– System Integration
Systems integration: from risk carrier to value-added provider
This interview appeared as a guest article in Sapport Magazine 11/20
Short development times, modular architectures and improved usability for customer and employee front-ends
How does the path to integrated, end-to-end systems work in the banking and insurance sectors?
Thomas Weber: In most IT modernization projects; Banks and Insurance companies are adversely affected by the project implementation timeframes required as well as the associated migration risks. These risks include uncertainty as to whether the hoped-for or promised benefits will materialize and/or whether it is feasible to align product development cycles with the client’s requirements. In general, companies are increasingly frustrated with their existing / legacy IT systems, which are usually not modular, having grown piecemeal over the years, and minimally integrated. In particular, non-intuitive and inflexible user interfaces are a primary source of legacy system inefficiency, technically and operationally. From a technical point of view, these interfaces determine the respective work flows and correspondingly, the automation capabilities and required enhancements to the existing systems.
Alexander Trimborn: Banks and Insurers now place a very high priority on user-friendly portals and user interfaces for strategic market reasons. Flexible front-ends ensure longer screen times, produce lower bounce rates, and make manual data entry and information delivery more convenient for users. Smart mechanisms such as Amazon’s collaborative filtering (customers who bought product X were also interested in product Y), bots or chat functions provide convenience, shorten UX and improve the user experience.
In this evolving market, digital insurers and Finsure techs are now setting the UX bar very high …
Trimborn: And rightly so! With UX design, banks and insurance companies succeed, from the customer’s point of view, in making their sometimes-complex products understandable and manageable. This makes it possible to create outstanding services.
Michael Vaupel: Providers often neglect usability criteria such as ease of use and website performance, especially with a mobile-first approach. Performance is now a key issue for banks and insurance companies in other areas as well. Long response times lead to poorer listings on comparison portals. This has a clear impact on potential business volume.
Magdalena Ganko: For about 15 years, we’ve observed that major companies such as Google, Apple, Facebook and Amazon, platform providers and comparison portals, are all putting themselves between end customers and financial / insurance service providers. They are entering this market space with more convenient functions, attractive offers, and access to higher levels of technology. Various paths exist for clients to escape this service commodity trap, such as active participation in the platform business. Innovative, flexible, maintainable IT integrations, so-called System Integration Platforms, enable financial sector companies to enter new markets.
About the experts
Magdalena Ganko is the Chief Product Owner of IKOR Poland, focusing on non-SAP solutions.
Alexander Trimborn was the Dock Manager of IKOR’s Dock Portals until March 2022.
Michael Vaupel is the Chief Discipline Manager of IKOR’s Dock Project Excellence.
Thomas Weber is IKOR's Managing Director since January 2023. At the time of the interview, he was managing the business of IKOR Assurance with a focus on SAP integrations.
Hans-Jürgen von Henning is the Chief Product Owner of IKOR’s Finsure Division.
Kristina Schreiber is IKOR’s Corporate Communications Manager.
“Innovative, flexible and maintainable IT integrations – System Integration Platforms – enable financial and insurance sector participation in new markets”
What does it mean for business processes and IT systems when the market strategies of banks and insurance companies are increasingly geared toward end customer behavior?
Trimborn: Banks and insurance companies will be in a good position if they not only take advantage of existing technologies, but also align digital communication processes and the associated complex interactions with their customer’s needs. Those who also manage to expand their IT infrastructure with smart solutions, automate and scale processes, and aggregate various services on a single platform position themselves to transform from risk carriers to true value-added providers.
Added value, smart processes, and API – what interface examples come to mind when you think of this triad?
Ganko: We take a holistic approach looking at the interfaces (policy, claims and financial data), partner systems (commission and agent data) and other critical systems (data warehouses / marketing systems). The decisive factor here is how well IT integration succeeds in making systems connectable, accelerating processes, innovating service offerings and enabling clients to enter new markets.
Vaupel: But keep in mind that this is precisely what can become critical. Innovative service offerings require, among other things, distilling the information from the data that makes customer-oriented service design possible in the first place. Modern architectures that are functionally aligned with domains do provide some of the capability. However, they also increase the demands on performance and technical infrastructure.
Weber: A decoupled architecture, ideally built from off-the-shelf, freely available components, solves the earlier problem of hard couplings. Instead, insurance IT, for example, is resorting to the best-of-breed approach: Smart, flexibly structured and powerful components docked with highly scalable and status-less interfaces.
“A system integration platform is a ticket to greater flexibility”
Point-to-point integrations still dominate the IT landscape in many companies. They are individually oriented to the systems involved in each case. This has resulted in tight couplings and a collection of varying integration logic across different ages and classes of systems. However, this leads to ever greater maintenance costs and challenges. After all, the know-how and experience with a range of older and diverse systems involved is increasingly difficult to find and expensive.
“System integration platforms, SIP for short, help to reduce the degree of coupling systems within an application landscape,” explains Hans-Jürgen von Henning, Chief Product Owner at IKOR Finsure. While integration architectures such as the Enterprise Service Bus (centralizing integrations with a hub-and-spoke topology) have been developed for this purpose they typically involve high costs and the use of proprietary technology.
“This is also one of the reasons why ESBs no longer meet client requirements, today or in the future. Instead, modern integration aims to enable flexible cooperation between systems from a wide range of providers, across the entire market landscape; Insurers, Banks, Sales organizations, FinTechs, comparison portals, customer and market platforms. Modern integration is the way to enable clients to implement new business models.
How do the systems actually communicate with each other (connectivity)?
Vaupel: Different systems – whether core systems such as SAP, Guidewire in the insurance sector, or other solutions – must conduct a dialog with one another in the correct language. An enterprise service bus or more elegant integration architectures help to identify and repair technical as well as logical breaks and thus create a centralized, low-effort operation.
Asked the other way around: What is the current technology reality for business and IT clients?
Ganko: It’s older, monolithic IT systems that don’t offer the structures and capabilities that can help an industry or company react quickly. Smart IT infrastructure must be secure and stable at the back end. The overall architecture must also be open to new, dockable systems. This is the best, most effective way that banks and insurance companies can bring flexible and innovative products to market, build an information architecture across different media such as portals and apps, and develop smarter sales channels.
Can you give an example of such services and dockable systems?
Trimborn: Telematics tariffs enable real-time analyses via networked data and corresponding recording systems, for example in the motor vehicle sector around driving behavior. A smartphone records the data via an app and forwards this information to linked systems. Sensors help commercial transport insurers to monitor key vehicle metrics such as vibration, position, humidity, temperature, and container misalignments, around the clock. Insurers can calculate premiums in real time using appropriate processes and integrated solutions, allowing insurers and the insured to act immediately in the event of a claim.
Many users are hoping for cloud solutions. Is this justified? What value do they add and how secure are the applications? What value do they add and how secure are the applications?
Weber: On-premise systems always have to cope with peak loads. This can quickly become expensive as these systems quickly reach their capacity limits during phases of increasing user requests / peak traffic. Secure, scalable cloud solutions precisely absorb and manage these peak loads. They can improve process efficiency through appropriate function integration, for example through fully integrated software-as-a-service offerings. They help to reduce handling costs per service call through appropriate scaling. Modern security concepts and corresponding solutions ensure that the binding BaFin requirements are covered with regard to data protection. (cr)
Systems integration: from risk carrier to value-added provider. The roundtable interview appeared as a guest article in the editorial section of Sapport Magazin (available in German).