As insurers learn to adapt to the digital age, the supporting technologies continue to evolve. The ground we are building on is shifting because computing itself is changing, and a new era of computing is upon us.
According to insurance analyst firm, SMA, it will transform how companies throughout the insurance ecosystem meet their digital needs and support digital initiatives. Every line of business, every process, and every business area faces unique opportunities and threats.
It is more than a single technological advance. Several different new trends in computing are converging. Some trends are already widespread today and continue to evolve, such as cloud and serverless computing, while others, such as quantum computing, will not have a profound impact until some years in the future.
SMA has detailed these trends and their impacts in a new report entitled Insurance and the New Era of Computing.
The report is an excellent read, so this blog will not go into great detail. Rather it will highlight five of the trends relative to how they might impact insurers core operations and transformations.
Not yesterday’s cloud
Cloud hosting has been the stepping stone into the new world of computing. Serverless computing takes this a step further to fully managing infrastructure through seamless scalability. No server management or capacity planning is exposed to the client. The cloud provider is wholly responsible for the dynamic allocation of computing resources.
One key benefit is the impact on costs. Vendors can charge for exactly the computing time and power that a client consumes – and no more. This “pay as you go” model delivers on cloud computing’s promise of rationalizing costs.
Another is speed. When new serverless cloud services are combined with cloud-native application design, they remove the typical lag between operational and analytical systems. The result is integrated solutions with no constraints on performance or data size that can support the application of insights right the point of interaction.
Microservices path to agility
Microservices are essentially a design paradigm that creates micro-components within a new or existing technical architecture. It externalizes a specific function or capability, such as rating, or pricing, so that it can operate and be maintained independently.
The great efficacy of this is that microservices can scale without being constrained by previous digital infrastructures. Upgrades to microservices occur independently of an insurer’s core system environment without affecting any other capability. And if an insurer wishes to change the microservice entirely, it is easy to swap one for another.
Microservices are also well suited to a DevOps model of continuous delivery of capabilities and support the test, fail, and learn process that innovative insurers need.
AI and ML break the rules
The SMA report states that insurers are investing in AI more than any other emerging technology. They see three general areas: user interaction (chatbots), operational efficiency (RPA), and data insights (data mining/ML).
In addition to the use cases mentioned in the report, another that has real relevance to insurance core systems design is the gradual replacement of the thousands of business rules within those systems with machine learning. The integration of rules is time-intensive and costly and prone to human error. The time invested in upkeeping a machine learning system is a fraction of what’s required for maintenance of rules. What’s more, rule-based systems are also often plagued with performance issues that can hobble real-time customer interactions.
5G and the Edge
5G is beginning to create a buzz within the industry because it will change the way data is transferred to the internet, independent of the device, user, or network. It will provide the high bandwidth required to support real-time data flows from the connected world.
Fortunately, given the exponential explosion of data, Edge computing is here to reduce the amount of data transferred to the internet and enable analysis at or near the point of collection. It distributes the analytic load to things like a smart water sensor or Fitbit.
Because the time we can afford to go from sensing to acting rapidly decreases, Edge computing will become commonplace. Gartner predicts that by 2022, seven out of ten bytes of data will never see a data center. Insurers will want to plan ahead with open and fast core systems that integrate well with new data sources.
These are just a few thoughts on the report. But don’t leave your reading to these alone. SMA’s paper has so much more to say about these computing trends, their impact, and how to plan for them.
Kevin Haydon is director of marketing and communications at EIS Group.