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July 31, 2018

When It’s Better to Build In-House

Summary:

Advantages of using applications already developed are self-evident, but building from scratch can be a key differentiator.

Exploring the initial steps of any development includes the question: “Stay in or go out?” which translates to, do we build in-house or can we use off-the-shelf applications? Advantages of using applications already developed are self-evident: They save time and resources spent on recreating common code that similar platforms need. The frustrating downside, though, is the need to often modify the off-the-shelf technology so extensively for passable integration that time and resources are ultimately not saved and the results are sub-par.

Incumbent carriers are struggling to deal with legacy-based policy management systems that have been in place since the 1980s. One of the difficulties with off-the-shelf solutions is that carriers can’t migrate all the data from their legacy platforms into a cloud-based platform. Even if they come up with a potentially relevant solution, there is still a significant risk of disrupting their customer portfolio.

This was the dilemma facing us at Hippo Insurance as we discussed what a system that effortlessly supports home insurance agents and consumers would look like. The highly regulated, slow-moving and traditional home insurance industry seemed poised to benefit from widely applicable innovations and rapidly changing technology, motivating me and our team at Hippo to see about making such a system a reality.

When our director of software architecture, Adrian Olariu, joined Hippo to help build out the company’s home insurance tech platform, we analyzed what was currently available and looked for an off-the-shelf service we could mold into something we would use for years to come. After trying to work within the legacy systems of the industry, we discovered outdated functionality and limited capabilities that not only made it difficult for insurance carriers to maintain cost-effective and compliant policies, but also made it difficult for us to provide a positive user experience for carriers and customers alike.

So, we decided to build a policy management system in-house at Hippo, starting from the beginning. This undertaking, while risky, seemed to be the best option to create a streamlined offering we knew the system – and those using it – needed. Our goal was to launch an initial working version in three months and a fully functioning system in six months.

See also: Trends in Policy Admin System Replacement  

The complexity of the system we were building continued to reveal itself yet further reinforced our decision to build in-house. We successfully developed patent-pending technology that balances regulatory compliance with a user-friendly experience that saves time and money for agents, underwriters and support staff, ultimately passing along those savings to the customer. Our focus included:

  • Single-system functionality. We created a single system that provides a seamless experience for the customer, agent and developer. It is one of Hippo’s most important features and means that all processes are handled within the one platform through the use of microservices. We included everything from document generation and storage to quotes and underwriting, billing and servicing to reporting and agent commissions. We designed it to streamline the management process, provide expansion capabilities and significantly reduce costs. Traditional policy management systems are built in fragments and pieced together. Because they operate independently from one another, they lack connection, causing additional cost, time, continued maintenance and potential for error.
  • Automated. Within the single-system functionality, we also built functionality to automate potential change-in-policy notices, such as cancellations, non-renewals, non-payments and reinstatements. Communications are automatically triggered to send to the customer via e-mail as soon as they are processed (or mailed, when required by law). This allows customers more time to respond to any required actions and developers more time to focus on other projects. Legacy systems only generate hard copies of notices, meaning additional lag time that causes a delay in alerting customers to any actions necessary. Simultaneously, automation benefits agents who no longer need to pay attention to or manage repetitive and manual processes, freeing their time to attend to customers. This has already showcased strong value in our organization, helping us drive average NPS scores upwards of 78, and 85% five-star reviews.
  • Cloud-based. The Hippo team also made the decision to make this a cloud-based system. We recognized that a cloud-based system allows for the kind of scalability we want through unlimited expansion and storage, enhanced data encryption (which protects consumer data), multiple redundancy backups and accessibility from any internet-connected device. Compare these benefits with the traditional server-based systems, which are prone to lost data, lack efficient expansion capabilities and limit remote user access.

We also built and implemented key pieces of technology such as:

  • Out-of-sequence endorsement processing, which means the system allows endorsements to be automatically updated regardless of when they’re processed (no longer needing manual processing by dedicated engineers)
  • Real-time document generation once a transaction is completed
  • Automated future-update processing (versus agents and underwriters remembering to manually process the required change at a future date)
  • Pre-programmed renewal periods to match the timeline set by the Department of Insurance, helping reduce compliance violations and regulatory fines.

See also: Innovation: ‘Where Do We Start?’ 

Hippo has been able to expand into eight states in eight months with multiple products, including homeowners and condominium insurance. Building our system in-house has also allowed us to partner with large insurance carriers that lack the capabilities this system provides, allowing them to benefit from one of the most advanced policy management systems in the industry.

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About the Author

Eyal Navon is a veteran CTO and passionate technology executive with a background in software engineering and R&D. In 2015, he co-founded Hippo, a modern home insurance company.

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