Digital Evolution

Measuring Insurers's Data Revolution

How to conquer the constraints of legacy IT systems in the insurance sector

by Giuliano Altamura

Mr. Altamura is Financial Services Business Unit Manager with Fincons Group. Visit www.finconsgroup.com

In a 2019 global survey of life insurance executives, change management, customer experience and growth were cited as the top three challenges currently facing businesses. When asked which forces are driving these challenges, respondents mentioned technology, consumer behaviour and regulations as the factors that will have the biggest impact on their company in the next five years.

It is clear that insurers are feeling the pressure to evolve with the times. Customers now expect to engage with insurance businesses digitally across multiple platforms, while retaining access to human experts, especially for life and health policies, which can require a sensitive and empathetic approach.

Antiquated and Siloed IT Systems

However, as companies look to develop their services and review their existing operations, many insurers are coming up against the same obstacle: IT systems that are antiquated but also critical to business operations due to the vast amount of data they hold on policies, accounts, claims and customers. These legacy back-end systems must be preserved while modern front-end systems are developed to provide users with attracting and engaging interfaces that are speedy and efficient to boot.

The purchasing journey may progress from a website to a self-service portal to a telephone call, and this is driving up the level of incoming queries to an unprecedented level. As legacy systems also need machine time to cope with line-of-business activities, such as statements, reports or investment management, there is a high level of pressure on these systems that is not sustainable in the long-term, and can prevent businesses from achieving the desired level of digital transformation.
Moreover, the complexity is raised by the fact that the IT systems are usually siloed into specific information systems, one (or sometimes more than one!) for any business area (Life, P&C, Claims, …); this situation does not help when insurers try to provide intermediaries a unique and 360 degrees vision of the customer.

Unpredictable Query Levels

Moreover, in the aforementioned survey, life insurance professionals cited automation, Artificial Intelligence and data science as the technologies that are most crucial to their company’s success in the coming five years. Though these new technologies will certainly have a positive impact on the customer experience, they will also further exacerbate the data volume issue and intensify pressure on back-end systems.

This issue affects multiple individuals and organisations; brokers and intermediaries, such as agents and financial consultants, may also be interrogating systems in addition to direct insurers, driving unpredictable peaks in data queries. Consulting legacy systems can be a lengthy process if data is not well-integrated; in the insurance sector, it is common for back-end systems to be organized in vertical silos, with each dedicated to a single business line. Often, there are multiple back-end systems for a single scope (e.g. claims or policy administration), which can further complicate access, particularly for intermediaries.

Limited Solutions

At the moment it is often the case for large insurers that the data they hold on a client is siloed in legacy systems across the organization and held for use by individual departments...

How are companies addressing this issue? Middleware solutions improve access to data and analytics, and thereby reduce the burden on legacy systems. Application Programming Interfaces (APIs) and microservices architecture enable the development of new capabilities maximizing efficiency. With respect to front-end development, new technologies such as single-page-web-application, html5, css3, angular, react, and Progressive Web Apps (PWA) are all critical for delivering the required user experience, but highlight the limitations of legacy systems when it comes to providing data at the required speed.

A New Architecture

A solution which can help to resolve this conundrum for insurers is a new architectural structure based on Digital Integration Hubs, which ensure that Application Programming Interfaces (APIs) deliver fast access to data from different sources. How is this achieved?

Data from legacy back-end systems feeds into a ‘data lake’ which can be consulted by enquiry APIs, rather than calling up data from legacy systems directly. To ensure that data provided is as accurate as possible, the data lake is continually updated in near-real time. Users benefit from fast query response times, while the addition of user-friendly functions such as Google-like search features to front-ends can further optimize the overall customer experience. This type of feature cannot be made available when there is direct access to the back-end system without putting it at risk of crashing.

Maximizing Potential

The Digital Integration Hub solution allows agents to seamlessly access customer data via dashboards or cockpits which then build up complete customer profiles, in turn enabling agents to offer informed advice on the next best actions. Customer behaviour and preferences history can also feed into AI-powered decision models to provide the customer with the right support exactly when it is needed. Digital Integration Hubs are agile and flexible; information can be fed into the data lake from a multitude of different sources, such as IoT.

However, it is important to consult with knowledgeable specialists to ensure that the full potential of the solution is being explored, and that it is tailored to the specific needs of a company. Furthermore, an end-to-end solution is the most effective way of maximizing benefits to the business, rather than solely implementing elements of the architecture, which cannot achieve the level of transformation needed for insurers to truly stay ahead of the game.

 

To find out more, please download the latest whitepaper from Fincons Group here