Insurance core system modernization: What is externalizing of products, rules, and rating and how can it benefit insurers?

Current Industry Challenge

Many core systems have stood the test of time, operating efficiently for over a decade with excellent performance. With current market requirements that demand speed and agility to deliver superior partner and customer experience, existing core systems are not designed to handle ad hoc or differentiated neo-market or channel requirements. Their robust nature makes them ideal for Accounting, Claims, Reinsurance, Billing and Policy administration. The other side of the coin that core systems are not optimized for, are new product dynamics, integration with customer portals and partner portals of affinity ecosystem, all of which require speed and scalable API infrastructure.

As carriers continue expanding and diversifying their distribution channels to work with more ecosystem partners, it becomes imperative for carriers to enhance their core’s capabilities to meet current market demands. These enhancements cannot be short-term fixes that add to the growing technical debt. Carriers need a scalable solution that allows them to seamlessly grow their business without drastically increasing operating costs. This flexibility is crucial for adapting to new market demands and customer expectations.

The Insillion Approach

Rather than overhauling the entire core system—a task often associated with risks such as data loss and operational disruptions, Insillion offers a more strategic approach. By externalizing the dynamic product layer into an agile intelligence layer, Insillion decouples the elements that require constant updates (such as products, rules, and ratings) from the core system. This lightens the load on the core and enables rapid product innovation, deployment and market adaptation.

Insillion has been an early adopter of this philosophy, where the platform acts as a middle and front-office intelligence layer, de-risking the core while modernizing the carrier’s existing architecture. This approach maximizes ROI on existing investments, future-proofs technology, and prepares carriers for the evolving market landscape.

What does externalization of product, rules and rating layer mean?

The existing core system is retained as the System of Records, while the product, underwriting, rules, and rating layers are moved to a dynamic cloud-based intelligence layer. This layer will provide advanced functionality and allow for easier updates.

The intelligence layer enabled by Insillion will offer rating and underwriting capabilities through APIs. This approach will give carriers greater flexibility and agility, allowing them to configure workflows and portals as needed.

System of Records vs. System of Intelligence

The core system acts as a database (System of Records) while Insillion serves as the intelligence layer, facilitating data flow, validations, and communication with other systems. This optimizes the performance of existing systems and extends their lifespan, while reducing the need for costly upgrades or migrations.

Value proposition for carriers to externalize products

Faster speed to market

When migrating products to a new core, it can take years to realize the benefits of modernization. Insillion offers an alternative and quicker approach, where carriers can easily transition into digital-first insurers, this equips them with the functionality needed to adapt to any market changes and tap into any new business opportunities.

Carriers can launch products for new channels, for example, health insurance product for an aggregator or travel insurance for airline sites. While retaining the stability of existing core systems, carriers can extend their offerings to new distribution channels, ensuring agility in the face of changing market and regulatory demands.

Achieving scalability without increasing operation costs

By moving the product layer to the cloud, carriers can scale their operations with reduced disruptions to the core. For high-volume-low-ticket products, such as Group Personal Accident offered on ride sharing apps or ticketing sites, where the velocity of the policies issued is extremely high, leading to excessive load on the core system, especially during peak seasons such as holiday season or rush hour. Carriers can achieve scalability with a middle office layer that enables on-demand scaling to meet channel requirements and ensure that customer and partner needs are met without impacting the system’s performance.

Cost transformation

Maintaining core systems often incurs escalating costs, particularly as skilled resources become scarce, leading to inefficiencies and missed business opportunities. According to PwC, around 70% of an insurer’s IT budget is typically spent on maintaining older systems. By moving the products to a cloud layer, carriers can enable new product launches and reduce operational costs, while empowering innovation and agility without any trade-offs.

Conclusion

Insillion’s API-powered approach offers insurance carriers the best of both worlds: it maximizes ROI on existing core systems while providing the flexibility to innovate and scale as market needs evolve. This approach positions carriers to thrive in an increasingly digital and interconnected insurance ecosystem, driving both growth and customer satisfaction.