Remember seeing phone company trucks driving around town with giant spools of wire, installing new communication lines everywhere new construction was planned or in progress? It seemed like every day there was a new project going on, and a spool or two on the side of the road somewhere.
With the advent of cell phones (and much better planning and coordination between communications providers and municipalities), the spools are a rare sight nowadays. A modern approach centralized the hard work and handily took the place of distributing and overcomplicating all of that effort.
So why are insurance companies still building so many product variations from scratch every time they want to offer coverage in a new geography, or need to make a simple regulatory update? Why don’t more of them use systems that let their products inherit common characteristics from one primary definition, much like a thousand cell phones all getting their signals from one central tower?
The technology exists, and it’s been proven for years – yet for most insurance companies, building small variations into an otherwise commoditized product looks a lot like a giant spool of wire on every street corner.
Insurers need to maintain many products in myriad regulatory climates in order to offer cohesive coverage across a set of geographies. The result? Simple changes take too long and cost too much. Teams of consultants are needed to update rate tables or add new rules. Keeping up with regulatory changes is painstaking and expensive.
And the potential for human error further weighs down the process.
Historically, insurance products have been built in silos. They were defined at the highest level, then customized for each regional and/or regulatory variation by copying and pasting the common attributes and manually filling in the differences. Alternatively, one massive product was created with every potential variation accounted for, which necessitated coding if/then logic at every turn. Either way, the process was cumbersome, time-consuming, and prone to error – and it had to be repeated whenever even the smallest of changes was required.
The opportunity for a better solution was clear: insurance products that shared the vast majority of their attributes can be built as a primary definition, with each needed variant inheriting all of those key characteristics and only requiring modifications to the parts that are unique. An insurer can manage their product portfolio conveniently by facilitating reuse through centralized management of common attributes that doesn’t require duplication of structure and logic.
This inheritance model radically simplifies the process of managing and distributing insurance products. Maintenance and rollout times are drastically reduced, creating efficiency and freeing up resources for innovation. Expanding business into new geographies requires a fraction of the effort, and handling regional regulatory compliance is simple and straightforward. Products that meet evolving consumer demands can be brought to market as rapidly as those demands dictate, and can be updated as much and as often as necessary with minimal impact.
And insurers that adopt this model can gain a tremendous competitive advantage.
One real-world example we’ve seen with our own customers is that of an insurance business in an extremely price-competitive market playing what they call “the penny game,” adjusting their pricing by as little as one cent every time their competitors do the same. Under the old paradigm, this small but meaningful change would have to be made for every region in which a given coverage type was offered; if the product was offered in the U.S. alone, they needed to retool fifty versions for every one-cent price change. By the time the work was done, there was a very real chance that it would have to begin again immediately, over and over, every time market demands prompted competitors to charge a penny more or less.
With a robust product inheritance model, the difference is night and day. This insurer makes the small pricing change at the primary product level, and each variation of the product inherits the change with no impact to any of its regional differences. Months of development time become weeks; weeks become days.
And insurers that still rely on legacy technology can’t keep up.
Here at Socotra, we know that a strong inheritance model makes it easy to diversify your product portfolio, meet regulatory requirements in various geographies, and tailor your products to each market niche and region in which you do business. It’s a big part of why Socotra is the system of record that enables you instead of holding you back. Insurers that rely on our core policy administration system can create and manage large portfolios of products without expensive workarounds and customizations – all with enforced integrity and traceability.
Can you hear me now?
Socotra is a true SaaS offering with built-in flexibility and modularity. It’s the one platform you can easily adapt to support your needs across different geographies, unleashing your IT team from change complexity and letting you focus on your business, your market, and your customers. You can see it for yourself with a customized demo and a zero-obligation pilot project you can use to build a real, market-ready insurance product, no matter how many geographies you need to distribute it in. Get in touch to learn more – let’s talk.
