Microservices in P&C industry: A big challenge

In the property and casualty (P&C) insurance industry, the adoption of microservices represents a significant yet essential challenge to remain competitive and efficient. This article explores how transitioning to a microservices architecture can transform traditional operations, enhancing the agility, scalability, and responsiveness of insurance companies.

This design approach allows for the breakdown of monolithic applications into smaller, autonomous components dedicated to specific functions such as policy issuance or claims management.

Benefits of Microservices

The following key points detail why microservices design is a very useful tool today.

• Speed and Agility: With a clear separation of business concerns, any changes can be made more quickly, minimizing implementation time and improving adaptability to market demands. Similarly, each microservice can be updated and deployed independently, reducing the impact on the overall system.
  This strategy allows insurers to quickly meet customer and market needs, implementing new features or improving existing ones without affecting the service.
• Scalability: Microservices promote scalability by using elastic containers that can adapt according to the specific demand of each business function.
  This allows insurers to efficiently manage work peaks and modernize the customer experience.
  By enabling each service to scale independently, resources are optimized, and operational costs are reduced.
• Decentralization: The partitioned management of microservices allows different teams within the organization to develop and maintain their own services with complete DevOps responsibility. Its implementation not only improves operational efficiency but also allows for the use of the best technologies for each specific business function.
  Decentralizing administration fosters innovation and accelerates the time to market for new solutions.
• Resilience and Sustainability: Microservices are self-sufficient and can be updated without affecting other system components. This reduces the risk of failures and ensures that the system remains updated and relevant in a constantly evolving technological environment.
  The ability to isolate failures in individual services improves the overall system resilience and facilitates maintenance.
• Continuous Improvement and Experimentation: Microservices architecture allows for experimentation and continuous improvement. Development teams can test new features and run A/B tests more efficiently. The ability to make small, controlled changes enables insurers to continuously innovate and adapt their services to changing market needs without the risk of large-scale implementation failures.
• Better Integration and Compatibility: Microservices can easily integrate with other internal and external applications and services as independent components. This improves interoperability and allows insurers to work more effectively with partners and technology providers. The introduction of open standards and well-defined APIs facilitates the integration and extension of system functionality.

Application in Insurance

In the context of policy management systems, microservices enable insurers to design more open and flexible platforms. This is crucial for creating a sustainable competitive advantage as it facilitates the incorporation of new technologies and the quick adaptation to changing business and market needs.

Challenges and Complexities

Although the benefits are numerous, adopting microservices requires a significant organizational change, not only in terms of technology but also in corporate culture. It is crucial to have well-trained teams and efficient DevOps processes to manage the inherent complexity of this architecture.

Strategies for Implementing Microservices

The implementation of microservices in insurance should focus on three key areas:

Technical Strategy: The following technical points are key for the perfect implementation of this methodology.

• Use tools for the implementation, scalability, and monitoring of microservices (Zipkin, Grafana).
• Implement continuous integration and delivery (CI/CD) pipelines to automate microservices deployments and ensure that new features and updates are properly implemented.

Organizational Strategy: This is fundamental because organizations need to have a culture that follows technology-driven changes. This strategy is mainly based on the following organizational assumptions:

• Foster a culture where teams are autonomous and take full responsibility for the microservices they manage. This covers development, operations, and maintenance.
• Invest in training and improving your team’s skills to provide them with the tools they need for DevOps and microservices management, ensuring they stay current and up-to-date with the latest trends and technologies.

Development Strategy: This point is one of the most important and concentrates on the success of a good implementation. This strategy is based on the following points:

• Adopt DevOps practices that allow for continuous and efficient delivery, facilitating experimentation and rapid innovation, including the implementation of monitoring and logging to ensure visibility and control over microservices in production.
• Ensure that all microservices are designed with well-defined APIs and open standards, streamlining integration and interoperability with other systems and services. Good API design also improves the reuse and modularity of services.

Comparative Analysis of Framework Providers for Claims and Policy Management

It is crucial to choose a solid and reliable framework to ensure that the operations of an insurance company are efficient and effective. Solartis and Guidewire are two leaders in this field that have stood out by providing innovative solutions adaptable to market needs.

Solartis excels due to its modular approach and ability to deliver insurance solutions through the SaaS (Software as a Service) model, enabling companies to customize and expand their operations with agility. With a strong emphasis on automation and integration, Solartis simplifies policy and claims management through a flexible platform that easily integrates with pre-existing systems.

On the other hand, Guidewire is characterized by its comprehensive suite of products designed to cover the entire insurance process, from underwriting to claims management. The robust platform supports complex and high-volume operations, offering advanced tools to insurance companies to optimize processes and significantly enhance the customer experience.

The following is a detailed examination of the features and advantages provided by Solartis and Guidewire, emphasizing their key attributes and how they can be beneficial for entities in the insurance sector.

Solartis

Solartis Insure offers a catalog of microservices, between other resources, that cover the entire policy lifecycle, allowing for unprecedented customization and scalability.

Its microservices are designed to be used on various technological platforms, from consumer portals to underwriting systems for agencies and distribution partners.

Categories of Solartis Microservices:

Solartis Microservices Categories

• Rating: The rating microservices are used to calculate insurance premiums and provide a list of forms to include in the policy document. These microservices can be configured at the coverage, location, or policy level. They are invoked whenever there is a need to calculate or recalculate the policy premium, including quick quotes, proposals, endorsements, cancellations, reinstatements, and renewals. The rating microservices are configurable and specific to the selected jurisdiction and coverages.
• Document Generation: These microservices combine one or more insurance form templates with policy data to generate a single insurance document in PDF format. The templates can be static PDFs or dynamic forms in XSL or DocX format. These microservices can be configured to generate various types of insurance documents, such as rate indications, applications, proposals, invoices, policies, payment receipts, endorsements, etc. The ability to generate documents dynamically facilitates the customization and accuracy of insurance documentation.
• Transaction: The transaction microservices are granular tasks within the policy lifecycle that save and retrieve data based on the specific LOB/Product schema. These microservices are auto-generated based on the product structure defined in the Solartis PMT. Examples of transaction modules include submissions, quotes, policies, endorsements, cancellations, reinstatements, renewals, etc. These microservices enable efficient and accurate data management throughout the policy lifecycle.
• Workflow: The workflow microservices are high-level actions within the policy lifecycle that execute critical business functions. These microservices are specific to the client’s product/LOB and are configured during the initial onboarding of the insurance product. Examples include create submission, register submission, create quote, offer quote, issue policy, pay and issue, create endorsement quote, issue endorsement, cancel, reinstate, create renewal quote, etc. The ability to orchestrate microservices into workflows allows for the automation and optimization of complex business processes.
• Utility: Examples of utility microservices include validation, underwriting rules, authentication, authorization, integration, etc. These microservices can be either stateless or stateful, depending on specific needs. Utility microservices facilitate the implementation of common, reusable functions throughout the system, enhancing consistency and reducing development time.
• Product Management: The product management microservices provide ways to access and change insurance products configured in the PMT without using the PMT user interface. These microservices allow for the creation, management, and maintenance of insurance products from an external system without accessing the PMT. Examples include creating products, managing product versions, obtaining geographical and coverage data.
• Metadata: The metadata microservices provide lists of valid UI/UX questions, attribute lists, dropdown values based on the selected product, geographies, coverages, and responses to previous questions in a UI/UX. These microservices are useful for dynamically generating the UI/UX instead of building it statically.

Solartis Insure takes policy administration to a new level, enabling insurers to create customized and efficient policy administration systems.

There is more information about the Solartis Microservices Catalog in this link

Guidewire

Guidewire has adopted a microservices architecture to update and scale its solutions in the insurance industry. This approach allows insurers to be more agile, enhance integration, and quickly offer innovative products. Below is a detailed description of how Guidewire structures its microservices architecture and its main components:

Guidewire Cloud Platform

Guidewire offers its cloud platform, which provides security, scalability, and advanced functionalities for the deployment of InsuranceSuite. This platform is designed to support large volumes of data and transactions, enabling insurers to access real-time data and make informed decisions quickly.

Key Components Provided by this Tool

Data Platform

• Data Ingestion: This platform utilizes open-source frameworks like Kafka Connect and Debezium for Change Data Capture (CDC) to Kafka, enabling integration with internal and third-party systems.
• Data Catalog: Manages metadata to unlock capabilities such as role-based/attribute-based access control (RBAC/ABAC) and curated datasets.
• Security: Employs security methods that ensure data privacy, integrity, and availability, integrating with the Open Policy Agent (OPA) to facilitate access and data protection policies.
• Data Lake: Stores data in long-term storage formats using AWS technologies like S3, Glue, and Lake Formation, allowing for unlimited scalability and SQL queries via AWS Athena.

Curation Engines

• Data Processing: Utilizes distributed processing engines like EMR (Spark, Hive, HDFS) to scale processing capabilities as needed.
• Designer API: Facilitates the creation of curated data views through simple SQL inputs, allowing for both streaming and batch processing.

Operational Automation and Controlplane

• Operational Automation: Employs Infrastructure as Code (IaC) and tools like Terraform, CloudFormation, and Kubernetes to manage all operational elements in the data platform, ensuring automatic deployment and scaling of complex distributed systems.

There is more information about the Guidewire Cloud Platform in this link

Specialized Solutions

Guidewire has also developed specific solutions to address different needs in the insurance market:

• Embedded Insurance: Allows insurers to offer insurance at the point of sale of non-insurance products, optimized for travel insurance but adaptable to other products.
• Excess & Surplus Lines: Facilitates the creation and customization of products for complex commercial risks.
• Micro-BOP: Targeted at small and medium-sized businesses, it enables direct insurance offerings with simplified underwriting processes.
• Parametric Insurance: Facilitates the implementation of parametric insurance, automating underwriting and claims processing, simplifying pricing, and expanding the addressable market.

These options allow insurers to present innovative products, improve customer retention, and offer personalized experiences to their policyholders.

Challenges and Adverse Effects of Using Microservices and SaaS Providers in P&C

Nevertheless, while a number of positive aspects surround the adoption of microservices and SaaS providers like Guidewire, it also brings with it several challenges. One of the major challenges is the increased integration complexity resulting from custom built implementations of standard Java libraries by these vendors. This customization often means that developers need to learn how to use these proprietary extensions and modifications, thereby increasing their learning curve. Coupled with this, there is a requirement for constant compatibility maintenance among different microservices which result in high overheads. With poor management or lack thereof, such integration may lead to performance bottlenecks and potential security vulnerabilities. Also if firms rely on third party SaaS solutions they can be locked into vendor offerings thus limiting flexibility and possibly driving up expenses over time. All these show why meticulous planning and consideration are important when bringing in micro services as well as SaaS solutions in P&C industry.

Final Thoughts and Future Directions

In the article, we have explored some of the characteristics of companies developing microservices infrastructures in the insurance industry. It is important to note that those mentioned are only a selection of the many that exist in the market. Other notable companies include Duck Creek Technologies, Insurity, and Majesco, among others. In future posts, we will delve deeper into these and other platforms. The next step will be to generate practical exercises using some of these platforms, which will allow us to discuss them in detail. This way, we can design and implement our own platform, leveraging the acquired knowledge of the business domain and best practices in using microservices in the insurance industry.