The software revolution laps the insurance shore

Never has there been a disruption in the fundamental process around how carriers acquire, service and maintain their client base that comes close to the scale we are experiencing today. Insurer business units and their colleagues in IT operations and system development need ways to respond to the challenge. Nobody wants to be caught holding stone chisels in a digital world.

Fortunately, the software revolution has finally begun to lap the insurance shore.

In our changing world, baby boomers make up the largest percentage of the population, but millennials are the fastest growing segment. Traditional carriers that recognize this generational transformation understand the need to make major changes to their core platforms, not just to support expanding offerings for current products, but also in support of digital experience and evolving insurance needs. And the technology-driven change in consumer buying behavior requires carriers to adapt quickly.

To better align business with technology units in response to this shift, many carriers have adopted an Agile-based development process, a term increasingly familiar to insurers. The next step is for organizations to adopt a DevOps process — a less familiar term — for software development, testing, delivery and deployment, to fully reap the benefits of Agile. DevOps is one of three wave makers of the rising software tsunami. Cloud operations is the second. And the microservices model for application development is the third and the least commonly heard and understood term, to date at least.

Insurers join the race to value

As insurers look to be nimble, they are embracing DevOps. The approach has — for a number of years — been the solution delivery modus operandi of retail and tech titans such as Target, Netflix and Amazon and helped power their legendary customer responsiveness and speed to market. Encumbered by greater product complexity than most and by large legacy systems, insurers come late to the game.

Any description of DevOps quickly devolves into a tyranny of technical terms. We will avoid that. In short, DevOps is developers collaborating with IT operations to automate infrastructure provisioning, orchestration, and software deployment and management. It removes the barriers between the code makers and the code deployers. In so doing, it removes much of the latency — which translates into cost overruns and delayed realization of benefits — that has existed for years around software development in insurance companies.

In the same way that Agile development techniques represented a breakthrough in how developers worked with business professionals to deliver solutions more efficiently, DevOps is transforming the way developers and IT operations deploy and test both application code changes and infrastructure changes. DevOps is a natural evolution of Agile. DevOps puts the focus squarely on rapid and continuous deployment of small numbers of changes rather an all at once "big bang" approach. It empowers the organization to truly adopt an agile methodology, allowing the business to innovate quickly, improve efficiency and quality of code, while lowering overall implementation risk.

Take, for example, the roll-out of a new claims solution. The Agile approach calls for a regular reveal, every couple of weeks or less, of new claims capabilities, rather than a grand entry of a fully-baked new system many months after project scoping. This has the obvious benefit of enabling the claims organization to better monitor progress and make corrections along the way. DevOps in turn will further accelerate the work by providing an automated, highly-repeatable and tested process and pipeline to push new capabilities into production.

DevOps is one of three wave makers of the rising software tsunami. Cloud operations is the second. And the microservices model for application development is the third. (Photo: iStock)

Cloud keeps things fast and simple

How does the cloud play in this software development and deployment revolution? The cloud has obvious benefits related to security, scalability, speed and performance. But the most valuable characteristic is that it provides a way to manage infrastructure and development and deploy environments as code. Say good bye to the time-wasting and partly-manual IT operations of installing and launching servers and applications, and the configurations of various related services. These are among the guilty gremlins that drove latency in the past.

Leading cloud providers have made it a central focus to simplify these operations by using what is called Infrastructure as Code (IaC). Essentially, IaC is a DevOps practice that makes the process of managing your infrastructure much easier, more reliable, and faster.

Now the very same person who developed and tested the software might also be deploying your new update to your doc gen, underwriting, or any number of other core and non-core systems. This constitutes a significant organizational and productivity change as it collapses traditional operational boundaries.

Microservices: Designing smaller and better

Our third avatar of the new software age, microservices, is a software design approach. How is it different to what we have done before?

Up until the present, application architects have mostly thought in terms of component design. But components are a part of something larger and don't have value outside of the larger entity. For example, a gear is a component of an engine. The engine needs the gear to operate, but the gear has little value outside of the engine. Architects now think in terms of designing services, which have innate value without being part of something larger, but still can participate in a larger context, increasing its value.

In the insurance context, we can visualize one of these gears as being a large policy process, like quote, bind and issue, or an endorsement. A micro-service approach breaks large pieces of business capability down into much smaller pieces. This makes it easier to upgrade the larger business capabilities: just replace or upgrade the relevant microservice. And re-usable: a payment service for premium overpayment could also be used in a customer claims payment.

But here is the bonus value of a micro-services approach. Microservices are expressly designed, unlike their predecessors, to move smoothly along the software delivery pipeline. Isolation, decentralized data management and implicit tolerance for failure are central design goals for microservices, making them fit neatly into a DevOps process.

Forged for the future of insurance

The software revolution is at hand and the forces are arrayed. If insurers can get the potent mix of these powerful tools right, their ability to quicken the pace of innovation and digital transformation will leave heads spinning in their wake. Forged on the hammer and anvil of intense competition in the retail and entertainment sectors, these tools when put to task in insurance will improve the speed to value equation of insurers' technology initiatives. They will lift the industry to meet rising customer expectations and do commerce in the digital age.

Keven Lincoln is vice president of cloud and managed service solutions at insurance core systems and digital platform supplier EIS Group. He can be reached by sending email to [email protected].

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