the scale to build it all in-house. As the saying goes, just because you can doesn't mean you should, but it often takes a painful failure—and a big write-off on some in-house system that never gets deployed—for organizations to change their approach.
As a venture capitalist, I am arrogant enough to think I can see the future of an industry. I've also experienced enough mishaps as an investor to always know I might be wrong. There are two main reasons I might be wrong and why no-code might fail.
First and foremost, it is human nature to resist change. This is especially true when the change threatens a person's value or role in an organization. My favorite example is when a startup pitches its machine-learning capabilities to replace actuarial science … and needs to sell the senior actuaries. A similar dynamic could erect barriers to the adoption of no-code. A company pitching no-code may encounter undue resistance if IT executives feel like adoption would diminish their role or undermine their position in the organization.
The greater risk to the no-code thesis, putting it bluntly, is whether these platforms actually work as claimed. The first generation from years ago were really configurable systems rather than no-code platforms, and they're widely viewed as a disappointment. There remains a lingering question whether the current generation of no-code platforms do, finally, deliver all the benefits of cost savings, speed and moving business vision directly to implementation.
I would like to say this is the billion-dollar question. But it's more than that. Consider how much is at stake for the insurance industry. Consider how much the industry spends on technology every year. The future for no-code, when it works as claimed, is the hundred-billion-dollar question.
Best’s Review contributor Caribou Honig is chairman and co-founder of InsureTech Connect, as well as a partner at SemperVirens Venture Capital. He can be reached at email@example.com.