The German insurance industry is under significant pressure to modernize and innovate. This also applies to the mapping of core processes in policy management systems.
This pressure arises from the following factors:
- The German insurance market is saturated, so customer acquisition is only possible through outstanding products, good advice, marketable prices, but also through modern, holistic and lean processes, especially in the online sales channel.
- Changes in customer behavior towards the conclusion of online contracts for products that require less explanation, such as private liability insurance or household insurance.
- Customer touchpoints are more diversified than they were 10 years ago, so insurance companies need to be able to be available at the desired touchpoints at all times.
- The cycles for the development of new products have become shorter, so that speed plays a very important role here.
- More competition from InsurTechs and the ongoing phase of low-interest are forcing insurance companies to digitalize and automate processes.
Survey of the current situation for many insurance companies
The existing policy management systems from many insurance companies have a high degree of functional maturity due to continuous further development. However, the systems are often 10 to 20 years old and, due to their technological obsolescence, are no longer able to meet the requirements to survive on the market in the future.
The current policy management systems in the German insurance industry are mostly embedded in an architecture that has grown over the years, sometimes uncontrollably. This is due to the fact that over decades, requirements have been repeatedly added to the core processes without any adjustments to the system structures. At the same time, the documentation of processes and system functionalities is rarely complete. This leads to the fact that knowledge about the systems is usually only spread across a few employees in the companies. Due to their complexity, the development and maintenance of these systems are usually very time-consuming and therefore expensive.
In addition, there are systems that use programming languages such as Cobol. Experts who have mastered these programming languages are rarely found on the market or will retire soon. The aspect of concentrated knowledge distribution and the imminent staff departures due to demographic trends represent a dangerous situation for companies.
In addition to the classic policy management, the mostly related development of new tariffs or products is very time-consuming due to the technical restrictions of the outdated systems, and thus, also slow and expensive. A quick reaction to market conditions is therefore only possible to a limited extent.
What are the benefits of a new policy management and product modeling system?
The most important arguments for the use of a new system are to meet customer concerns and at the same time to work internally in a cost-efficient manner. In this way, the competitiveness of the company and its products is to be maintained or even expanded by gaining competitive advantages.
But what does a modern system have to be able to do?
- Integration capability: The integration of new systems into an application landscape that has grown over decades is a very important aspect of implementation in a project and in the subsequent application. The product model and policy management have an impact on all other core processes in an insurance company. For this reason, the interaction of product – policy – claims and all subsystems, such as the collection/disbursement system in the sense of a holistic strategy, must function smoothly via interfaces. This is the only way to achieve the desired automation and thus the increase in efficiency.
- Product development: Product development cycles have become shorter compared to the past. This development is driven in particular by the InsurTechs operating on the market. The product modeling system must therefore be able to enable the departments to implement product ideas quickly and easily. Product modeling must be able to take place according to the motto "modeling instead of programming" by means of an intuitive interface, the use of which does not require any programming knowledge. Furthermore, it must be possible to develop new product variants by copying and modifying existing products.
- Time-to-market: In addition to features for quick and easy product development, end-to-end processes to support all sales channels (multi-channel support) are a fundamental prerequisite for shortening the time to market for new products.
- Automation / straight through processing: Both the system for modeling products and the policy management system must be fundamentally designed to be able to process business transactions that are controlled externally in a fully automated manner. Here, a high degree of flexibility in the design of the straight-through processing procedures is crucial. In this way, not only standard business transactions such as "change of address", but also much more complex customer concerns can be automated. The processes can be controlled either by an internal workflow or by a workflow engine that is externally connected via all systems.
- Collaboration with Artificial Intelligence (AI): In order to establish fully digitalized and end-to-end straight-through processing , a modern policy management system must be able to process the data prepared by so-called AI. The background to this is that the straight-through-processing capability of a business transaction often depends on the quality of data that is available via the various input channels. A text recognition (OCR) component and associated AI uses machine learning to ensure consistent and reliable quality of the necessary data, thereby increasing the straight through processing rate.
Conclusion:
The introduction of a new product modeling and policy management system brings insurance companies enormous advantages in competitiveness in terms of flexibility, speed and efficiency. However, such a project must also be well planned and carried out with a reliable partner. For this reason, it is advisable to select a partner who is prepared to take overall responsibility for both the new system and the integration.
If you would like to learn more about the topic "Modernization of product modeling and policy management systems", please feel free to contact our expert Ruslan Rabaev.