Against a backdrop of continued disruption, insurance companies are being asked to reinvent themselves. To transform at an operational level, insurers need to move from complexity to simplicity. That alone is a daunting task. Composable architecture helps insurers simplify the complexity at every step of the insurance value chain, often using their existing processes. Here are 5 practical use cases for composable architecture.
1. Policy management – from complex organizational structures to agile integrated ecosystems
Many services for new insurance applications can be unbundled. This will enable insurers to source applications from digital portals and AI-based product/coverage selection engines. This can also help them build pre-qualification engines based on data from different vendors, such as distance from shore, CLUE reporting, risk checks using IoT sensors (surveillance systems, smart appliances, smart metering, etc.), as well as externalized ratings and pricing engines. This helps distribute development, integration, and testing efforts and enable faster adoption of new business strategy applications. Breaking the process into multiple sub-processes helps users use them at different points in the policy transaction timeline, such as when creating a monetary endorsement or during renewal.
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2. Billing management – from manual to automated and personalized invoicing
In the case of billing management, list billing service segments can be used to help build reusable functionality such as account creation and member detail updates. Generate invoices at a specific frequency for transactions between multiple policyholders or agents and complete EFT payments for different policy members in different locations. Recovery and refund transactions can be triggered based on audit tasks completed at the end of the policy year. Many of these individual services can also be reused for periodic audits of commercial lines.
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3. Transform claims through composability – from inflexible to dynamic claims solutions
There are four advanced modules for claims processing: First Notice of Loss (FNOL), Processing, Finance and Claim Closure. FNOL processes have micro-level services that can be carved out as individual application programming interface (API) services to internal and external systems and listed as carved out microcomponents. In a composability business model, these unbundled components can be rebundled to build dynamic modules.
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4. Straight-through processing (STP) of claims – from time-consuming review processes to API-led automated approvals
Straight-through processing (STP) claims are high-volume, low-value claims that are paid immediately without the need for a detailed adjudication process. In this case, different APIs are used for the following processes: starting with the claim basis; policy search and retrieval; attaching claim invoices by automatically pushing invoices with vehicle or claim numbers; verifying coverage for specific details in the invoice; and seeing if the invoice amount is below the STP threshold specified by the insurance company (e.g. $350). Based on the results of all these API processes, claims can be automatically approved for payment and the amount is immediately paid to the insured. These are available for automotive “glass only” claims as well as low-cost medical injuries.
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5. Holistic simplification – from large-scale legacy infrastructure to modular, agile approaches
In current conversations with customers, we recommend simplifying the overall structure to effectively enable composable architectures. This refers to the process of gradually dismantling existing infrastructure and rebuilding it in a more efficient manner. Holistic simplification helps minimize risk when customers have a holistic application that supports the business and is continually being enhanced.
Once we determine that composable design can be applied, we approach it in three phases: understand the challenge, assess required actions, and implement the solution. Following this initial approach, a further component inventory can be created to categorize the overall experience.
Contact us to find out how you can use it to simplify and grow your insurance business Comprehensive corporate reinvention.
