Setting Up a Composable Tech Stack for Your Insurance Enterprise
Everyone is talking about creating a composable architecture for your business. Daryl Plummer, VP, Distinguished Analyst & Gartner Fellow, notes that a “Composable business is a natural acceleration of the digital business that organizations live every day. It allows organizations to finally deliver the resilience and agility that these interesting times demand.”
Introducing composability into your insurance company’s internal systems, infrastructure, and even company culture can be daunting. This can be especially true for many insurers who have grown because they have multiple competing instances of parallel business and technical capabilities. It’s also problematic for those businesses where the various units are heavily siloed, operating in a semi-autonomous manner from the rest of the organization.
However, there is a good reason why composable architecture is a hot topic. It incorporates flexibility and agility while making it easier to address new threats in the market. Achieving the long-term value of this shift can only be supported by a parallel shift in institutional thinking. It may even require the incentivization of internal teams to be more collaborative.
Silos, Acquisitions & the Complexity of Insurance Ecosystems
Many businesses operate with their different departments locked in functional silos. This is evident in many financial organizations, including insurance. Underwriting owns underwriting, service owns service, billing owns billing, and so on.
That extends to the technology, ecosystems, and customer and internal-facing applications. There is an interconnectedness that is inherent to business operations, though. For example, underwriting needs to set billing parameters to ensure they invoice appropriately for policies and needs to set service standards to ensure policyholders are supported as expected when different sorts of claims occur.
A more modern approach has been to use APIs to connect to those core services. Whenever the business shifts, though — a new unit is created, a different market segment adapted to, etc. — stakeholders must develop a new API to write policies, retrieve and sort data, and more. It’s better than a monolithic approach but still requires starting from scratch by building a new set of API calls to various data sources when new apps and functions are built.
Beyond new products and services, this comes into play with mergers and acquisitions. These businesses have their own architecture and ecosystem behind the scenes and must build services to interface across tech stacks. Trying to integrate across data, portals, and databases is complex, and new and old customers expect a seamless experience quickly.
The Long-Term Benefits Of Composability
APIs are frequently likened to the Lego — small elements that you can combine with others to create new services. In a complex environment like insurance, lacking a cohesive vision leads to a lot of work and re-work with APIs.
Composable architecture is more like the Lego with a plan. Instead of looking at individual bricks, you’re looking at modular sections. You aren’t using small pieces that need to be broken down and apart to create something different. Instead, it’s more like having a library of Lego-built rooms, roofs, garages, and so forth. It’s made out of bricks, and some parts will still need to be customized, but you can combine these well-designed elements to get you 80-90% to completion quickly.
This saves time across business units while bringing overreaching services that cross-silo boundaries. This, too, is daunting for insurers. Why? Because creating these composable elements requires some investment and can mean building features and services that dip into another unit’s area of responsibility.
When viewed another way, though, this can create an internal marketplace where other departments can leverage the composable pieces you’ve already built. One department can “subscribe” to another’s service, and revenue sharing across departments can help fund further development.
This might sound radical, but it’s a model already being used. Chinese appliance company Haier has adopted a microenterprises model, leveraging the philosophy of the Internet, “small pieces, loosely joined.” Within the organization is an intricate marketplace where “node” microenterprises sell components and services to market-facing ones.
Highlighted by both Harvard Business Review and the book Humanocracy, Haier’s model is an industry-leading example that can be applied to composable technology services within the insurance industry.
Inspiring A Composable Culture
For organizations considering moving to a composable tech stack, you can start by decomposing the system structure already in place. Identify common denominators that will act as the foundation for the APIs that will work across functional groups.
Be prepared for internal resistance to change. Tearing down silos will seem like a threat to old and existing power structures, and it’s natural for those parts of a business to cling tightly to what is already theirs. Be ready to sell leadership and teams on the benefits composable architecture will bring to the enterprise.
Also, remember that partners, like DMI, are here to help. DMI starts all of its solutions by first understanding the people those solutions serve, both the end customers and the employees who support them. We dig into the challenges and pain points each of those groups feels and use that to prioritize the things driving their financial and personal outcomes while also supporting the business’s goals.
Our “Human at the Core” approach allows us to build a vision for our clients while keeping a constant focus on their needs so that we can continually adapt and evolve those strategies amid a rapidly changing landscape. Contact us to learn more.