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Ten steps to reinvent digital transformation (DX) at insurers 

Most insurers still use legacy environments while introducing layers of newer technologies to provide enhanced services to their customers. However, becoming truly digital requires a shift towards a modern architecture to reinvent the business and introduce innovation. Here are 10 steps to assist a traditional insurer with the migration. 

Step 1 – Increase your agility

The entire IT architecture should become agile instead of organizations trying to maintain a multi-speed environment. Due to rapidly changing customer requirements that demand a fast go-to-market strategy, digital transformation must happen across the entire organization. It must be the core that enables innovation. 

Step 2 – Manage channels

Insurers must consider how best to manage the increasing number of channels and end devices and make those as frictionless as possible. Customers judge the level of digitalization at the insurer based on their experience using their end devices. This is where all their interactions take place and how they engage with the insurer. But this is not only limited to customers. The insurer must also support its mobile sales agents with the data and solutions needed to make informed decisions while operating remotely. 

Whether it is a laptop or a mobile or even a virtual assistant such as Amazon Alexa or Google Home, the user wants a seamless experience from whichever device they use. To date, only a few traditional insurers have been able to ensure this capability to increase the customer experience. This is where the concept of the omnichannel must be implemented for consultants and agents alike to empower them with the data they need to create a more tailored customer experience.

Further, to support new business opportunities, changes to applications must be considered. The insurance industry is an excellent example of how insurers are changing their service offering to their customers. However, this can only happen if the applications are structured in a way to be more agile and rapidly adapt to changing market conditions.

Step 3 – Embrace microservices

Insurers should consider using microservices to gradually replace software monoliths. Those front-end, all-encompassing software applications developed in the 90s have reached their limit. Maintaining these systems, while still managing new implementations, costs time and money. Fortunately, most insurers have realized they must start using loosely coupled systems. However, replacing software that has been developed over many years should be done in phases. A big bang approach is too disruptive and scares even the most forward-thinking organizations.

At the core of these systems are microservices. These split complex applications into smaller, highly specialized components to be used as services. As a result, agility, scalability, and availability inside the organization increase massively. Using such an approach significantly reduces the complexity of the insurance application landscape. 

Step 4 – Go API-first

An API-first approach must be considered. It means establishing the foundation to easily integrate with other systems and applications. Furthermore, this eliminates the silos of information caused by legacy or departmental solutions.

Insurers must, therefore, develop their applications in such a way as to allow integration with both internal and external systems. One way to do so, is to publish those business-oriented integration points through an API management platform to offer B2B or even B2C services. An API-first strategy is leveraged with microservices and enables the insurer to build software-as-a-service (SaaS) offerings.

Step 5 – Leverage SaaS

Insurers should focus on how SaaS speeds up innovation cycles and reduces implementation effort. The current trend of supporting SaaS concepts will increase their adoption due to the advantage of transparent provisioning and clear billing procedures. Essentially, everything that can be outsourced, will be outsourced. 

Step 6 – Speed up innovation

API-led architectures can speed up innovation cycles and reduce implementation effort. As more SaaS offerings are released, it is important to integrate them with a vendor-agnostic approach. This lets the insurer select the best possible solutions that enable it to innovate at the highest level. Consequently, an API-led architecture lets insurers fully support and integrate with most emerging SaaS services. This not only speeds up the time-to-market to integrate but also accelerates innovation. The focus can now shift to the business instead of wasting time and money on implementing layers of integration.

This also relates to development platforms, which are changing as the shift towards cloud-native applications are taking place. In the past, all the development of services happened on a locally installed tool. Every time a new component or library to integrate a system was released, the development tool needed to be updated. However, the current speed of available cloud services and the associated new versions of their APIs, it would be impractical to maintain an on-premise development solution. By shifting the development towards cloud applications, the Web-based environments of insurers will always have the latest version of the tool.

Step 7 –The power of visual design

This step focuses on visual design with either no code or low-code requirements. So, instead of taking weeks or months to integrate applications, it can be done in a few hours or days. While a low-code approach still requires coding by someone knowledgeable about programming, it is significantly faster and more cost-effective than traditional methods. For its part, no-code software takes the low-code concept to another level, allowing even those with no programming knowledge to tailor an application to their needs.

This goes hand in hand with the concept of visual design. By dragging and dropping components to develop the integration flow, it is more a matter of configuring each step. The advantage is to allow lines of business to be involved in the development and even in some cases designing the solution themselves to speed up the time to market and be independent of IT.

Step 8 – The benefit of IPaaS

Once this is done, the focus can turn to integration platform-as-a-service (iPaaS). Most insurers need to reduce the cost of managing their in-house data center. When an additional load is placed on their systems or new applications released, more investment is required to update the hardware infrastructure. These additional machines require more management from the IT team using up resources that could have best been spent elsewhere.

With leading infrastructure-as-a-service (IaaS) providers, machine processing power can be easily allocated with a click when vertical scaling is needed. Going a step further, container-based services can scale according to requirements and shrink down when demand decreases. With cloud-native platforms, integration can be considered a service. This means iPaaS can be used to successfully connect multiple data sources and third-party services in the cloud and scale horizontally based on the load .

Step 9 – Introducing data science

Data science being used to assist with risk assessment, to predict risks and claims, help with pricing strategies, detect fraud, and help create more effective recommendation models. Often, insurers are just scratching the surface by applying data science to run pilot projects or experiments. They are not using data science to its full potential for improving the decision-making process. 

By applying machine learning and artificial intelligence effectively, better operational decisions can be made, and insurers will have an enhanced understanding of their customers. Segmenting the customer base, understanding their behavior, predicting what they are looking for, or what to offer at the right time can determine the success of the business. Data, therefore, needs to be analyzed in real-time to avoid missing opportunities.

Being able to predict what customers are looking for or what to cross-sell or upsell can unlock previously hidden growth areas. As access to real-time data starts increasing, the insurer can then apply statistical models to develop contextualized marketing initiatives. The right moment, the right product, and the right customer will be more relevant than ever.

Step 10 – Moving beyond on premise

Insurers must be able to separate from their own infrastructure. Up until recently, not many organizations outsourced essential IT systems to the cloud. However, the cloud has become the infrastructure of choice for the digital age, and the era of on-premise data centers is coming slowly to an end.

Additionally, cybersecurity has become one of the three most important topics on the agenda for most insurance CIOs. Since 2009, the number of cyberattacks has increased by 66% annually. No company can afford to invest heavily in IT security due to the multitude of professional hacking collectives in the market today. 

Since most insurers already check their IT security from the outside with penetration testing tools, this has given rise to the Security-as-a-Service (SECaaS). These kinds of cloud-based security services enable insurers to execute comprehensive security checks before potentially infected data reaches the corporate backend.

The future

Insurers can no longer rest on their laurels and think that their existing legacy infrastructures are good enough for the fast-paced digital environment. They must embrace change and look towards cloud-based offerings to not only become more agile but customer-centric as well to deliver a vital competitive advantage in a cluttered environment.

By Alessandro Chimera, director of digitalization strategy, Tibco Software

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