Insights and Trends - Insurance Software Development Market
While certain trends like SaaS (software-as-a-service) models and automation are catching fire in the wake of modern technological development, two of the most prominent insurance software development trends of 2018 are cloud-based organization and individual risk assessment. Cloud-based structure provides both insurers and clients with cost-effectiveness due to streamlined organization and versatile data management. Individual risk assessment currently faces the ever-growing issue of data privacy. The payoff for pioneering an efficient and ethical model by using large-scale data is well worth it, as it would provide clients with more accurate rates and reduce insurance fraud.
Key Findings -- Cloud-based Organization
- As of November 2018, one of the most prominent trends in the insurance software development market is the usage of remote cloud servers, instead of traditional local servers.
- Cloud-based organization is cost-efficient for both the insurers and their patrons, as it allows for less resource allocation and cost towards data organization, which in turn allows insurance companies to provide their clients with lower rates.
- Another benefit of remote servers is its ease of management. Managing the capacity of the server and updating it can be done far more easily than with local servers.
- The customer experience is also streamlined by cloud-based architecture. Due to the availability online portals, customers are able to view their information and, in some cases, even file claims through online portals.
- Mike Fitzgerald, a senior analyst with Celent and an author for Insurance Thought Leadership, highlighted the necessity for cloud-based structures in a research article titled "The New Recipe That Is Changing Insurance":
- “The new recipe includes aspects of both technical architecture and implementation methodology. Winners will re-architect into microservices, integrate using APIs, move systems to the cloud, drive agile into organization, and design solutions around the customer. In order to begin, insurers must understand the business value of building blocks of this new recipe and develop an outline for their transformation.”
Key Findings -- Individual Risk Assessment
- Due to the availability of large-scale data, insurers are able to use algorithms to narrow down the scope of risk assessment. For instance, weather trends can be used to determine the individual risk of property holders, allowing for more accurate rates.
- As of November 2018, about 10% of insurance claims are considered fraudulent. Using algorithms similar to those of risk assessment, insurers can reduce the rate of insurance fraud.
- A weakness of this model is its reliance on individual data. Insurers have to navigate the limits of data privacy in order to provide an ethical solution for risk assessment.
- However, a strength of this model is that due to its infantile nature, the first insurers to pioneer an ethical and efficient model will be able to provide their customers with accurate rates, resulting in business growth.
- Assaf Wand, CEO and co-founder of Hippo Insurance, noted the importance of understanding and analyzing large-scale data for risk assessment in an interview with Risk & Insurance, an insurer-based magazine:
- "Data sources are going to keep on multiplying on an ongoing basis and we don’t necessarily know what those sources will be. The amount of data will be insane, and that will force organizations to get the tools they need to bring that data into their flow as soon as possible and analyze it. They’ll become much more data-centric."