All insurance industry organisations use a variety of software systems to help them run their operations. In terms of technology and complexity, these systems range from old mainframe based systems to modern cloud based systems. The Insurance industry uses many different and often confusing terms that refer to these systems. In this post we will try to explore various terms used and their most popular interpretations. Generally, many refer to Insurance Systems as “insurance management software” which loosely groups a number of different systems together into one Insurance related category.
Operationally, we can divide insurance systems in four categories:
Also referred to as ‘Core Insurance” Systems that are used internally by an Insurance organisation’s staff. These systems are designed and used to implement a target operating model inside an organisation. Usually, these systems are internal facing only, and not accessible to any trading partners of an insurance organisation outside the company.
Front office system
These are systems that allow external users to interact with an insurance organisation’s products and services. These systems are accessible from outside an insurance organisation. Typical examples of such systems are;
- Point of sales systems that an insurance company may deploy to connect its agent workforce
- An insurance company’s web site that users can directly buy insurance from
Middle Office system
A relatively modern term and becoming rapidly popular, it represents a system, or technology asset which can act as middleware or glue between an Insurance Backoffice (internally facing systems) and Insurance Front Office System (externally facing sales systems). InsureMo is a good example of a flexible Insurance Middle Office System, more light to be shed on this in the following discussions and blogs
Channel Apps and external systems
Sometimes, other organisations build systems and solutions that connect into an insurance organisation’s products and services. A typical use case would be an ecommerce website selling insurance as part of extended warranty for items being sold. Ecommerce systems would connect into an insurer’s offered warranty product to offer this insurance to its customers. This is now the fastest growing area of insurance value chain, where an insurance organisation is trying to enable hundreds of external apps and channels to connect and sell its insurance products.
Functionally, we can divide Insurance systems into the following categories:
Policy Admin Systems
Policy Administration systems, sometimes also referred to as “Core system” allows an Insurance organisation to Acquire a new insurance policy or maintain, modify, cancel, or extend an existing insurance policy. Depending on the line of business and type of insurance being offered, the operational needs around managing a policy could be very complex, and vastly vary between lines of businesses. This aspect of policy administration complexity is also referred to as “Insurance Policy Lifecycle”. For example, one category of product may offer, Quote (with Auto pricing), Issuance, Mid-term Alterations, and Renewals. Whereas another product category may offer Quote (manually underwritten), Issuance (cash before Cover), Alterations, and Renewals. There are many variations observed in the industry in this regard. A policy administration system is usually configured for an organisation based on its needs and the lifecycle it seeks for a given line of business.
A claims system is used to handle in claims regarding the losses against the underwritten insurance policies by an Insurance organisation. Claims processes have many stages, such as lodgement, assessment, and servicing. And like policies, the lifecycle of different type of claims may vary a lot. This is where organisation invest substantially to ‘customise’ any off the shelf offered software to suit its needs.
Financial systems are responsible for managing the monetary aspects of insurance policy, such as tracking and collection of premium, and any deductibles resulting from claims, and any payments resulting from claims settlements. Sometimes, tracking and managing the commissions paid to any “Insurance intermediaries” involved in the policy acquisition is also part of the Financial System’s responsibility.
There are many other systems that are used inside an Insurance company, such as Reinsurance Systems, compliance and reporting systems, etc. that we look forward to covering in future posts.