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The insurance enterprise can be said to be going through a digital transformation. Insurers are modernizing the technology stack to become more efficient, improve for the customers, and stay competitive. Upgrading core insurance software systems is one of these modernizations.
The traditional legacy insurance software is rigid, siloed and not so flexible and does not have enough features needed in the modern digital era. Insurers today have modern solutions that can ease some heavy processes, expose data and analytics, integrate with third-party apps, push omnichannel, and much more.
That is why insurers evaluating new insurance software platforms must carefully analyze the ‘must-haves’ versus ‘nice to have’ features. In addition, they confront a build versus buy dilemma: Do they spend money on custom-made solutions, or do they buy an off-the-shelf product? Each approach has merits and drawbacks.
This article will explore the key capabilities insurers should look for when upgrading insurance software in the digital age. It will also provide guidance on whether to buy or build new solutions. Armed with this information, insurance leaders can make informed decisions about modernizing the technology heart of their business.
Key Features in Modern Insurance Software
Insurers cannot afford to make the wrong choice when it comes to core system replacement. The stakes are high, as these platforms impact the entire business. Insurance experts highlight several key features carriers should prioritize:
Omnichannel Distribution
Today’s insurance customers want nothing less than an omnichannel insurance customer experience. However you apply online, contact an agent or walk in the branch, the experience should be personal, consistent and on demand.
Today, modern insurance software has gathered all the customer data into a single platform. This “single source of truth” integrates data across channels to deliver unified experiences across the customer journey. Key capabilities include:
- Omnichannel portal for customers and agents with a consistent interface.
- Integration layer to connect portals with back-end core systems.
- The business rules engine is used to apply context to customers and orchestrate workflows.
- Customer master to unify data from all channels into a “golden record.”
Read more here: https://www.luxoft.com/industries/insurance.
Mobility
The proliferation of smartphones provides insurance customers and agents anywhere, anytime access. Modern insurance software harnesses mobility with features like:
- Native apps for iOS and Android to let customers and agents complete tasks on the go.
- Responsive web design – web portals resize and reformat for any device. Investing in professional custom website development ensures that your insurance portal remains user-friendly, secure, and accessible across all platforms, from mobile apps to desktop browsers.
- Offline mode – apps securely store data until back online.
- Biometric authentication via fingerprint or facial recognition adds security.
- Machine learning for intelligent chatbots to support self-service.
Digitization
Insurers have tons of paper documents and manual forms floating around branches and back offices. Modern solutions use technologies like AI, machine learning, and RPA to digitize these artifacts and processes. Benefits include:
- Document management to store, index, search and retrieve files digitally.
- Data extraction software classifies forms and extracts information.
- Intelligent process automation bots handle repetitive tasks.
- eSignatures for faster policy issuance and straight-through processing.
Analytics
Data and analytics are key competitive differentiators in insurance. Modern software solutions bake analytics into the platform with tools like:
- Customer analytics to improve engagement and experiences.
- Predictive modeling to enhance underwriting accuracy.
- Exposure analytics to refine risk models.
- Operational analytics to boost productivity.
- Visualization dashboards for insights into performance.
API Economy
The API economy lets companies leverage ecosystems of digital partners. Modern insurance software promotes open architecture and APIs to enable insurers to:
- Quickly integrate with InsurTech partners.
- Launch co-innovation projects.
- Syndicate products on comparison sites.
- Exchange data with third parties.
Cloud Deployment
The days of managing complex on-premise software are fading. The cloud offers many advantages for insurers:
- Speed and simplicity – faster to deploy, easier to manage.
- Scalability to add capacity on-demand.
- Built-in resilience and disaster recovery.
- Usage-based pricing – pay only for what you use.
- Automatic updates with the latest features.
SaaS or PaaS models give insurers cloud benefits without large upfront capital costs.
Upgradable Platform
Insurers cannot afford “rip and replace” projects every few years. Modern solutions utilize modular components on top of scalable architecture. This supports continuous upgrades to new and featured technologies such as:
- Internet of Things
- Telematics
- Blockchain
- Quantum computing
- And more emerging innovations…
Low-Code Configurability
It is necessary for insurers to have flexibility in adapting systems to ever-changing business needs. Unlike vendor professional services, modern platforms allow business users to configure workflows, build custom interfaces, create rules, and other things with low code tooling.
Interoperability Standards
Modern core systems work with a broad spectrum of downstream systems for the administration of policy and claims management. ACORD provides a way for applications to integrate in a way that is not otherwise disparate.
When evaluating solutions, key indicators should support assessment for standards:
- ACORD’s Property & Casualty/Life & Annuity XML Formats
- IBM IFW/ILF Frameworks
- Guidewire Integration APIs
- And more…
By aligning with standards, insurers avoid vendor lock-in and can more easily swap out components down the road.
Should You Buy Off-the-Shelf or Build Custom Solutions?
Once insurers have a clear sense of must-have capabilities, they face the build versus buy decision. Off-the-shelf insurance software packages offer pre-built solutions spanning core system functions. Custom solutions are developed in-house or with an IT services partner to match unique needs.
Let’s compare the pros and cons:
Off-the-Shelf Packages
Mature insurance platforms have pre-configured modules for key functions such as policy administration, billing, claims, and more. Commercial packages can speed up carrier setup.
Pros:
- Proven technology – developed for insurance by insurance experts.
- Best practices baked in – platforms optimize processes out-of-the-box.
- Faster implementation – configure vs. custom code.
- Fixed scope and budget are more predictable.
- Vendor handles upgrades and updates.
Cons:
- Less flexible – limited ability to customize the platform.
- Vendor dependency and lock-in.
- Forced to adapt processes to software.
- Multi-tenant cloud limits the ability to customize.
- Additional services cost more.
Example solution providers: Guidewire, Duck Creek, Majesco, Socotra, Bold Penguin, and Vertafore.
Custom Solutions
Insurers build proprietary solutions from scratch with an IT services partner. This bespoke approach results in software optimized for that carrier’s specific strategic needs.
Pros:
- Purpose-built for that insurer’s competitive strategy.
- Fine-tuned to support unique processes and preferences.
- Avoid vendor lock-in and dependency.
- Customizable and configurable as needs change.
- Increased flexibility to respond to market demands.
Cons:
- No out-of-the-box best practices – must design solutions from scratch.
- Higher risk – unproven technologies and uncertain outcomes.
- Lengthier implementation and testing.
- Harder to maintain and update over the long term.
- IT must keep pace with the latest technologies and standards.
Hybrid Approach
A hybrid model is used in leading insurance modernization programs. For baseline capabilities, carriers deploy and deploy commercial packages and then wrap custom solutions over the top to differentiate them without reengineering.
- Core policy admin, billing, and claims functions handled by the vendor platform.
- Unique capabilities like embedded analytics, IoT integration, and co-branded portals are custom-built.
- Commercial software provides standards, while custom code offers flexibility.
This pragmatic approach balances speed to value with long-term competitiveness.
Key Considerations for Build vs Buy
Insurers can analyze the following factors when deciding whether to buy a solution off-the-shelf or invest in a custom build:
Let’s compare the pros and cons:
Competitive Differentiation
Will proprietary systems offer these companies a better strategic position than rival companies? Custom systems do a good job of embedding unique processes and data that provide a competitive advantage.
Degree of Change
What are the business needs, actually? Commercial packages can be configured to address incremental improvements, while wholesale process change may require ground-up builds.
Internal Capabilities
Is the internal IT department capable of maintaining custom systems with skills and resources? Otherwise, an IT services partner will help fill the resource gap.
Timeline Importance
Custom coding adds complexity and delays. If speed-to-market is critical, buying gets insurers to value faster.
Budget Realities
Commercial packages allow more predictable budgets, but they require annual licensing/maintenance fees. Custom systems require a large upfront capital investment but no ongoing vendor dependency.
Cloud Factors
Multi-tenant SaaS platforms offer little customization. Purpose-built private cloud solutions offer more tailoring while still gaining cloud efficiencies.
Future Flexibility
Future change is constrained by off-the-shelf packages of the vendor roadmap. The big advantage of custom solutions is that they can be added with capabilities over time.
Conclusion
Core insurance systems modernization is a no-small-stake, high-impact, long-term initiative. Buy vs build decisions are very important, and carriers need to be careful in balancing how to do it. It boils down to choosing essential vs. nice-to-have features and needs from a strategic point of view. However, insurers can achieve the right balance between speed to value and good long-term competitiveness by blending commercial packages with custom coding in a hybrid way.
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