New trans Atlantic partnership signals future tech model for insurance industry

New trans Atlantic partnership signals future tech model for insurance industry

Jul 15, 2013

A business partnership forged between Aquarium Software and global giant RSA’s pet insurance brand, Pets Plus Us, could signal the start of a whole new way of UK insurers buying technology platforms. Unlike the standard software business model in the insurance and indeed many markets – whereby the technology firm charges a large up-front fee for deployment and then charges ‘per seat’ for the number of people using the software – the Aquarium model flips that conventional thinking squarely on its head.

In essence, the client only ends up paying for the software if they use it. “We like to call it sharing the risk, but a phrase you are likely to hear more of in the future is ‘transactional revenues’”, says Aquarium’s Sales & Marketing Director, Mark Colonnese. “Instead of charging a huge fee up front and then charging for each user, we’re only interested in charging for the volume of policies sold or  renewed, or claims processed through the system. That way, unless our software really works for our clients they are free to look elsewhere or stay with their legacy platform with the vast majority of their capital intact,” he adds.

Transactional deal

Aquarium and Pets Plus Us agreed to a novel ‘transactional’ deal arrangement, where only modest initial financial commitment was required. In return for its up-front development work and consultancy time, Aquarium will get a fee for all the insurance business that Pets Plus Us processes in the future. For Randy Valpy, ‘Top Dog’ at Royal & Sun Alliance-owned Pets Plus Us, this meant he could concentrate on investing in marketing, while for Aquarium, its efforts will be amply rewarded as the client’s business prospers.

“We only earn if our clients are successful - we get paid when our clients get paid and this makes us deeply motivated to deliver a solution that really works” explains Colonnese. “But it also means our clients do not get trapped on outdated platforms. We have to keep one step ahead of the game continually re-investing in our solution to ensure ongoing client throughput which generates cash for us.”

Pay-as-you-go technology models are not in themselves a brand new concept, as Colonnese freely admits, however the traditionally conservative UK insurance software market hasn’t seen anything like this at such a bespoke level before, as far as Aquarium and their business partners are aware. “We’ve been developing and honing our offering for several years and have been working with insurers, loss adjusters, and claims management companies to get to where we are today,” says Colonnese. “We have yet to see any other mainstream supplier offering insurance process management or claims management software on a similar basis.”

The proof of the pudding with all these things is in the eating; in the case of RSA, they overlooked bigger players in Australia and Silicon Valley in taking a firm stand as a cheer-leader for Aquarium’s model.

“For us it was a real no brainer,” said Randy Valpy, “We picked Aquarium after sifting through several rival technology companies globally. Some were too expensive, others based on technologies that have a questionable lifespan. They were simply not fluid enough for us,” comments Valpy. “Or not scaleable enough. You can get similar transactional models elsewhere but the solution you’re offered is ‘one size fits all’, not tailored to your precise needs. What Aquarium has provided is unique to us and that was absolutely key.

Freeing up capital for growth

With a track record in developing and delivering P&C (Property & Casualty) systems for large UK insurers such as Capita, including work on their pet insurance business, Aquarium could offer Valpy a bespoke, highly responsive service, more cost-effective than some rivals but specific enough to deal with the many complexities of the burgeoning pet insurance market.

“With Aquarium we’ve invested in what I believe is a Rolls-Royce solution, when initially we only needed the Volkswagen,” said Valpy, alluding to Aquarium’s mega capacity, which he fully expects to need in the coming years.

“At the end of the day we had a simple decision to make. Once we had done our due diligence and confirmed Aquarium were a suitable and stable partner with which to do business, the decision was clear: with Aquarium we would free up spend for marketing and only pay Aquarium revenues if our business grew at the rate we hoped; with the other offers on the table, the marketing budget would have to be dramatically curtailed and we would still end up paying a major chunk of cash regardless of the success of the technology or indeed our own new business venture.”

Colonnese adds: “Thanks to the investment we have made in R&D our technology platform can uniquely offer a solution that is tailored to each of our clients’ needs quickly, and without huge up-front capital investment. This is what makes us really different.”