Ecosystems are a vital tool in our digital world. This piece is by Marcilio Oliveira, Founder and COO, Sensedia.
In Rishi Sunak’s first Mansion House speech on 1 July, he set out his vision for financial services to be ‘more open, more competitive, more technologically advanced and more sustainable’.
While the Financial Conduct Authority agrees Open Finance (OF) could significantly benefit consumers; increasing competition, improving advice and ensuring access to a wider and more innovative range of financial products and services, it warns it’s a significant undertaking for firms, confirming ‘key building blocks are needed for OF to develop in the interests of consumers’.
A number of financial services providers, such as banks, are already creating new ecosystems that enable them to compete in a more ‘open world’, but the same cannot be said for insurers where few have taken this leap of faith.
Only a handful of insurers have signed the Fintech Pledge – a set of principles the UK’s largest financial institutions are being urged to follow, prior to going into partnership with fintechs. Its principles are to:
· Provide tech firms with clear onboarding guidance via a dedicated landing page
· Provide clarity to start-ups re; their onboarding progress
· Provide a named contact, guidance and feedback
· Encourage good practice and improvement
· Commit to implementing the principles six months from signing the Pledge and give bi-annual feedback in the first year
Produced by Tech Nation – a platform for tech companies and leaders – with support from the government, the Pledge is designed to strengthen the country’s financial ecosystem. But how can insurers sign up to the Pledge, evolve and extend their ecosystems if they don’t know what building blocks they need?
The starting point is to adopt a modular mindset and add new components to existing legacy systems. In doing so, a business becomes a Composable Enterprise; maximising its ability to build, assemble and reassemble core business elements, seize market opportunities and respond to disruptors and threats, while maintaining resilience.
When connecting to new ecosystems, businesses are exposed to new markets and revenue streams. To reach this point, leadership teams must focus on making changes to their growth strategies, architecture and technology.
What is the future business plan and what ecosystems are important to connect with? Does the architecture have the structural capability to adapt and repurpose propositions? Packaged Business Capabilities (PBCs) are apps that have been purchased or developed, and can help here.
And with technology, are composable software components (normally accessed via APIs and event channels) in place? These interconnected pieces drive the technology necessary to support business growth.
Monoliths and Microservices
Rather than removing legacy systems, which have great business value, support them with modular technology platforms.
Companies with no need to integrate and build internal systems or extend their partner base, invariably use a monolithic architecture to support their IT platforms (where all activity relates to a single piece of software/code). This architecture however, cannot evolve quickly in line with business needs and if changes or updates are needed in one area, it’s likely the whole system will be disabled.
Here Microservices architecture can help. It connects separate or ‘decoupled’ elements and supports interlinked software applications, enabling them to communicate via the Cloud and be managed, modified, tested, deployed and scaled, without affecting the wider operation.
While this brings flexibility when programming languages and supporting underlying technologies, it can create communication challenges as the apps may not necessarily be in the same network (something often overlooked by developers).
So when embarking on a Composable Enterprise journey, don’t throw away the monolith (just don’t add anything else); start with the least dependent or most decoupled service, have a clear roadmap (re-writing a monolith is not easy) and pay attention to any network communication issues.
Application Programming Interfaces (APIs) are crucial to a Composable Enterprise. They share data securely across business systems, mobile applications, Cloud services etc, connecting businesses, partners and third-party providers. They’re more than a technology facilitator – they’re a strategically vital tool to compete in a digital world.
APIs standardise communications, and while it’s important to share services, it’s equally important to focus on how they are shared. Third-parties that encounter unresponsive interfaces or difficult coupling processes will have to overcome connection barriers. APIs allow a smooth transition with easy onboarding, reducing development cycles and ensuring faster delivery to partners and customers.
They also have security benefits; APIs manage and protect payment data, access control and authorisation/authentication issues, giving peace of mind to regulators, businesses and customers. APIs deliver a richer experience, supporting chatbots and interactive voice response systems that process customer requests faster and less costly, and identify instances of attempted fraud.
If any further incentive was needed, consider this; in the next four or five years, a third of the global economy – mobility, travel, banking, healthcare etc – will be powered through ecosystems and all these businesses and their customers need insurance.
Insurance providers and introducers will need their own ecosystems, connecting and selling to partners such as banks, regulators, start-ups, fintechs and healthtechs. APIs increase this exposure, facilitating data exchange and partner communication.
A single platform
The traditional way of doing things will not continue. Consumers no longer want their insurance in silos, dealing with different companies using differing communication tools. They want a single insurer platform and contact point that offers a broader range of policies and services, showing where savings can be made.
Customers used to Amazon and Google etc expect these services to transfer across to insurance.
A single platform also benefits insurers; more customer insight increases the opportunities to attract new prospects – those who are more flexible and likely to churn for new products and services.
Enhance the experience
When offering a bespoke service, it’s important to be able to alter and modify products and services as the market evolves. This is particularly relevant during the claims process where insurers with efficient digital channels will reap the rewards.
Take the initial claims interaction for example, customers don’t want to be judged, they just want to fill in their details and move onto the next section of their journey (ie car claim, replacement windscreen etc). And when processing claims, they may not want to speak to someone reading off a screen (they can do this themselves), they just want to know where their claim is in the journey.
Interactive and in-person voice systems add richness to the customer journey, so understand where they fit, and how they enhance the experience and reduce costs, while providing the level of service customers require.
Additional ecosystems can also enhance the overall insurance experience.
Take electric cars and motor insurance, these cars have regular steering and navigation system updates, so why not tap into this data and similar to the black box’ initiative, drill down into the detail and insure per journey, rather than annually? A customer driving 500 miles on the motorway poses a different risk to someone popping to the shops, so cost per risk and journey.
The same applies to phone insurance, offer it per event, rather than the whole year. Tech firms can help insurers access data from different sources, tie it all together and support instant decision making.
High speed connections
As people become more connected with home assistant devices, such as smart watches etc, and tech advances (5G, IoT) present more high speed data access opportunities, the world of insurance will look very different.
In the event of an accident, cars will automatically call their manufacturers and insurers without any human intervention. The vehicle will share all information, including the accident details via webcam, reducing customers’ emotional engagement, speeding up the process and making it easier to progress claims.
This process relies on fast and secure connections and insurers partnering with and sharing information between vehicle manufacturers, smart watch and other biometric suppliers.
It’s no longer insurers working in isolation, it’s a world of high speed connections with ecosystems supporting instant decision making and claims processing, reducing customer anxiety and potentially increasing profits.
Insurer MAG Seguros shows how it’s thriving, having connected with other financial services ecosystems across Brazil.
MAG Seguros is the specialist life and pension division of the Mongeral Aegon Group and has been operating in Brazil for over 185 years. In 2009 it became part of the Aegon Group and is one of the 20 largest life and pension groups in the world.
The company’s business transformation started in 2011 when it began to build a digital sales model and integrate partners into its ecosystem. The initial focus was on brokers, but following the launch of other MAG Seguros divisions, specialising in pension funds, management, investments and real estate etc, partnership opportunities emerged with investment agencies and co-operatives.
Luiz Henrique Queiroz, Superintendent of Enterprise Architecture, comments: “We wanted to provide a secure, flexible and sustainable platform for partners to integrate with our operation. A different model was essential and we thought about creating an API portal to promote full integration. But this posed a technology question. What is the best way to create an open portal that allows connections with other ecosystems from different sectors?”
MAG sourced a solution from connectivity specialist Sensedia, migrating what was already on its internal insurance platform to Sensedia’s API management platform. Next came the creation of a Developer Experience (DX) service unit.
“This gave us security and the support we needed to integrate more partners, expand our capacity and avoid bottlenecks,” continues Luiz.
The big tech challenge was to create a portal that offered the best experience, but with functionality and simplicity for technical and business users. The answer was an API portal.
Sensedia customised the portal to MAG’s specific User Experience requirements, introducing a Features Roadmap, where users choose their top priorities.
“Our Business to Developer (B2D) tools gave developers a greater share of voice and a key differential is the functional documentation of APIs in the portal, with a single language and easy access for all internal and external partners,” says Rafael Flexa, Sensedia’s Director of Business Development.
Onboarding tools, such as contract templates for differing types of businesses, speed up the process of validating and integrating partners, quickly enabling them to sell, create portfolios and offer additional products and services. Partners can automatically enter the API portal and if they have any problems, the DX team is on hand to help.
The API portal completed at the beginning of 2019 and in its first year, MAG connected with numerous financial services companies including digital banks, credit card providers and investment firms; all of whom are introducers.
MAG also created a tool for its sales team to generate business; they can register partners, set up the sales process and integrate them online, using their preferred distribution channel , for example direct or white-labelled.
Luiz confirms: “This is a simple onboarding process; our commercial teams access template contracts for each type of business, insurance cover and sales process, put together an offer and connect with Sensedia’s platform. Once integrated, the partners onboard with the DX team and so the ecosystem grows.”
MAG says its financial services platform and ability to scale-up is a key differentiator. Luiz concludes: “Almost 100% of our digital operation is accessible through the platform and we have our sights set on being part of the Open Banking and Open Insurance community in Brazil. Our goal is to offer the best digital experiences for purchasing and managing not only insurance products, but the different ecosystems of other companies in our Group.”