Tag Archives: legacy systems

New IT Architecture: Digital Innovation Hub

Today’s era of total mobility has seen insurance consumers increasingly demanding to receive customer service across a number of different channels – each driving an exponential increase in data volumes. Bombarding systems with queries and operational tasks like never before, this surge in traffic is taking its toll on insurers’ back-end systems. A new architecture, the digital integration hub, is rapidly coming into focus as the ideal solution to ensure that legacy back-end systems are not compromised while enabling U.S. insurers to digitalize their customer and intermediary interactions.

Rewind to just 10 years ago, and insurance providers in the U.S. comfortably relied on the telephone and e-mail. Since then, the pace of technological development has spelled out an ever-increasing number of touchpoints, creating pressure from consumers and intermediaries to deliver a better, faster, more intuitive user experience. In 2019, 23% of insurance executives said enhanced customer experience was their primary indicator of marketing success to support their acquisition and retention efforts (66%) and to increase personalization (60%). Customers expect that information should forever be at their fingertips, through an app or an instant messaging (IM) service. Modern consumers expect a seamless customer experience in which one conversation can be carried out, successively and simultaneously, across various platforms.

Intermediaries, brokers and direct insurers as well as a growing number of third parties are increasingly responding by striving to provide their consumers with information, modeling and fast processing of claims across different devices and channels. As a result, frequency and volume of system interactions across multiple channels are surging. More than ever, systems are being interrogated through a huge range of operations.

Risk arises because the data required to fulfill these queries is stored in back-end systems that also contain business-critical information such as customer data. These back-ends must be kept safe from third-party access – and third-party activity must not interfere with line-of-business systems by provoking unpredictable peaks in queries. Although new front ends have been designed to be remain independent from back-end legacy systems, the front ends often put pressure on the legacy systems, occupying machine time on low-value activity rather than core operations.

See also: 6 Implications of Big Data for Insurance  

New technologies and automation also pose great risk to existing infrastructures. For instance, new front-end development technologies such as single-page-web-application, html5, css3, angular, react and progressive eb apps (PWA) struggle to operate at the required speed and highlight the limitations of legacy systems. Additional data sources, from distributed ledger technology, big data, IoT, cloud computing, AI or biometric technology heighten the issue of handling growing data volumes.

So how can insurers leverage the powerful potential of application programming interfaces (APIs) without placing their back-end systems in jeopardy?

A new architecture centered on digital integration hubs has distinguished itself as a more efficient system and a means to overcome this challenge. In this new architecture, APIs read data extracted from a “data lake,” which is perpetually updated in near-real time by the legacy systems rather calling data up from legacy systems directly. The opportunities to feed data into the data lake from other sources such as IoT is endless and presents a game changer for the industry.

When gathering data from legacy systems, traditional data management platforms tended to be based on a batch approach, which updated data in the data warehouse (DWH) on a daily basis rather than in the near-real time way offered by digital integration hubs and require hundreds of extraction and ETL procedures. While traditional DWHs can be useful for analytics and reporting, their more infrequent pulling of legacy data makes them unsuitable for customer-facing front ends. Reducing the complexity of the API service layers, digital integration hubs allow for historical and new real-time data to be fused into a single repository that APIs, rather than the back end, can interact with. During peak activity, the digital integration hub can handle the load and leave back-end systems unaffected.

Other advantages that come with digital integration hubs include their provision of 24/7 real-time data and intuitive Google-like search functions. Brokers can seamlessly access data through dashboards or “cockpits” that allow them to manage customer profiles based on a 360° view. Through system integration, flexible end-to-end solutions can help insurers to embark on their journey toward digitalization and meet customer expectations without putting their systems at risk. Insurers should embrace the opportunity to introduce a digital integration hub and connect legacy back-end system integration with new technology and data-sources.

See also: 4 Trends in Insurance in the New Year  

Today, there are some vendors on the market that can provide one or two of the elements composing the solution, but end-to-end solutions offering all of the above benefits are much less common. Paying attention to the specific needs of the client, experienced consultants can be helpful in selecting and combining different options to fully realize the benefits offered by digitalization.

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

Sorry State of Life Claims Processes

“When my mom passed away, I was aware she had a small life insurance policy. When I started the claims process, I had to keep resubmitting documents and kept getting asked to complete more documents. Finally, after four months of going back and forth, when the money was about to be reimbursed, I wanted the money transferred to my account as direct deposit, but my only option was a check. I’m lucky I didn’t need the money right away for expenses, or I wouldn’t know what would happen.”

Will you consider purchasing life insurance policy from the insurer, I asked? “Hell no,” was the answer.

I was giving a presentation a few nights ago on Benekiva and heard that story from someone in the audience. Throughout my journey with Benekiva, I have been intrigued by all the stories I’ve heard about the nightmares that beneficiaries have faced.

As a new parent and owner of a life insurance policy, I know that ensuring the well-being of our family is critical. The thought of my daughter having to go through a hellish experience to get the money makes me furious and want to act now to fix the problems.

After several years of researching and analyzing the life insurance claims processes, there are four main problems our Benekiva team has identified that have prevented life insurance companies from embracing digital transformation in their claims processes:

Outdated Processes: The life insurance industry is a 258-year-old industry, and, though claims may make it in the top 10 list of issues for the CIO, the focus for the company as a whole tends to be on generating revenue. The claims staff works overtime to come up with various duct-tape systems filled with Excel spreadsheets, Access databases or various systems to balance the needs of regulators, old processes (this is how we have always done things) and beneficiaries. Beneficiaries wind up supplying the same information in multiple documents, sending the same documentation multiple times and chasing down faxes/mails for next steps.

See also: How IOT Will Change Claims Process  

Legacy Systems: On average, the claims staff touches four to 10 systems to process one claim. The claims module is most likely attached to policy administration systems in which modules don’t get updated often. To innovate claims processes gives CIOs headaches because they have to rip apart the monolithic and old systems that run the entire business. The mentality – “If it ain’t broke, don’t fix it” — creeps in.

Unclaimed Claims: There is more than $14 billion of unclaimed life insurance policies, and the number keeps growing $1 billion a year. Why is that? Ask yourself one simple question: How many times have you been asked to update your beneficiaries? Ask yourself another simple question: Have you informed your beneficiaries about policies you have for them? One of our co-founders could have been another drop in the bucket for unclaimed claims. He was at his father’s funeral, and one of his father’s co-workers came to give Jason his condolences. The co-worker said, “If you need help with paperwork, please let me know.” Jason said, “What paperwork?” He learned that his dad had a life insurance policy.

Laws Changing: Each state and country has its own governing laws that need to be abided with when processing claims. One state may require a death certificate while another state may ask for additional documentation.

How might claims departments innovate in the face of outdated processes, legacy systems, data that needs clean-up and changing regulation?

There are three key recommendations:

Keep Learning – Insurtech is HOT! Books are being written, conferences are popping up and fresh faces (like me) are appearing. Keep reading, attending and talking to learn what is happening in the space and how to navigate change.

Keep Seeking – Insurtech is HOT! Which means, there are startups that are popping up to help solve complex problems. Benekiva is my startup with three other founders, and we are on a mission to help bridge the gap between life insurance companies and the intended beneficiaries, through beneficiary management and claims automation. What is cool about us – we can work with legacy systems, so you don’t have to pour millions into the work. There are other insurtech startups that are solving other pain points. What’s great about startups – they are small, nimble and hungry, which equates to: They will do whatever you need them to do…to a certain extent. Partnering with startups can leapfrog your innovation efforts and their startup mentality may rub-off on your staff.

Keep Trying – You eat an elephant one bite at a time. I see claims processes as a big elephant, and the only way to improve is by “bitsizing.” What is one area of claims that can be improved? Identify that and try to find or partner up on a solution. Remember: Insurtech is HOT! I’ve seen organizations want to tackle the “elephant,” and unfortunately, those projects can take two years and longer and your strong talent is burned out at the end. What you get at the end is an “old” system – two years is a long time in tech.

See also: Making Life Insurance Personal  

To innovate in claims, the C-suite needs to make claims a priority and see it as a customer-experience issue.

My five-year vision is to have the following experience when giving presentations about Benekiva:

“Bobbie, I just submitted a claim, and I instantly received notification that money is available in the account. I also received a text message from an adviser whom my dad was using and who is going to help me plan for my future.”

Blockchain: Basis for Tomorrow

Could a blockchain platform deliver new markets, more agile products and large-scale cost efficiencies across the industry?

Commentators have identified the insurance industry as an ideal candidate for transformation by blockchain technology. Many blockchain Insurtech pilots are exploring alternatives for processes in the insurance value chain such as know your customer (KYC) and claims. But few have seriously explored the more fundamental potential of blockchain for the insurance industry and considered how it could improve a substantial part of the value chain by removing rework and driving efficiencies, thus transforming the industry, including its operating model and cost structures and thereby opening up new market segments.

Insurers Are Struggling with Digital

Growing digital channels and transforming insurance organizations are hampered by:

  • Complicated products. Clients struggle to understand product features while the ticket sizes and commitment durations are often intimidating. Products increasingly fail to meet client expectations and don’t suit new digital distribution channels.
  • Legacy systems. Monolithic systems obstruct personalization and require long product development cycles. Straight-through processing remains the exception, not the norm.
  • Limited customer service options. Insurers dictate which channels clients use for service while the omni-channel experience remains a dream and far from reality.
  • Limited digital options for customers. Digital support is sporadic across the customer journey.

This means Asian insurers struggle to find a model to cost-effectively expand their reach into Asia’s emerging middle class while a growing millennially minded, digitally savvy demographic in mature markets is underserved.

See also: Why Blockchain Matters to Insurers  

Properties of a Blockchain

Blockchain implementations have three fundamental qualities:

  • Trust. All parties know their view of the current state is true and devoid of fraud.
  • Transparency. Participants can be confident all counterparties have the same information.
  • Immutable. The content of the transactions that delivered the current state can never be changed. The code encased in a smart contract will endure for the transaction’s lifecycle.

To understand this potential, let’s decompose the blockchain and understand the technology properties it brings to solving business problems.

  • Database. First and foremost, a blockchain is a distributed database, with each node maintaining its own copy with the confidence that its version is identical to the other parties’ and safe in the knowledge that no one can change the history of transactions that have created the current state.
  • Codified services. Smart contracts enable code to be executed at various points in the lifecycle of a contract. The executable byte code is enshrined in the contract. The code reacts to the changes in state by executing each time the variables in the contract are updated.
  • Middleware. Contracts are replicated to all nodes on the network. Nodes can monitor the network and react to changes in the state of contracts. It’s publish-and-subscribe.
  • Business process management. These properties create a perfect environment for BPM. Changes in the state of contracts can orchestrate a workflow described in the contract’s code. This enables the execution of complex processes where different parties (such as insurers and distributors) perform roles and execute a process.

Contracts stored on a blockchain cannot be changed. Once a contract is mined into a block, it is cast in stone. In blockchains like Ethereum, the code can never be changed but the variables can be updated, creating a new state and storing a new version of the contract. As each new version is propagated to the other nodes on the chain, the code will execute and react to the changes in state. This is perfect for updating contracts over the lifecycle of an insurance policy.

For example, on each anniversary of a policy there are payments and renewals to be processed and commissions to be paid. The logic for this would be encoded in the policy at its outset. The rules would reflect the terms and conditions of the policy itself, the commission agreements for distributors and the processes of the insurer. All of this would be encoded in a smart contract representing the policy. Claims would be separate contracts, emitted by the policy and coded to follow their own lifecycle as they are assessed and paid.

Integrating Industry Participants

Blockchain is an ideal distributed platform for connecting participants in an industry that includes distributors, insurers and reinsurers. Like any industry with multiple participants, each party currently maintains its own version of data. At various points in the life cycle, these different perspectives need to be reconciled. This could be commission payments to a distributor or claims against a reinsurance agreement from the insurer to the reinsurer.

A shared database means all of the participants are looking at the same single source. All the relevant participants know the current state of a policy or a claim.

Many benefits are enabled by a trusted shared platform.

  1. There is a single source of truth. Parties to a policy (distributors, insurers and reinsurers) are accessing a single source of information. This has the potential to deliver a true omni-channel experience.
  2. The distributor could use a contract to request quotations from insurers on behalf of a client.
  3. The terms, conditions and premiums for a policy, once agreed, are permanently encoded in a smart contract.
  4. Names, addresses and contact details of the policy owner, the life insured and beneficiaries could be stored in client contracts so that all parties to the policies have up-to-date information.
  5. Payments could be made by clients using tokens or be performed using traditional channels and tracked using oracles and contracts.
  6. Documents relating to the policy, KYC and claims would be stored off-chain and shared in a parallel environment, with the blockchain used to share their provenance, locations and authenticity.
  7. Reinsurers could be participants using contracts documenting reinsurance relationships. If an insurer has an agreement to cover a percentage of all policies written for a product, this could be executed automatically when a policy is underwritten.
  8. Claim contracts would be linked to policies and any impact on reinsurance contracts would be instantaneous.
  9. The model can be expanded to other participants. Providers of health services could access coverage limits and submit claims on behalf of clients.

Improving Business Agility

Existing policy administration systems are cumbersome because their code base must support multiple generations of products. A policy administration system for life insurance, for example, needs to be capable of processing everything from term life to universal life, disability, health and every conceivable rider. Its commission system has to support every possible structure, including those that may have only been used for one or two products.

This ever-expanding code base is costly to maintain and slows product development. Changes to accommodate new products need to consider this vast array of legacy to ensure nothing is broken when they are introduced.

The policy contract on a blockchain would have its own heartbeat. Its code and business rules remain with it for its life. This may be a matter of days for travel insurance or an entire lifetime for a term life policy. But the code and business rules enshrined in the contract need only support that policy. It is self-contained, and it doesn’t have to include all of the options for every other product ever produced.

This simplifies the code base. We no longer need a monolithic application to support all products and commission structures but smaller programs each supporting individual policies.

This is the key to product and service innovation enabling experimentation with new designs. This will be important in new distribution channels, partnerships and reaching specific client segments with targeted offerings.

See also: What Blockchain Means for Analytics  

Keys to Success

To realize this vision of an industry platform on a blockchain, a successful solution would need these features:

  • Enterprise scale. It would need to be capable of processing the volume of insurance transactions in a jurisdiction.
  • Credentials. Access must be limited to properly qualified industry participants. With participants filling different roles (distributors, insurers, reinsurers, etc.), a system of credentials is required to govern the permissions of participants.
  • Encryption. Blockchains are typically public. People often confuse the cryptographic structure of a blockchain with encryption of its data. The state of a contract can be seen by all participants in a basic blockchain, whereas policies and insurance transactions need to be confidential. Any solution needs a method for encrypting individual contracts.
  • Open APIs. There must be a set of services defined and implemented enabling each node to interact with the participant’s own or third party systems.


A blockchain-based industry-wide platform will be the catalyst for entirely new paradigms for selling and administering insurance. The shared platform offers cost-effective adoption of new technologies giving access to new generations and segments of consumers.

As business models of existing and new players within the industry flex and evolve, their integration via the platform will deliver a seamless, rewarding client experience. And blockchain technology will uphold the secure, trusted and reliable qualities that are so critical for insurance brands.

Clock Is Ticking … and Stops for No One

If you feel like insurance is changing faster every day, you’re not alone. According to our most recent research, published in 2017 Insurance Technology Priorities and Spending, 37% of insurers reported that the pace of change is keeping them up at night.

Insurers find themselves facing two very different challenges: the accelerating pace of change and the need to transform and modernize their business. Our industry stands at their intersection, and these two imperatives can seem very much at odds.

We are driven to become highly responsive to market opportunities, personalized to customers’ evolving needs and in sync with the changing insurance ecosystem as well as the technology landscape that supports it. The flexibility necessary to take on these new roles is a challenge to any insurer’s organization — and their infrastructure must be aligned to meet these business needs.

See also: 3 Reasons Insurance Is Changed Forever  

Of course, this is much easier said than done. The sheer scale of core modernization projects can be daunting, but legacy systems simply cannot provide the adaptability that insurers need to thrive in this new environment. Today, insurers are well aware of this quandary. In SMA’s annual research on IT strategic initiatives, core systems have always been a high priority for insurers.

This year, however, the picture has changed. In our research on IT priorities and spending, we found that the No. 1 business project for all lines of business — personal, commercial, life, you name it — is policy administration systems. We have been tracking this data for years, and policy admin has never been insurers’ top priority. Much of the focus this year is on the enhancement of the current systems in place, rather than on full replacement.

This finding could either be a good sign or reflect one of the fundamental challenges of our industry. If these policy admin projects are focused on implementing new coverages, products and services and on adapting to the digital needs that require access to transaction capabilities — and in a time frame that meets the business needs — then there is great alignment with the greater direction of the industry. But if the effort is mired in multiyear implementations of modern systems or the struggle to enhance the systems to meet today’s standards, then there is an issue that needs to be addressed.

Can the whole insurance ecosystem embrace fast implementations, the flexibility to change products on the fly as new opportunities arise and accessible integrations as well as APIs to be able to leverage advancing technologies? That will require a new mindset for both insurers and solution providers. Insurers must rethink their approaches to core projects to meet the needs of the pace of change and the shifting market. Solution providers must ensure that their solutions support the speed at which insurers need to move.

See also: How to Lead Change in an Organization  

Share your core modernization experiences with us by participating in our latest research study on the state of the insurers’ core environments. Reflect on how you and your company are contributing to a more responsive industry, regardless of your role in the insurance ecosystem. What can you do to adapt to this new norm? We all have to accept this new world order as quickly as we can — the clock is ticking.