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Technology and Digital Transformation to Enable Insurance for All

30 Mar 2023

Emerging digital technologies and growing competition from innovative, new-age rivals are forcing insurers to transform their businesses, led by a modern technology architecture, and digitalisation of systems and processes, which would empower them to simplify operations, enhance customer and partner experiences, and take solutions to the market faster.

It trickles down to the fact that providing a top-notch customer experience along with customer convenience is a sure shot recipe for increasing the insurance penetration and this is possible when an insurer is equipped with state-of-the-art technology and a robust digitized mechanism to fulfil customer expectations.

The existing legacy systems may allow some flexibility in the form of partial accessibility to application programming interfaces (APIs), their rigidity limits the ability to adapt to the fast-changing needs of the business. With businesses becoming dynamic more than ever before, technology teams across insurers are facing difficulties in bringing some of the key trends to life.

Ecosystem tie-ups, enhanced customer experience and digitized processes are some of the trends that are exceedingly difficult to orchestrate given the rigidity of legacy systems. In addition,

Transforming Technology Architecture

Many insurers till date are still taking a reactive approach towards changes and building processes around the existing systems creating an ‘Accidental Architecture’. The system is created with a defined framework and structure for software development, choosing the right set of tools but often focusing on only the past and present challenges leading to a ‘point in time architecture’, lacking future proof planning and upgrade feasibility. As this practice continues, the IT landscape at insurers continues to progressively expand, and the organization becomes less intentional and more dispersed. The result is a highly interdependent and tightly coupled system. To get around the rigidity of core systems, a variety of fragmented minor utilities are introduced, which further muddles up the overall solutions, and rapid transformation becomes challenging or even impossible in certain circumstances.

The ‘Accidental Architecture’, many a times, results in inconsistent data, drains the employees away from value creating activities and adds to customer dissatisfaction. With time, it becomes a challenge to find the right resources to maintain these legacy systems, manage costs of operations and vulnerabilities to security risks resulting in service disruption for customers, hampering insurers’ reputation and market position.

Insurers need to start moving away from complex legacy architecture and rigid, monolithic core system to a more modern architecture and core system built on agile workflows, configurable business rule engine, API-driven microservices and cloud. Increasingly, insurers are taking a possible first step towards modernizing their technology architecture – hollowing out and enabling the core with emerging technologies, which would help solve for a lot of issues around product launch, customer or partner onboarding and servicing.

Open Insurance

New technologies, such as internet of things, blockchain, metaverse, NLP, AI/ML, are continuously evolving and driving innovation in the insurance space. Embracing these technologies have helped insurers in automating manual operational processes thereby bringing in more efficiencies, stimulating business growth, lowering risks and frauds.

Open Insurance, though still emerging in India, essentially means giving partners and communities access to services and data to expand and simplify distribution, provide customer-centric offerings, and venture into disruptive business models.

Insurers can combine their goods with their business partner’s non-insurance offerings to give a more comprehensive and personalized customer experience. Operating efficiencies enabled by open insurance are anticipated to have an impact on the whole insurance value chain, which would eventually save operating cost for insurers. All these could be accomplished through increased transactional efficiency and speed, decreased development and maintenance costs, decreased data duplication, decreased fractional costs, and the introduction of automated straight-through processing.

Technically, open insurance is a combination of microservice-based architecture and a strong API ecosystem that is applied to insurance applications. Using real time data analytics, a microservice architecture encourages building adaptable systems that offer innovative, personalized propositions to the customer. It suggests implementing small, incremental modifications that can be developed independently, tested jointly and confidently deployed into production.

It enables insurers to start looking at APIs as digital products and a potential revenue generator. Insurers can provide their APIs to B2B and B2C partners to deliver value-added services creating a win-win situation for all – customers, partners, and insurers. Open APIs is the future for insurers as it encourages collaboration, opens multiple streams for revenue generation and brings them closer to customers. However, insurance companies have traditionally seen their data as a priceless proprietary asset that offers them an edge over rivals, which may hinder the adoption of open insurance.

In the platform world, insurers have two choices:

Become a platform by combining products and services to meet customer’s holistic needs, or,
Enable partners to integrate insurance into their customer journeys, which would make insurance discovery easier.

Before moving to microservices architecture, insurers must pause and think what kind of business and architecture capabilities they want to have and carefully assess internal expertise, existing technology landscape, partnership with vendors and service providers, relationship with customers and opportunities to monetize APIs.

To know more, read the CII KPMG report on Personalisation and Transformation: Enabling ‘Insurance for All’

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