Should I stay or should I go? Insurance companies grapple with innovation
Insurance companies and innovation don't often seem to go hand-in-hand, but as customer expectations rise, the industry must make changes.
The convergence of insurance and digital technology — “insurtech” — has transformed the industry, spurring growth and accelerating innovation.
Over the past few years, insurance companies have invested heavily in insurtech. In 2021, the insurtech market was valued at $3.78 billion, according to Grand View Research.
For insurers, the advantage of partnering with insurtechs is that they can expand their existing product portfolio or simplify internal operations in a fast, low-cost way without having to build the internal expertise or applications themselves. But challenges remain.
What is insurtech?
Insurtech, short for insurance technology, refers to innovative use of technology to improve core business processes, efficiency, speed-to-market, and customer experience for the insurance industry.
Insurtech solutions leverage advanced technologies such as artificial intelligence, data analytics, machine learning, blockchain, Internet of Things (IoT), and cloud computing to streamline processes, enhance efficiency, reduce costs, and ultimately deliver better services to both insurers and policyholders. Insurtech falls under the broader FinTech or financial technology domain.
Insurtech’s goal is to make it easier for customers to buy insurance products, including life insurance and policies for small businesses. For example, the technology has made it possible for customers to research and buy insurance online without working with an agent.
Although insurance companies initially feared insurtechs would whittle away at their market share, partnering with these disruptive tech firms is now widely seen as the catalyst necessary to drive growth and speed the development of new insurance products.
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Transformational: Insurtech use cases
The rise of insurtechs has had an uplifting effect on the industry, and the list of possible transformations is growing. Early use cases include:
- Telematics for usage-based and “pay-how-you-drive” auto insurance models
- Disruptive business models, such as peer-to-peer insurance
- AI-aided fraud detection and AI-enabled service
- Internal workflow automation with robotic process automation (RPA)
- Machine learning to automate claims processing
However, while insurtech has delivered transformation on a small scale via standalone projects or point solutions, continuing to innovate in this one-off, loosely connected manner will eventually become too difficult to manage.
To capitalize on its full potential, insurers must connect insurtech to their core business. This requires a new breed of API-first, customer-centric insurance software, called coretech.
Coretech seeks to solve the largest barrier to innovating with insurtech: integration.
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Why is integration so difficult?
Nearly every core policy administration system out there has APIs. Many have app marketplaces where customers can find apps from pre-integrated partners. There are even integration-platform-as-a-service tools that make connecting multiple systems easier.
Choose any pair of cloud applications, and you can likely find some off-the-shelf way to handle it. So why is integration a roadblock to insurtech adoption?
When it comes to insurtech, it’s rarely ever about whether applications can integrate. Assuming you’re talking about cloud solutions, the answer is almost always “yes.” The issue is how deep and transformative the integration can be.
Questions to ask:- What data can be transferred?
- Is it bi-directional?
- Does it happen in real time?
- If data changes in one system, does the other get notified?
- Is the workflow automated and event driven?
- What’s the user experience like?
- Can one app’s functionality be embedded into the other?
- How easy are the integrations to manage?
- When one system gets updated, will the integration break?
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Insurtech benefits depend on connectivity & context
Clearly, “Does this application integrate with that?” is a question that merits more than a yes/no answer.
All policy admin system vendors will tell you they have APIs to support any integration. Many will point you to their library of pre-built integrations. Those connectors are real. However, context is king. Simple integrations are alright, but the advantages of insurtech cannot be fully realized without a deeper level of connectivity.
The most basic integrations slingshot data from an insurtech app to the core system in one direction, without considering happens down the line. From a workflow perspective, the integration might automatically trigger a simple action in response to a predetermined event.
Richer integrations sync data between systems and notify related applications when data changes, enforcing data hygiene and automatically resolving conflicts. They support conditional logic that triggers actions based on the details and context of an event that occurred. The integrations could incorporate custom algorithms or AI to determine, for example, if a policy application requires human involvement.
While it’s no secret that decades-old legacy solutions struggle to support advanced integrations, insurers are even replacing core systems deployed more recently — referred to as “modern legacy systems.” They’re simply not designed to integrate quickly and deeply.
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What is a coretech solution?
Coretech supports the depth of integrations insurance companies need. Coretech is capable of quickly connecting, disconnecting, and reconnecting with other systems, platforms, and insurtechs to peer deeply into multiple data streams, automate workflows, and simplify customer experiences.
Coretech shares its DNA with insurtech. It’s built with the same languages, microservices architecture, APIs, containers, and event-based workflows, so a coretech system can natively support advanced insurtech integrations.
For IT, coretech makes it much easier to connect applications, get them to work better together, and manage the integrations. For the business, it means simplified operations, reduced labor costs, and better customer experiences.
When that’s multiplied across thousands or millions of users and policyholders, and hundreds of applications, the value of coretech-to-insurtech connectivity grows exponentially.
