The world of software is a complex and vast one, but when it intersects with specialized industries, it enters to a different realm altogether; such as insurance and banking software. At times, these two distinct worlds are compared, causing confusion for end-users who ask us, as the behind-the-scenes operators of these specialized software systems, why there’s so much complexity in insurance industry software and why others in different industries aren’t dealing with these issues.
As the designers, producers, launchers, and supporters of specialized insurance industry software, we have the responsibility to explain the important differences between these two domains, so that we can provide a worthy response to our audiences’ inquiries regarding the features of insurance software and see how it differs from the banking sector.
- Insurance industry algorithms are more complex
Although the number of records and transactions in the banking system is several times higher than the insurance industry, the algorithms used in the insurance industry are several times more complex than those used in the banking industry.
- The insurance industry is undergoing greater changes
Banking business and the related software is relatively stable in terms of the definition of deposits, loans interests, and other processes. These concepts have remained unchanged for many years in the banking industry. Meanwhile, new definitions, fields, and algorithms are constantly being introduced into the insurance industry, and every insurance company even has its own specialized algorithms in accordance with innovative policies. Therefore, software companies in the insurance industry are constantly analyzing new insurance fields, algorithms, and regulations and incorporating them into their software design.
- Processes in the insurance industry are time-consuming
Due to the existence of various inquiries in insurance policies, issuing an insurance policy is more complex and time-consuming than opening a bank account.
- There is more diversity in insurance than in banking.
The multitude of insurance coverage options and the wide range of potential claims create a greater level of complexity in insurance software computations. For example, in banking systems, the deposit rate is a fixed number that only changes for different types of deposits. However, in a particular insurance field, there are various coverage options with different coefficients, such as medical insurance, which not only has multiple levels but also each insurance company offers different and diverse disease and medication coverage options.
- Insurance industry’s interactions with organizations outside the industry are more intricate
The insurance industry has extensive and diverse relationships with numerous organizations (such as traffic police, registration offices, tax agencies, ministries, healthcare and medical organizations, hospitals, clinics, and visitors). These wide-ranging and diverse relationships make coordination more challenging.
- Calculating income from collaboration with insurance companies is diverse.
The type of collaboration between insurance companies and agents, brokers, and marketers is typically commission-based, whereas in the banking system, collaboration is not defined commission-based.
- The number of insurance customers is not insignificant compared to that of banks
The assumption that the number of insurance customers is lower than that of banks is incorrect. Just as an individual can have multiple bank accounts, they can also have multiple insurance policies (such as auto, health, life, fire, etc.).
- Rapidly implementing changes is a crucial part of daily operations in the insurance industry.
There are numerous urgent tasks that need to be performed quickly, such as launching a new insurance product within a few days or making significant changes to insurance premium calculations and reserves from seasonal to daily. These types of requests make software personnel in the insurance industry more capable of providing accurate and prompt responses and support.
- Only one insurance field i.e. life insurance, includes all banking processes.
Comparing the entirety of a banking system to only one insurance field is possible. The life insurance field alone encompasses all banking algorithms, such as deposits, interest rates, and more. Additionally, life insurance includes loans, which adds complexity to the software system by incorporating components such as dividends, participatory profits, mathematical reserves, and more.
- Banking systems and payment systems have international standards
Card systems and devices such as ATMs and point of sale terminals exist in the banking and payment industry and are responsible for a significant portion of banking transactions. However, it is important to note that these devices have international standards such as ISO 8583 and ISO 7810 for the generation and exchange of transactions, and their usage procedures have been standardized over the years. The existence of these standards and official documents significantly helps the developers to do their job easier compared to the insurance industry.
- Software teams in banks have access to more facilities
The number of employees, equipment, and dedicated space for the IT team in the banking industry differs significantly from that of insurance. Banks spend several times more than the insurance industry on support and software departments.
- Banking software generates more revenue in the support section than insurance software.
The cost of support is significantly higher for banks; for example, if you withdraw 1,000 Tomans from your account, the transaction incurs the same cost for the bank. Additionally, at the end of each month, banks are required to calculate deposit interest and deposit it into the holder’s account. However, performing this operation for accounts with a balance below 10,000 Tomans incurs more cost for the bank than the account balance itself. Therefore, the revenue generated from support for banking software is more attractive than that of insurance software.
