16 Insurance Business ReviewJanuary - March 2023While some may look at the recent negative press and abysmal stock performance surrounding public insurtechs and assume that the insurtech threat is receding, the insurance industry's digital transformation is inevitable. It is therefore imperative in my view that CIOs regularly benchmark their tech stacks vs. their peers and emerging digital carriers/MGAs to future-proof their organizations.At this point, it's much easier for the casual observer to point out what insurtechs are getting wrong (e.g., loss ratios, unit economics) vs. what they are getting right (e.g., modern technology infrastructure, delightful customer experience, innovative product design). It may take several years for startups to figure out unit economics at scale but make no mistake, insurtechs plan to "weaponize" their technology to challenge incumbents as their books mature and loss ratios normalize.With this in mind, it may be interesting to imagine how CIOs could build their technology infrastructure if they were starting from scratch today. What does the modern insurtech "tech stack" look like, and what does this architecture enable for tech-forward insurance companies?Cloud-based microservices architectureWhile most legacy insurers are in the early or middle stages of a multi-year, multi-million-dollar cloud transformation, new insurtech MGAs and carriers are built on cloud infrastructures, giving them flexibility to plug in a variety of 3rd-partytools and data sets into their tech stack. A microservices architecture allows larger applications to be separated into smaller independent parts, each having its realm of responsibility. Product and IT teams can implement iterative development processes and upgrade features flexibly.A modern data pipeline connects internal and external data sources, cleans, and structures data, and delivers individual risk and portfolio/management level insights directly into workflows.Further, API gateways are vital for communication in a distributed architecture since they create the main abstraction layer between internal and external microservices. We have already seen a few traditional insurers begin to separate themselves from the laggards by focusing on building external APIs. Digital rate, quote, bindThe most prominent example of what a modern technology infrastructure enables is the ability to digitally rate, quote, and bind insurance with minimal questions for the applicant. These questionnaires can be answered directly, through a broker portal, or embedded within a channel partner's customer experience.While many carriers have APIs for "rate call 1" (initial quote offered by an insurer based on high-level data), few have APIs for "rate call 2" (more accurate quote validated by additional questions and enriched by third-party data), and even fewer can enable "rate call 3" (fully bindable quote for purchase). The most cutting-edge personal lines THE MODERN INSUR-"TECH STACK"By Nick Bendell, Senior Associate, MTech CapitalNick BendellIN MY OPINION
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