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Insurance Development: Insights on the Industry and Software

by Yevhenii Ostroverkh

The insurance industry is large and experienced as the insurance development roots back in times of the ancient Babylon and Greece. Basically, insurance is a certain type of risk management which helps people to protect from unexpected losses in everyday life, in manufacturing, during travels or on rest. Modern policies cover different sectors such as property or health. Surely, agencies and brokers earn on clients when they are safe.

Today, the industry grows quickly in terms of employment, premiums written, and income. As more dangers emerge (e.g. terrorists, war conflicts, natural disasters, and tech accidents) more people decide to get an insurance policy. Moreover, a lot of countries require personal insurance either for residents or for tourists who wish to cross the border. Considering these facts, we think that the insurance business may be pretty profitable in the next years.

This educational article focuses on historical aspects of the insurance processes and insurtech systems which rise nowadays. We will look at the past and current state of the market plus more specific tech questions including the development of dedicated software, e.g. managerial platforms for claims/policies, accounting apps, CRM products, and ratings. Without further ado, let’s explore how the insurance industry emerged and how it works now!

Historical Basics of the Insurance Sector

First examples of insurance policies appeared a long time ago, in 4000-3000 BC. Contracts called bottomry or respondentia were known for Babylon’s traders, ancient Hindus in the VI century BC and Greeks in the IV century BC. According to the idea, these contracts provided for merchants together with loans which didn’t have to be paid if related cargo were lost. Roman vendors also were familiar with bottomry. Later, these contracts became the basis for advanced marine law of the XV century.

Moving to exact states and territories, we want to analyze four big systems of insurance development:

  • England. In the XV century, Englishmen discovered the benefits of fire and marine protection. The first one appeared after the Great Fire in 1666 while the second one was a result of a long development. The current state of insurance in England was impossible without Lloyd’s – the insurance market founded in the XVII century. Its journal, the Lloyd’s List, exists to this day.
  • United States. The first US-based insurance brand was organized by Ben Franklin in 1752 and there were 17 firms in NY only by 1820. A lot of agencies failed because of speculations, bad management, fires, and earthquakes. Only after 1910 the insurance development became stable and featured a 600-fold increase between 1910 and 1990. By this date, there were more than 5,000 companies!
  • Russia. Similarly to the UK and the US, first policies in the Russian Empire were issued to protect properties from fire. Right after the 1917, the industry was nationalized and was controlled by Soviet authorities in the USSR. A department called Gosstrakh worked with domestic policies while Ingosstrakh focused on foreign risks. Now, Russia combines national and private insurance firms.
  • Japan. This state has a mixed system where both private and governmental companies issue policies and rates are formed by voluntary teams with state oversight. Benefits and policies are similar to Western types. Some insurance types like workers’ compensations are obligatory while health insurance is typically included in the social security. Japan actively collaborates with foreign insurers now.

Insurance development in different countries

Insurance in the Modern World

The boom in insurance and economic development was near the end of the XX century because of increased globalization rates and integration of world trade. Today, brokers and agencies tend to move away from governmental control, focus on worldwide policies for multinational companies, actively implement software innovations because of quick insurance software development. Most of the leading teams are located in North America and Western Europe.

For example, there were four top-rated insurance brokers in 2017 globally. Two of them (Marsh & McLennan on the first place and Arthur J. Gallagher on the fourth position) are from the USA while two others (Aon and Willis Towers Watson on the second and third places, respectively) represent the UK. Moreover, other members of the big 10 are from these two countries, as well! The combined revenue of all leaders was around $47 billion.

Insurance Development by Brokers

Simultaneously, the total number of US-based agents/brokers/employees was near 1.135 million in 2017 with 35,000 increase compared to 2016. Since slight decreases during the recession of 2008-2010, the insurance and economic development is on the rise now, so we want to postulate our opinion once again: entering the insurance market with new software can be very profitable for entrepreneurs.

Insurance and economic development in numbers

Driving Forces Behind Insurance and Economic Development

From the early 1990s, various researchers studied the development of insurance and correlation factors which affect this market. Explorations by Browne and Kim, Outreville, Beck and Webb, Dongshoi, and Rocha, Lester and Feyen revealed a few critical things which define the development of the whole insurance industry. While authors aren’t solid in their opinions, they agree that seven factors are definitive and positive:

  • Income.
  • Population.
  • Population density.
  • Social security.
  • Education.
  • Private ownership.
  • Legal framework.

Simultaneously, other factors are completely negative, e.g. inflation, strong governmental control over insurance, and religious societies, particularly, Muslims. However, the most intriguing results are ambiguous. For instance, foreign insurers can cause negative effects for the first term but turn into a positive factor in the long run. Additionally, high young dependency ratio boosts the demand for insurance policies against mortality while high old dependency in the country drives interest to protection against loss of income.

The mentioned driving forces are viable for P&C and L&H insurance markets, as well.

Understanding Insurtech Systems and Insurance Software Development

So far as we study the whole insurance history, it’s impossible not to mention modern achievements of the industry. Insurance software development is essential for entrepreneurs who want to get the clients’ attention and boost the brand’s loyalty. In the era of mobile technologies, high personalization, and quick progress, insurtech solutions become extremely useful as they facilitate interaction with modern customers.

Following the discussion about key development factors, McKinsey lists seven insurtech value drivers divided into two categories. The growth stimulus has 40% of the insurance corporations’ interest and focuses on the increase of sales and UX. The cost reduction factor handles other 60% as businessmen want to cut expenses, decrease risks and loss ratio. Technologies can solve many issues, as you see.

Driving forces behind insurance software development

Further, we will talk about insurtech understanding, insurance development, and custom products for this industry.

Insurance Software Definitions

Generally, it’s important to realize that the market offers two types of insurance software. The first one is used in traditional institutions and looks like classic spreadsheets (hi, Excel!), accounting tools, and messengers. We’re not interested in this old-fashioned stuff, so let’s focus on the second type further.

The brand-new software for insurance is often called insurtech as an analogy to fintech. The Insurance Information Institute lists examples of insurtech approaches: online policy handling, automated processing, personalized risk development, and so on. Thus, the mentioned software type utilizes modern technologies to boost insurance teams’ productivity.

From the McKinsey study revealed earlier, we learn that insurance development is strongly linked with innovations. The leading role belongs to big data and machine learning with 20% popularity. The usage-based insurance gets 13% and the famous Internet of Things approach has 12%. The top five is closed by gamification and robotics, each responsible for 10%.

On the charts below, you can easily check these stats as well as the overall number of innovations split into insurance industries and approaches.

Innovations for insurance software development team

Insurance development by industries

The Process of Insurtech Apps’ Creation

Now, what do you think about insurance software development itself? How it’s going on? Is it simple to get an application with all these shiny features like automation and CRM? The answer is yes but with one condition. You have to realize your company’s goals clearly. Without a proper understanding of business operations, current objectives, potential requirements, scalability needs, risks, and other pitfalls, it’s impossible to develop a suitable insurtech application.

Hence, let’s look at the development stages:

  1. Define objectives: write down core business goals, analyze the environment, get a working plan, arrange schedules, choose the vendor/developer.
  2. Think about modules: choose the features you need (e.g. contacts’ catalogs, user profiles, leads’ processing tools, trackers, policy databases etc.), set a budget.
  3. Agree on terms & conditions: discuss the desired features and tasks with the chosen development team, sign contracts and SRS documents.
  4. Get an MVP. Ask vendors to create a basic version of the product initially, deploy it, check how systems work, and ask for changes in the final version if needed.
  5. Test everything. Get a good QA team to find bugs or unexpected interface glitches, test products in real working environments, fix issues.
  6. Launch the system. Deploy the final program, set links between new and legacy apps, handle data migration.
  7. Update and support apps. Agree on additional maintenance to forget about tech problems, plan further upgrades and extensions.

All the listed processes are easier to complete when you work with a custom team of developers. Actually, devs handle all these tasks.  Long story short, the software vendors can sell you prepackaged apps with fixed sets of features or they can develop a program from scratch. Our team follows the second path, so you can get a product fully customized to your needs.

Your Own Insurance Product

Custom applications have pros and cons, obviously. For example, you get a tailored product but should wait longer than owners of prepackaged apps. Moreover, you get a significant competitive advantage because your own software is unique and other marketers don’t have the same features. For this, you should be ready to pay the higher initial cost but it will cover nearly everything as bespoke solutions usually come with one-time payment instead of fees.

Our team creates custom programs since 2011. We focus on different industries including insurance where our clients can get modern insurtech systems designed from scratch. For example, a solution called BenefitNet brings together all stakeholders. The single online platform allows insurers, brokers, employees, and managers to get control over insurance policies and benefits.

For your own product, you can choose any set of modules focused on various managerial tasks:

  • Carriers management.
  • Claims management.
  • Contact management.
  • Document management.
  • Insurance rating.
  • Policy management.
  • Products management.
  • Risk management.
  • Task management.

Insurance software development modules

We handle custom insurance development, upgrading of outdated systems, switching your business to mobile channels, maintenance of existing and recently launched apps, and business analysis. All processes are completed inside the team with strong guarantees of on-time delivery and profitability. Our software is our reputation.

If your business is located abroad, we suggest checking the article about features of outsourcing to Ukraine.

FAQ

As a pre-conclusion, we offer you to check key insights in the format of questions and answers. We’ve prepared core information to help you refresh the most important things without scrolling the whole article.

What is Insurance Development in a Nutshell?

As for the industry, it’s a process of the market growth in which underwriters introduce new strategic approaches and help clients to get maximum satisfaction. On the other hand, tech insurance development stands for designing new software systems for this industry.

What Is Offshore Insurance Software Development?

This process is similar to traditional creation of applications but it’s handled by external developers. Means, insurance companies can delegate specific tasks like designing of ERP or CRM solutions to foreign teams.

Explore the offshore software development benefits in our guide.

What Are Primary Steps of the Development Process?

Basically, there are five stages: planning, MVP creation, testing, deployment, and maintenance. Each step can be divided into smaller parts such as setting goals or budgets during planning or data migration during deployment.

How Does the Best Insurance Software Development Team Look?

We opt for custom teams. Without claiming that this approach is the only viable, we think that companies which create apps from scratch can deliver more profitable software for insurers. Typically, teams should include developers, analysts, QA engineers, and a lead.

How to Get Insurance Software Development Projects?

If you want to get a bespoke app, just find a reliable company which creates software for your industry. Otherwise, look for vendors of ready-made systems. In both cases, you want to find a developer with good reviews and reputation.

Conclusions

Let’s be honest: insurance is useful but we don’t want to use our policies. It’d be better to forget about them (and about accidents related to insurance cases) but the world is dangerous. In recent years, news about terrorists, wars, and hurricanes force more people to get insured. Hence, underwriters get benefits from this demand and increase their revenue. Looks simple, right?

We have another approach to boosting your business. Even without menacing news, entrepreneurs can attract new customers by using insurtech solutions and showing the pros of innovative personalized offers. Nowadays, growing generations are familiar with new tech, so why not to speak the same language with your clients?

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