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Top Challenges for Insurers and Why CIOs Should Act Now

Posted by Joseph Wong on July 07, 2021

Owing to the pandemic many insurers suddenly find themselves in survival mode, trying to stay afloat while broadening their ever-growing offerings to their customers. The need for innovation is greater than ever. To make matters worse, the insurance industry faces three overarching systemic challenges. Let’s take a closer look at each of them.

Challenge #1: Staying Legal

imageThe insurance sector is highly regulated. Operators must follow the laws of the market in which they participate. Unfortunately, different countries have different regulations for compliance. This means for insurers to be present in multiple countries, a good deal of time and resources must continually be allocated to keep the business up to date. Time to market often suffers as a result. Not long ago, one of my prospects explored offering insurance policies to Grab drivers in Malaysia. This was a new insurance product that needed to abide by Malaysian legislations. Perhaps due to poor execution in convincing government agencies, the prospect eventually lost the opportunity to a rival. Having to simultaneously satisfy customers, drivers and governing institutions is no easy ordeal.

Challenge #2: Integrating with the Ecosystem

Insurance companies operating in Asia are reliant upon external business partners. Whether brokers, agents, or banks for bancassurance, seamless integration with these third parties is necessary. Linkages between the insurer’s policy administration and third-party external systems are common integration needs that come to mind.

Such an IT undertaking can sometimes render business partners a risk for insurance firms. For starters, how can you ensure the integration can happen efficiently, so you do not lose revenue unnecessarily?

The importance of this issue recently struck home, when I worked with a MNC insurer that is expanding from Hong Kong to Thailand. The Thai market is heavily broker-reliant; and integration to the ERP systems of the brokerages is a must. For every month of delay in the deployment of each proposed integration, the prospect is looking at a six-figure US dollar revenue loss!

Challenge #3: Satisfying Increasingly Sophisticated Customers

The third challenge is providing customer offerings with speed and efficiency. The Asian audience is becoming increasingly digital first, if not digital native. Users nowadays demand access to every service from their fingertips with a smartphone. A life insurance client of mine in Indonesia recently faced this challenge head-on. The average age of the Indonesian population is under 30 years old. To cater to the millennial population, this client had to expose a great deal of data from their on-prem systems to their mobile app. In so doing, there was a far higher chance of their customers getting a quote, buying a policy, and doing self-administration on their phones in real-time. Satisfying this demand from the local demographic was absolutely essential for success in that market.

The Solution: Building an API Factory to Create a Composable Architecture

The above challenges offer a unique opportunity for insurance operators to upgrade their technology stacks. The topic of integration often comes to the forefront in the annual planning and budgeting process. The solution involves the skillful application of microservice-based APIs to create a composable architecture.

This is where OpenLegacy comes into the picture. We are an API factory that rapidly and effectively bridges any two systems, whether it is internal vs external or legacy vs new. We expose core insurance logic and data from IBM mainframes, IBM i (AS/400s), Oracle databases and ERP systems to agent/brokerage systems on-premise or in the cloud, not to mention enriching mobile apps in the process.

OpenLegacy sets the bar high as our clients see on average:

  • 10x improvement in deployment speed
  • 75% saving in total cost of ownership (TCO)
  • 5x reduction in performance run-time

It is not difficult to understand how an API factory can lead to a quicker time to market. After all, a factory is designed to mass produce widgets with standardized quality – in our case, the widgets are APIs. To understand the cost and run-time benefits however, one must look at the monolith of middleware that sits between the legacy and new IT stacks. A typical middleware architecture involves an ESB/SOA, which is expensive to build and maintain if you factor in the hardware, software and teams of people needed to keep the lights on. If a microservice enabled API can bypass the “monolith” and connect a legacy system directly to the digital layer, the cost saving potential is enormous. The performance run time will also improve as packets of data have a direct path between systems and need not traverse the multiple layers of the middleware.

There is an added benefit of using APIs to connect different systems. This involves the eventual modularization of the legacy layer that is likely 20+ years old and uses very different design philosophies from today. When an API becomes the most granular composable unit gatekeeping a specific piece of logic or data, any changes to how data is accessed only involves modifying the API itself. The design, build and test times required for this approach can be reduced significantly since there is no need to worry about one change affecting the rest of the monolithic structure. We essentially have a composable enterprise made up of readily plug-and-playable units. This infrastructure is conducive to change, thus allowing innovation to happen at a much quicker pace.

Embracing Change

The pandemic has and will continue to cook up new trends for the insurance realm. For instance, COVID-19 insurance is now being sold in key markets around the globe. Insurance companies will need to stay nimble and roll out new products as circumstances change. Applying the right paradigm shift such as employing an API-first strategy, will enable these transitions. The good news is such technology is already available to help CIOs and senior IT leaders. It is up to them to make up their mind and take action quickly. The road to change is never easy, but those who fail to embark on the journey will certainly be eliminated.

Are you ready to take the leap?

Written by Joseph Wong - General Manager, APJ at OpenLegacy

Joseph has a track record of thrice orchestrating the hyper-growth trajectory of companies with ambition in Asia. He is currently serving as General Manager Asia Pacific and Japan, for OpenLegacy, a leading integration solution provider for Fortune 1000 enterprises. As a thought leader in ITdigital transformation and cloud computing realms, Joseph speaks regularly to corporate leaders on accelerating the digital transformation journey of their organizations.

Topics: insurance