What are low-code platforms?
Like many of its business vertical contemporaries, the insurance industry is undergoing a significant digital transformation. Modernizing core claim systems, however, has historically been an inefficient and costly process, often failing to deliver desired outcomes while taking years to implement, leading many insurers to turn to low-code platforms as a powerful solution to accelerate development, reduce technical debt and achieve operational efficiency in claims handling. Here, we will explore the rise of low-code platforms, their significance in the insurance industry and how insurers can deploy them effectively to create the ideal claims experience.
Low-code platforms are a type of visual software development environment that empower professional developers and non-technical users (AKA “citizen developers”) alike to create mobile or web applications with relative ease. These platforms offer a drag-and-drop interface, enabling users to build apps by connecting pre-built components, eliminating the need to write code line by line. Part of the allure of low-code platforms is that they generally do not require in-depth knowledge of traditional programming languages, so everyone, from business analysts to administrators to other non-developers, can participate in the creation process, leveraging configurable components to build and test applications.
The proliferation of low-code platforms directly results from a growing demand for faster development cycles coupled with a scarcity of skilled software developers. Low-code platforms have proven to be instrumental in solving complex business problems swiftly and efficiently. As the insurance industry faces changing customer expectations, talent gaps, increased claims litigation, and various economic pressures, low-code platforms offer a viable solution to bridge the gap between legacy systems and seamless digital experiences.
On the rise
The worldwide market for low-code development technologies is rapidly expanding, with a projected total of $26.9 billion in 2023, signifying a 19.6% increase from 2022. This growth can be attributed to the upsurge of business technologists and the adoption of hyper-automation and composable business initiatives. Because low-code tools cater to both professional IT developers and non-IT individuals, they embolden organizations to achieve the digital competency required in today’s modern agile environment.
Why modernize?
The insurance industry faces several challenges that necessitate the modernization of core systems. First and foremost, changing customer expectations, undoubtedly influenced by smooth, hassle-free digital experiences in other industries, require insurers to provide efficient and user-friendly services. In addition, increased claims litigation and economic pressures have put insurance companies under immense financial strain, demanding operational efficiency to manage costs effectively.
Enhanced financial performance and customer retention: By embracing flexible, digitized product systems, insurers can better streamline their overall product innovation process, leading to faster time-to-market for everything from rate changes to new products. Enhanced integration capabilities also improve the front-end user experiences and support agency and broker sales processes, resulting in increased customer satisfaction and reduced churn. This approach has led to premium increases of 0.5 to 1.0 percent in the property and casualty (P&C) insurance sector and has shown similar positive effects in the life insurance segment.
Heightened operations productivity: Modernizing core systems often prompts insurers to give their operations setups a facelift and adapt workflow mechanisms, improving work organization and productivity. Benchmark studies have shown that players with modernized IT achieve significantly higher productivity than those with legacy IT systems. For example, their ability to process more policies per full-time equivalent is more than 40 percent higher.
Cost savings: Once implemented, modernized IT systems can substantially reduce the cost of core IT systems by running on more cost-efficient hardware and infrastructure. Studies indicate that those with modernized IT enjoy as much as 41% lower IT costs per policy compared to those with legacy IT systems.
Low-code platforms offer myriad benefits to the insurance industry, helping it thrive in the ever-changing digital landscape. These platforms drastically reduce the time required to build and launch applications, allowing insurers to respond swiftly to ever-changing market demands and evolving customer expectations. The agility offered by low-code solutions is a game-changer, allowing insurance companies to stay ahead of the competition and square up new opportunities promptly.
Cost of ownership is a critical aspect for insurers looking to optimize their operational expenses—and low-code platforms contribute to lowering them. By embracing low-code technology, insurers can sidestep the costs of lengthy development cycles. This financial advantage frees up resources that can be redirected to other business areas, fueling further origination and growth.
Additionally, low-code platforms help address the matter of technical debt. As insurers seek to upgrade their systems in the digital era, they often encounter legacy technologies and outdated applications that accumulate technical debt. Low-code solutions help insurance companies refresh their technology while minimizing this debt, encouraging insurers to embrace innovation and transformation without being weighed down by legacy issues.
Indeed, low-code technology is solving many of the problems outlined in this article; however, it’s worth noting that the low-code platform of choice needs to be layered into an existing claims ecosystem to fulfill the needs of an insurer. While the capabilities out of the box are extensive for claims with some low-code platforms like Unqork and Appian, for instance, market leaders such as Mendix and OutSystems take a more customized approach to managing the unique needs of insurers. Still, low-code platforms offer insurers the means to achieve digital transformation and improve the claims experience without disrupting their existing backend claim systems.
Simply put, the insurance industry must embrace transformative technologies if they want to remain competitive. Low-code platforms are a revolutionary tool for insurers, allowing them to accelerate development, meet customer demands and streamline operations efficiently. By strategically incorporating low-code platforms into their claim’s ecosystems, insurers can create the optimal claims experience, ensuring they stay ahead of their rivals and deliver seamless, customer-centric services. As the market for low-code development continues to grow, insurers harnessing these platforms’ power will be better equipped to thrive in the modern agile environment.
