Enabling Ecosystems: Golden Rules of Digital Transformation

The Automated Insurer | Digital Transformation

API, Microservices and the Data (R)evolution: exchanger technology lets insurance companies manage data flow

By Cristian Marcov | 8 March 2022

Key Points

Insurance companies today must curate vast digital ecosystems consisting of several different applications in order to continuously innovate and meet customer expectations. To accomplish this mission, carriers should leverage APIs and microservices while cultivating an API-first culture to keep data flowing freely between applications.

Today, insurance systems need to talk to each other. They must store, share, retrieve and use the same data. Data should flow unimpeded from the first information collected from a prospect or census, straight-through underwriting to policy administration to claims.

Failure to integrate data increases costs and complexity and reduces accuracy. Manual input errors can slow everything down, potentially leading to loss of business in an increasingly competitive environment for group and voluntary benefits. In fact, insurance technology laggards lost 10% of their annual revenue in 2018, and if they don’t change, they could miss out on as much as 37% of their yearly income by 2023.

Our clients at Global IQX often choose other best-of-breed systems to optimize their digital capabilities: CRM, policy administration, claims, enrollment systems, risk and lead scores and self-built software. No one wants to re-enter data. Everyone requires an automated streamlined solution.

Frictionless integrations with other systems yield an impressive competitive advantage. Indeed, technology leaders like Uber maintain ecosystems of thousands of different microservices to deliver maximal value to their customers. Similarly, insurance companies that take advantage of the dynamism and flexibility of digital ecosystems will be able to deliver more value to their customers, faster. 

In spite of this, insurers today often still can’t use the same data across their value chain for a variety of reasons, with the burdens of legacy systems being foremost among them.

Legacy Insurance Systems

Legacy systems for employee benefits may still be great workhorses, but they are less flexible. It takes extra work to get them to communicate with other systems. In addition, insurers that have gone through a merger may have two systems and often find their systems incompatible. This means data must be reentered multiple times. 

Even if carriers decide to implement their own integration, the dynamic nature of the group insurance market can quickly make a recent system integration obsolete. 

For example, carriers may be forced to consider a new insurance product or furnish old ones to meet the market demands. Usually, such changes will trigger a cascade of updates for many, or sometimes all, integrated endpoints. Microservices can alleviate this kind of problem. Breaking down software into smaller components can lead to better modularity, reducing the implementation effort because smaller portions of the system have to be changed.

Sometimes even microservices are not enough – many carriers have implemented complicated data pipelines with complex business logic. 

Changing or updating a single stage in this pipeline can dramatically affect any downstream endpoint. This is where the new IQX Exchanger platform can help. Instead of software updates and changes in the microservice application programming interface (API), the Global IQX Exchanger lets carriers quickly change or update the data structure that flows through the pipeline.

Enabling Ecosystems: The IQX Exchanger Platform

Managing Data Flow

The Global IQX Exchanger was designed with backward compatibility (it is compatible with data structures produced by any Exchanger version) and external compatibility.

Managing data flow is a growing priority for both IT and business users: each group of users has specific requirements and/or constraints. For example, IT users focus on data formats, data security, and system performance, while business users focus on business rules and data validation.

Each of these aspects is configurable within the IQX Exchanger platform. One particular characteristic of integration systems for group insurance systems is the size of data that often flows between endpoints. The amount of exchanged data is substantial for huge groups with a complex insurance product structure. 

For this reason, the Global IQX Exchanger can operate in both synchronous and asynchronous mode with built-in protection against system overload.  Data flowing through the transformation pipe can be formatted in either XML or JSON and restricted to specific users, based on their authorization level.

Enabling New Business Endpoints

The Exchanger platform offers a powerful tool to build more specialized applications that fit specific needs. 

The percentage of insurers using cloud solutions like Salesforce or Amazon Web Services (AWS) has increased from 70% in 2018 to 90% in 2021. Although, in the long run, this reduces IT operating costs, it still requires integrations with existing systems that are not yet deployed in cloud-like policy administration, claims, payroll, and archive.

For all these endpoints, insurers can use one of the many Global IQX Connectors built on top of the IQX Exchanger platform. Connectors are specialized applications ready to be deployed and integrated with a specific endpoint. 

For example, the Salesforce connector allows bi-directional communications with Salesforce cloud applications. Salesforce users can leverage Global IQX Salesforce Connector to initiate “ratable quotes” and receive final rates whenever these are made available by the carrier rating system.

Having a stable, backward-compatible web-service API becomes even more critical given the lack of an established and adequate data-exchange standard with third-party information providers. Data-exchange standards should encompass data aggregation, format and translation, and frequency of delivery. 

Without standards, chaos can develop, and costs can ratchet up. But unfortunately, data-exchange standards are not universal. While this remains a challenge, industry groups such as LIMRA, CLIEDIS, and ACORD are making serious inroads into developing common standards. 

One encouraging sign of progress: in 2019, LIMRA launched the prototype of the LIMRA Workplace Benefits Electronic Data Exchange Standards. To this day, LIMRA’s Data Exchange (LDEx) Standards are continuously updated and maintained in collaboration with a committee of dozens of insurance, finance, and technology companies. 

Building Ecosystems of the Future

Legacy systems are losing their value as the market rewards dynamic carriers that leverage APIs, microservices, and web services to build systems that offer the right experience on the right platform to the right people.

The insurance industry’s digital transformation is well underway, as 66% of insurance executives say the pace of their digital transformation is accelerating. 

By integrating with tools like the Global IQX Exchanger platform, IT teams can promptly manage massive data sets, create specialized applications, and enable new business endpoints. 

Insurers who can most effectively collect data to create personalized policies and enable a frictionless customer experience will succeed in their digital transformation. Conversely, insurance companies who struggle to organize and manage data will be prone to errors, additional costs, and longer wait times for their customers.

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Cristian Marcov

Cristian Marcov is technical architect at Global IQX, a leading software provider of web-based sales and service solutions to employee benefits insurers.

He is an expert in Java technologies, Oracle database programming and complex web applications.

Marcov received undergraduate and graduate degrees from Politechnica University, Bucharest, and completed postgraduate training at the University of Manchester and the Oracle Education Centre.

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