Affordable Technology Platforms
How do you provide affordable technology platforms for mutual and other insurers in the developing world?
The demand for low cost insurance is growing at a phenomenal rate. With enormous potential benefits to both state and consumer, low cost insurance provides a financial safety net to some of the lowest income families around the globe.
To match this demand we’ve seen growth from a number of different types of insurance organisations. From member and community based organisations (cooperatives and mutuals) to traditional brokers and carriers, each face a number of common challenges.
To keep premiums at an affordable level without compromising loss reserves integrity, the market risk needs fine analysis - and policy distribution and management costs kept at an absolute minimum. However the combination of lack of data and challenging distribution channels mean new approaches must be explored.
Technology plays a large part in solving many challenges, but we need to adopt innovative approaches – something that can be difficult for a traditionally conservative market. The balance is to find non-traditional approaches that offer efficient benefits already proven in less risk adverse sectors.
Historically software vendors have had a one-size –fits-all approach. A mentality which can work well in established markets, it can stifle growth and innovation in a developing economy. Insurers either develop their own solutions for in-house use, or they purchase off the shelf from specialist software houses. Once committed it becomes very difficult to migrate to alternatives. A lack of open standards means future migration to new software is never easy and the large financial and resourcing commitments makes it very difficult to justify change. Include on-going licencing and support charges from the software vendor, or internal support and development costs and these challenges can seem insurmountable.
In emerging markets it is essential to address financial and resource commitments. Organisations are typically a lot smaller, so cost–effectiveness is key. Therefore a collaborative and iterative approach to system implementation - where organisations come together to develop open standards and systems - is the only way to deliver value quickly and sustainably. Fostering flexibility on all sides is crucial to deliver an infrastructure truly fit for purpose - and not just a replica of another country’s established operating model.
Not only does this reduce the financial burden to any one organisation, industry collaboration also allows businesses to become stronger as they work together and take ownership of the tools required to run business. It is easy to think that insurers may lose some competitive advantage by collaborating with their peers, but real competitive advantage is how effectively you use the tools at your disposal – not just in the tools themselves.
Open Source software is ideally placed to encourage this kind of collaboration. It allows like-minded individuals and organisations to develop software together that meets their exact needs, sharing costs between peers. It is also not just about coding, either. Open Source software covers business requirements, planning, design, testing and documentation - so many different parties can contribute to the skills process. This collaboration often results in a modular, extendable design, where features can be developed independently and be turned on or off as required.
Recent technical advancements have been essential for the success of collaborative projects like this. With little or no-cost web tools such as Skype, Jira (JIRA project and issue tracking) and SourceForge (source code repository) these make it easy to manage global collaboration on projects, especially when combined with new development methodologies like Agile that offer a lightweight, flexible approach to development.
A huge benefit has to be the no cost associated with licencing of open source software. And because open source projects are completely open, the source code is freely available for anyone to access - which in turn opens up user support channels. No longer dependent upon the original developer for ongoing support, anyone familiar with the system can support them, allowing finer control over expenditure that reduces dependency on any one, single organisation. For low cost insurance this means massive software expenditure can be greatly reduced, bringing the cost of administering policies to a manageable level.
We are witnessing a global, industry-wide revolution – where open source software consistently delivers higher quality, better efficiency and a quicker time to market.
One project we are involved in is a pilot in Ghana to provide the insurance industry with better risk analysis and actuarial capability. Using OpenUnderwriter’s open source solution OpenActuary, the Ghanaian Insurance Association (GIA) is creating an industry-wide risk data repository and reporting facility. The project involves global parties, but key to its success is significant Ghanaian representation - people who understand local culture, regulation and insurer infrastructures.
Insurers take ownership of the business requirements and functionality and contribute across the delivery, whilst expertise from outside Ghana including the OpenUnderwriter team, ensures advice and delivery. Best of breed open source technology delivers the solution including the latest collaboration tools to manage the project and communication. We use Agile methodology for faster turnaround, at much lower costs than any traditional approach.
Dr Eric Gerelle, Development Consultant and Director of IBEX Project Services recognises the potential of open, collaborative projects,
Open source technology offers huge benefits for the sector….
For example the micro finance sector is served by Mifos, an award-winning open source technology platform. The open nature of both Mifos and OpenUnderwriter invites opportunities to integrate the technologies and serve a common audience with both financial and insurance services in a really cost effective way.
Technology is a powerful enabler for smaller insurance organisations; new approaches equal a lower cost delivery, a faster turnaround time and ensures quality is maintained, too. It is also important that any delivered technology keeps pace with changing business and environments.
At OpenUnderwriter we are passionate about open source and are immensely proud of the work we have achieved in emerging economies. The rapidly changing technological landscape is ripping up the rule book and creating a whole new world of collaboration, where people in all corners of the globe can pool their resources and create great software that changes the world we live in for the better.
About the Author
Matthew is a founder of OpenUnderwriter and has over 20 years’ experience working in the Insurance sector. He has extensive experience in delivering complex solutions in both general and commercial lines for Lloyds and London markets working with companies such as Talbot Underwriter, Brit and Catlin. Matthew has been at the forefront of the design and overall direction of the OpenUnderwriter suite of products. Matthew is also an active member of the microinsurance community and has been involved in a number of major projects in developing countries across the world.