How Insurers Can Save by Spending on Experience
Insurers often have legacy and outdated core systems that are older than the customers they serve. Obviously, this poses big challenges given the need to accelerate digital transformation and innovation efforts in an increasingly digital world.
Successful core system transformation requires thoughtful planning and answering questions such as: how to achieve our business objectives such as increasing operational efficiency? How do we decrease the time to market and improve customer and broker experience? What are the best options around? Should we change all or part of the core?
Many insurtech solutions support insurers with this, ranging from platforms to facilitate end-to-end digital processes that replace the traditional way of working, to platforms to build advanced solutions on top of the existing systems, to Insurance-as-a-service platforms that allow insurers to offer digital insurance with limited impact on their own structure.
To shed more light on the latest available options and how to find the best way to success, we sat down with Nick Ford, Chief Technology Evangelist at Mendix.
Mendix, a Siemens business, is the global leader in low-code and no-code application development for the Enterprise. Founded in 2005, Mendix currently serves 4000 customers across the world and has over 800 team members. 135,000 developers use Mendix. Leading Insurers using the Mendix low-code development platform to accelerate their digital transformation are f.e. CapSpeciality, CED Nederland B.V, Chubb, Erie Insurance, LV=, OpenClaims, RGA and Zurich.
Given the variety of core systems, how does a company determine which way to go? In other words, how to get to the right system?
Nick: Let me begin by saying that it would be counterproductive to look for a system that can everything, as this approach is not maintainable, robust, or even cost effective. Systems, much like people, have different specialties for a reason. For example, an Insurance Agent and a CIO could swap roles in a pinch, but neither would be the best person for that job. There is a difference in purpose, roles and capabilities required.
So, how do you see the various functions of insurance systems?
Nick: To understand these functions and how to integrate these, let’s look at their evolutions. Traditionally, core systems were meant to provide a carrier with an automated way of managing policies, claims, and bills. At first, one software solution covered all these bases, but internal users quickly realized that they had different departments that had different workflow needs. This resulted in specialized offerings in the market – so then we had a billing system, a claims system, and a policy administration system. With this separation, integration became a challenge.
Fast forward to the age of modern desktops and agents need a way to automate their entry of events around a core suite. Sometimes, in the shape of desktop application that functioned as a typical client server app with the mainframe being the server. This created a separation of workflow which helped agents and brokers to do their job by following the best sales process instead of the core system needs.
More recently the need for real-time systems arose. This led to platform solutions enabling real-time interaction with events on the policies, while allowing companies to buy parts of their platform and integrate with other systems. However, by tightly coupling the user experience to the workflow needed to process events on a policy, they didn’t allow agents to have a truly differentiated workflow.
If I understand you correctly, it is about looking for what a certain system does best?
Nick: Indeed! Having said that, the term “Best of Breed” was heavily overused in the insurance industry. It roughly meant paying for all the best core policy, claims, and billing systems out there, only to spend a fortune on integration.“Best of Breed” should mean using the best software and tools available to meet your business needs. Utilizing the best thing to solve a specific problem.
Okay, let’s narrow this down to Mendix’s expertise; user experience
Nick: Novarica, a leading research firm, recently listed the current experience solutions in two categories.
- The first category consists of ‘Digital Experience Platforms’ or DXP, which includes insurance platforms that evolved from what we traditionally think of as the agent- or broker-facing applications.
- The second category is ‘Application Platform as a Service’ or aPaaS solutions
,which have only truly matured in the past decade in enabling enterprises to build secure, scalable, and maintainable applications, while still following proper IT and development best practices. They are now more well known as low-code and no-code platforms.
The Mendix solutions are within the aPaaS category. How does this relate to Best of breed?
Nick: Best of breed requires an underlying architectural principle that systems should have the ability to publish or consume fine- or coarse-grained services. aPaaS offers this ability, with which you can enable a system doing only the things you need it to and nothing more. By looking for solutions that have a solid API layer but not the fanciest of other features, you will create the ability to reduce long-term expenses by picking made-for-purpose systems. It’s a big plus if that system can easily plug into an Event Driven Architecture.
The way to talk about this separation of functionality is by using the common “as a Service nomenclature,” such as Policy as a Service, or Claims as a Service, or Content as a Service.
When thinking of separation, use microservice architecture principles and break things apart. Ask yourself, could this be used somewhere else? If the answer is yes, make it “as a service.”
Can you give an example of this?
Nick: Sure. For example, by having a true content system, the business can own the data, control who can consume that data, and decide how they would like that data presented. That content might be owned by many parts of the business, but the team responsible for the brand and experience would be able to decide on where to use it without enlisting an army to have many meetings about it. Another scenario might even be to break apart your Policy as a Service to the type of policy, life versus P&C.
So, this ‘only use and pay for what you need’ architecture enables a more inexpensive approach to Best in Breed, as well as flexibility to add or remove components?
Nick: Exactly. With the low code approach, you can create custom widgets inside the framework that suit your specific needs. In this way aPaas allows for a great user experience that integrates into processes and has good workflow. And next to that it ensures creating these engaging experiences at speed, without compromising legacy systems or requiring large modernization projects.
To wrap it all up, what is the way to go?
Nick: You don’t want your CIO to be an Insurance Agent and you don’t want your Insurance Agent to be a CIO. An organization runs better when people are in roles where they can work to the best of their abilities. You should apply that same thinking to building your core system. Look for as-a-service platforms that really are the best at a specific function. Your experience layer should not be your content management system, that data should come from your Content as a Service Platform, nor should it be the place that houses your insurance business logic, save that for the Policy or Claims as a Service platforms. Leverage the best solutions in UX and Process Integration to focus on what they do best, experience.
By doing this, you will have a differentiated experience that you can fully control and own, but the processing speed and efficiency that the core systems provide.