Legacy software systems pose several challenges for insurance companies, given their complex ecosystems. Old systems often struggle to cope with the load of data received from multiple countries, customers, medical institutions, banks, smart devices, etc. Old systems may lack flexibility, present integration difficulties and security vulnerabilities, and have limited scalability as well as high maintenance costs. IT modernization can address these issues and enhance security, accuracy, performance, and customer experience. DigitalMara has studied various insurance platform structures and technologies to help develop more effective insurance projects.
Digitalization and modernization in the insurance field can encompass insurance processes, data, products, and operational models. In practice, modernization means implementing data lakes and straight-through data processing, asset management systems, processes automation, MDM (mobile device management) systems, advanced CRM systems and self-service opportunities. Thanks to these improvements, insurers are able to handle large volumes of data, make faster and more accurate decisions, reduce fraud and other risks, and improve their products and services.
Customers today expect insurers to provide a personalized digital experience. They want to have easy access to insurance guides, services and payments anytime and from anywhere. This means companies should consider implementing omnichannel solutions and updated insurance models, including mobile apps. For example, offering clients on-demand insurance policies that can be purchased and activated instantly through an app.
When developing insurance software, it’s important to pay attention to certain peculiarities:
- One of the most important factors is the large amount of data insurers must deal with. Data comes from a variety of sources and is updated frequently. So insurers need advanced data management tools to automate manual underwriting, eliminate errors in claims processing, and assist with predictive analytics.
- Insurance is a highly regulated industry with strict data security and privacy standards. Security breaches lead to the loss of sensitive customer information that can be used to steal an identity and to commit fraud. Such leaks cause reputational and trust losses and potential legal consequences. Newer technologies can help with proper data management as well as cybersecurity protocols.
- Digital modernization of insurance platforms refers to the process of modernizing traditional insurance systems and processes, to improve profitability, agility, and performance. It’s quite a challenging task. The basic steps include transitioning to a cloud environment and workflow automation.
- There are new risk profiles not previously considered by traditional insurance systems. For instance, cyber risks such as hacking, data breaches, and usage-based insurance based on individual behavior. Technologies are needed to develop new insurance products, update risk models and provide more accurate risk assessments.
From legacy to digital
Traditional legacy systems have limitations. They are not flexible enough to adapt to new business models, market changes and customers’ needs. They also have technical limitations when it comes to allowing integrations with modern technologies such as mobile apps and cloud-based platforms, as well as data management, including handling large volumes of data or complex data structures. Legacy systems may not have the latest security protocols, and that makes them vulnerable to cyberattacks and data breaches. And last but not least, there are high maintenance costs because they require specialized expertise or hardware.
All of this has a negative impact on the company’s brand image and service quality. Meanwhile, their customers want digital solutions, customized offerings and fast responses to queries. Legacy infrastructures are not flexible and scalable enough to meet these needs. The way out of the situation is to restructure the company’s main systems and transform the overall business model. There are several approaches to modernization: the insurer can modify the functionality and structure of the system, create its own platform, or purchase a standard software package. The choice depends on the state of the legacy system and the available resources.
A traditional core insurance platform has four main elements:
- Policy administration system (PAS),
- Centralized database on the local server.
The old interface makes it difficult to use, for both agents and clients. Which in turn makes it difficult to conduct key operations, from invoicing and claims to reporting and analysis. At the same time, manual data entry results in errors. Legacy insurance systems are missing proper CRM, business and customer portals, and business intelligence parts.
A modernized digital insurance platform adds the following elements:
- Components for automating all processes,
- Utilities for data storage, analysis and governance,
- Integrations with third-party services,
- Security in all units of the system,
- Connections with partners.
Technologies to develop an insurance platform
Cloud technologies – Cloud technologies allow you to entirely rebuild an old insurance platform, for example, to create cloud-based PAS platforms, record-keeping and underwriting solutions, intelligent claims processing and new products, and provide customers with an omnichannel experience. Using a cloud system increases efficiency, scalability, and durability, and makes it possible to process and use large amounts of data, such as thousands of claims. What’s most important is that new features, functions and products can be developed, tested, and launched faster in the cloud. The insurer benefits from more efficient use of assets, automation of processes, fraud detection, and risk assessment, more flexible operating models, better customer service, and compliance with regulatory requirements.
APIs and Integrations – APIs are valuable tools that can assist in a faster launch of new products and services, creating a new digital experience for employees and clients and rebuilding business models. In practice, they connect various components of the system with each other. For example, they give access to information from large databases, receive data from trackers, sensors and wearable devices, and link to third-party apps, services and chatbots. In general, APIs also serve to streamline procedures, increase the speed of processing and improve accuracy.
Artificial Intelligence and Machine Learning – AI and ML can be widely implemented in insurance activities, such as risk assessment, predictive analytics, fraud detection, automated interactions (advanced voice responses, chatbots and self-service tools). They are capable of reducing human error at all stages and making processes more accurate, efficient and fast. For example, insurers can provide better customer service through simpler and streamlined claims processing and underwriting.
Business Intelligence and Data Analytics – Data for insurers is collected from various sources, such as telematics, agent interaction, customer interaction, wearable devices, smart homes, etc. And the amount of data is constantly growing. If the data is scattered across different systems and not visualized properly, it can get lost and become useless. Insurance companies need BI tools to efficiently store, use and manage all data. Data analytics is needed to make more effective, data-driven and well-informed business decisions, reduce the number of fraud cases and risks, and improve offers and services.
Cybersecurity (data security) – Like any sector that works with data, insurance providers face risk. Large amounts of information, such as personal and contact info, financial and health details, need to be managed and stored reliably and securely. Client portals, claims, financial transactions and data warehouses are sensitive to vulnerabilities and cyber threats. Basic security recommendations include implementation of risk assessment, secure access and data encryption, monitoring of user activity and third-party risks. Comprehensive security solutions should be integrated into insurance software and applications and work with all types of data in various operating systems and environments.
Insurance industry compliance – As was mentioned before, insurance is a highly regulated industry that needs to comply with a variety of standards. This includes GPPR, the laws of a particular country or region, HIPAA for health data, Know Your Customer (KYC) standards, Anti-Money Laundering (AML), anti-corruption practices and ethical norms. The activity of an insurance company must be transparent, so that customers and regulators know they can trust it. Any violation or malfunction will not only have regulatory consequences but also cause damage to customers. Insurance companies can implement risk and safety assessment systems that can assess the likelihood of risk and mitigate potential damage.
Digitalization is transforming the insurance industry by enabling insurers to streamline their operational activities, enhance customer experience, and improve profitability. Technologies such as AI, ML, Blockchain and IoT are driving innovations and creating new opportunities for insurers to offer personalized products and services. Companies are changing their policy-oriented approach to a customer-oriented approach. Insurers can better understand the needs, preferences and behavior of customers and adapt their offers accordingly.