Insurance Core System Modernization: Benefits of Externalizing Key Layers

Introduction

In today’s competitive insurance market, agility and scalability are essential. While many core systems have reliably operated for over a decade, they struggle to meet modern demands for speed, digital integration, and multi-channel distribution. Externalizing products, rules, and rating through an agile intelligence layer provides a scalable solution. This approach accelerates product launches, enhances operational efficiency, and enables seamless expansion into new distribution channels.

Current Industry Challenge

Many core insurance systems have demonstrated longevity, operating efficiently for over a decade with excellent performance. However, modern market demands require greater speed and agility to enhance both partner and customer experiences. Existing core systems, while robust, are primarily designed for:

• Accounting
• Claims
• Reinsurance
• Billing
• Policy Administration

On the flip side, core systems are not optimized for:

• New product dynamics that require rapid innovation.
• Integration with customer and partner portals in an affinity ecosystem.
• Scalable API-driven infrastructure to support multi-channel distribution.

As carriers expand and diversify their distribution networks, enhancing core capabilities becomes imperative. However, these enhancements must go beyond short-term fixes that contribute to increasing technical debt.

Carriers need a scalable, cost-effective solution that allows seamless business growth without significantly increasing operational expenses. This flexibility is key to adapting to evolving market demands and customer expectations.

The Insillion Approach

Rather than overhauling the entire core system—a task often associated with risks such as data loss and operational disruptions— Insillion offers a more strategic approach. By externalizing the dynamic product layer into an agile intelligence layer, Insillion decouples the elements that require constant updates (such as products, rules, and ratings) from the core system.

This lightens the load on the core and enables rapid product innovation, deployment, and market adaptation. Insillion has been an early adopter of this philosophy, where the platform acts as a middle and front-office intelligence layer, de-risking the core while modernizing the carrier’s existing architecture.

This approach maximizes ROI on existing investments, future-proofs technology, and prepares carriers for the evolving market landscape.

What Does Externalization of Products, Rules, and Rating Mean?

The core system remains the System of Records, while the product, underwriting, rules, and rating layers transition to a dynamic, cloud-based intelligence layer. This layer enables:

• API-driven rating and underwriting capabilities
• Greater flexibility in configuring workflows and portals
• Seamless data flow and system communication

System of Records vs. System of Intelligence

The core system acts as a database (System of Records) while Insillion serves as the intelligence layer, facilitating data flow, validations, and communication with other systems. This optimizes the performance of existing systems and extends their lifespan, while reducing the need for costly upgrades or migrations.

Value Proposition for Carriers to Externalize Products

Faster Speed to Market

When migrating products to a new core, it can take years to realize the benefits of modernization. Insillion offers an alternative and quicker approach, where carriers can easily transition into digital-first insurers. This equips them with the functionality needed to adapt to any market changes and tap into new business opportunities. Carriers can launch products for new channels; for example, a health insurance product for an aggregator or travel insurance for airline sites. While retaining the stability of existing core systems, carriers can extend their offerings to new distribution channels, ensuring agility in the face of changing market and regulatory demands.

Achieving Scalability Without Increasing Operation Costs

By moving the product layer to the cloud, carriers can scale operations while minimizing disruptions to the core system. This is particularly beneficial for:

• High-volume, low-ticket policies (e.g., Group Personal Accident insurance on ride-sharing apps)
• Handling seasonal demand spikes (e.g., increased travel insurance purchases during holidays)
• Reducing excessive system loads while ensuring seamless customer and partner experiences

With a middle-office intelligence layer, carriers can scale on demand, ensuring channel requirements are met without compromising system performance.

Cost Transformation

Maintaining core systems often incurs escalating costs, particularly as skilled resources become scarce, leading to inefficiencies and missed business opportunities. According to PwC, around 70% of an insurer’s IT budget is typically spent on maintaining older systems. By moving the products to a cloud layer, carriers can:

• Enable new product launches efficiently.
• Reduce operational costs and improve resource allocation.
• Empower innovation and agility without trade-offs.

Conclusion

Insillion’s API-powered approach offers insurance carriers the best of both worlds: it maximizes ROI on existing core systems while providing the flexibility to innovate and scale as market needs evolve. This approach positions carriers to thrive in an increasingly digital and interconnected insurance ecosystem, driving both growth and customer satisfaction.