How insurance companies can embrace digitalization through Bimodal IT

Sandwiched between changing customer demands, regulatory requirements and a low interest rate environment, insurance companies are in desperate need for flexibility and speed-to-market. Unfortunately, more often than not, they are faced with obscure and complex IT and data landscapes that make it all but easy to change or enhance their processes and value propositions. This leads inevitably to a fundamental question: How to reduce the complexity of a legacy IT landscape whilst promoting the development of new and innovative products and processes?

New systems entail high costs and efforts

Insurance companies generally have two options for updating their IT landscape. One option is to modernize and enhance the landscape based on the existing technical setup. Alternatively, they can try to switch to a new technical platform. While both approaches are very rigorous, in practice they can both entail projects running several years and investments of tens of millions. In the short to medium term, neither of the approaches may present a suitable solution.

In order for insurance companies to be able to rapidly react to the current environment, it is crucial to employ a solution-based approach that facilitates the quick and flexible development of innovations whilst retaining existing systems. In this context, Bimodal IT has already proven itself in numerous and diverse industries and represents, from our perspective, still the most promising approach.

The basic concept of Bimodal IT

Speed and flexibility through Bimodal IT

Bimodal IT represents a solution concept with which new IT requirements can be quickly and flexibly implemented without the need to immediately replace existing legacy systems. This balance is achieved through the introduction of an intelligent integration layer which can separate the existing systems and new IT solutions being developed (see figure 1).

Figure 1: Schematic representation of Bimodal IT

Establishing a service-oriented architecture (SOA) is vital as the technical basis for Bimodal IT. Namely, the concept attempts to make the functionalities of existing systems available over services, while new developments can build upon these services. In this context, it is critical that new developments call on the services by means of the integration layer and by that prevent maintenance-heavy point-to-point connections.

Besides the technical basis (SOA), the concept of Bimodal IT also includes cultural and organizational aspects. While the further development and maintenance of existing systems can continue to operate as per usual, the development of new and innovative products is often facilitated by agile structures and approaches with which customer demands can be more appropriately met than with a traditional waterfall approach.

Efficient and safe operations of existing systems

Despite its often mentioned weaknesses, the traditional waterfall model still has its strengths. Namely, the model is suitable in cases in which there are clear requirements and both the time and costs can be estimated accurately. Through the clear distinction of individual phases in the waterfall model, it is possible to plan early and control changes effectively. These prerequisites are particularly necessary in operating the existing systems being characterized by strict requirements in terms of security and efficiency. Therefore, Bimodal IT does not necessarily aim at switching the development methods to agile approaches, but rather leaves this decision deliberately open (see figure 2).

Figure 2: Different approaches for existing and new applications

Intelligent transition between two worlds

The transition between the ‘new’ and ‘old’ is managed by the intelligent integration layer. Among others, the integration layer has the task of integrating the provided services of existing systems and in doing so making them available to the new IT applications over defined interfaces. To achieve this, an Enterprise Service Bus (ESB) is used as a core component of the integration layer.

Besides the ESB, components for data storage as well as recording and running the business logic can be set up in the integration layer. The advantage of using data storage within the integration layer, for example, is the simulation of a real time process for the customer, despite the use of a batch process which only runs once a day (the required data can be retained in a floating database until the batch run).

Innovation at the interface to customers and partners

In order to meet the requirements of customers and partners, the development of new IT components must be heavily focused on the needs of the users. Here, agile development methods have widely proven themselves: Through their iterative character, products can be developed within short cycles, validated and adjusted based on customer feedback.

Bimodal IT in operations

Bimodal IT as a lasting transitional architecture

Insurance companies should retire the traditional image of a target architecture. Instead, in future, a lasting transitional architecture for facing changes will be needed – a concept, that is represented by Bimodal IT.

While Bimodal IT allows for both, the continued operations of existing systems and the new requirements to be implemented quickly and flexibly, it is not an invitation to run the existing systems without any long term restrictions. Even if the pressure to replace legacy systems is decreased slightly by Bimodal IT, business-critical systems need to be kept up-to-date.

The replacement of existing systems, however, can be simplified considerably through Bimodal IT for two reasons: Firstly, through the use of the integration layer and the associated removal of point-to-point connections, transparency about interfaces is increased. Secondly, the number of dependencies is reduced significantly, which in turn simplifies system replacements.

Value-driven implementation of Bimodal IT

Despite the use of an integration layer, the connection of individual, already existing systems to the ESB entails efforts. To manage the complexity of this task, Bimodal IT should be implemented in phases (see figure 3).

Figure 3: Iterative implementation of a Bimodal IT

For a practical implementation with low impacts on the running operations, an iterative and value-driven process is necessary. Here, services are linked successively to the ESB, optimally starting with the functionalities that are urgently required for the new, innovative applications at the user interface.

Conclusion and outlook

Bimodal IT describes a holistic concept for increasing the flexibility and speed of corporate IT infrastructure while at the same time fulfilling security and efficiency needs of existing systems. The concept relieves the need to replace existing systems and enables the rapid implementation of new developments.

An integration layer synchronizes the ‘new’ and the ‘old’ world and makes functionalities from existing systems available for the new applications by means of defined interfaces.

As the insurance sector is often characterized by outdated system landscapes, Bimodal IT can be a crucial enabler in meeting the industries’ challenges. While some insurance companies are or have already been considering the idea of implementing Bimodal IT, it is now important to speed up the practical implementation.

Dr. Jan Hendrik Sohl

Partner Office Münster

Michael Kötting

Senior Consultant Office Frankfurt

Kekeli Anthony

Consultant Office London


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