The Dual Challenge: Customizable Software Products in the Insurance Industry

Introduction

 The insurance industry has been undergoing a digital revolution in recent years, but unlike other industries, it presents technology providers with a unique challenge: the need to deliver standardized software solutions that can also adapt to the specific requirements of each insurance company. This is the dual challenge that few manage to solve – how to develop a generic product that can be precisely tailored to customer needs, while maintaining the ability to maintain and upgrade the product over time. As the owner of a company that combines a software house specializing in "insurance development" with an advanced core platform, I've been exposed to this challenge from all angles. Most software providers in the field fall into one of two camps: product companies that struggle to adapt their solutions to unique needs, or development service companies that struggle to maintain stability and continuous upgrades of their systems. 

The Complexity of the Insurance Technology Market

 The insurance world consists of a wide range of products – from car and home insurance to complex business insurance and life insurance. Each area has its own unique business logic, operational processes, and data structure. Furthermore, insurance regulation is constantly changing and dictates significant changes to information systems. Insurance companies need to meet strict reporting requirements, maintain high-level data security, and continuously adapt their products to new regulations. Finally, and perhaps most importantly, each insurance company develops its own unique "character" over the years – work processes, existing information systems, organizational structure, and marketing and sales strategies. All these create a reality where a "one-size-fits-all" solution simply isn't possible. 

The Dilemma of Software Companies in the Insurance Industry

 Insurance software providers face a constant dilemma: on one hand, developing and implementing a fully customized system is expensive, time-consuming, and risky. On the other hand, a completely standardized product usually won't meet the unique needs of the customer. This tension creates a situation where product companies tend to adopt one of two problematic approaches: either they refuse to customize their product (and then lose customers), or they make extensive customizations for each customer – leading to the "version trap." In this trap, the single product essentially becomes dozens of different products, where each customization for a new customer makes code maintenance more difficult, complicates product updates, and ultimately harms innovation and stability. 

Common Failures in the Traditional Model

 Field experience shows that traditional models fail in one of two ways: Pure product companies struggle to meet the needs of large, complex customers. They offer a stable and innovative product, but one that is too rigid. Customers are forced to adapt their business processes to the product – not the other way around. This often leads to customer attrition and lost opportunities. In contrast, software houses focused on development services succeed in providing customized solutions but struggle to maintain coherence and stability over time. Every change request becomes a development project, and costs inflate. Moreover, technological upgrades (such as moving to new technologies or architectural improvements) become an almost impossible task. 

The Hybrid Model: Combining Product and Service

 Understanding the limitations of traditional models, we developed a hybrid approach that combines the advantages of a product company and a specialized software house. The model is based on three central principles: 

• Modular architecture – We developed our core product in a way that allows extensions and customizations in separate layers, without affecting the basic code. The architecture is based on microservices, well-defined API interfaces, and configurable settings.
• Integrated teams – Unlike other companies, our development teams are not divided into "product team" and "project team." Each developer knows both the generic product and the specific customer requirements, and can see the big picture.
• Bidirectional work processes – We've developed work methodologies that allow mutual input between customer needs and product development. Good ideas that arise in a specific project may become part of the generic product, and vice versa.

Benefits of the Hybrid Model for Customers

 Our customers enjoy several significant advantages thanks to the hybrid model: Shortened implementation time – Instead of developing a system from scratch, we start with a mature product base that can be quickly customized. Implementation is shortened by tens of percentage points or more compared to fully customized development. Flexibility alongside stability – Customers enjoy the stability of a mature product, together with the flexibility of a customized solution. The changes they request don't "break" the system, and they can extend the functionality according to their needs. Lower total cost – Since most core components already exist and are maintained within the product, development and implementation costs are lower. Maintenance costs over time are also significantly reduced. Continuous upgrades – Unlike customized solutions, customers continue to receive upgrades and improvements from the generic product without the need for redevelopment. 

Case Studies: Successes in the Hybrid Model

 One of the clearest examples of the advantages of the hybrid model occurred when a large insurance operation wanted to adapt its claims management system to a unique process it had developed. In the traditional model, there would have been a need to build a new system or make far-reaching changes to the existing product. Instead, using our modular architecture, we were able to add a customization layer that handles the unique process, while using the core product without changes. When, a year later, we launched a new version of the product with advanced data analysis capabilities, the customer was able to upgrade and receive the new features without affecting their unique customizations. 

Key Principles for Success in the Hybrid Model

 The key to success in the hybrid model lies in several fundamental principles: 

• Proper planning of product layers – Clear separation between the product core, extension layers, and customer customization layers. This separation allows flexibility while maintaining stability.
• Integrated development processes – Combining product development with project development, with a comprehensive view of customer and market needs.
• Expectation management and transparent communication – Clarifying to customers what customizations are possible, and how they integrate with the long-term product strategy.
• Advanced version management – CI/CD systems and automation processes that allow multiple changes from different sources to be integrated efficiently and reliably.

The Future of Software Solutions in the Insurance Industry

 Current technological trends, such as artificial intelligence, machine learning, and advanced data analysis, only strengthen the need for the hybrid model. These applications require both a strong product infrastructure and adaptation to specific customer needs. We anticipate that the future lies in a gradual transition to a PaaS model with advanced customization capabilities – cloud solutions that combine the advantages of a uniform product with advanced configuration and extension options. Modern technologies, such as microservices architecture and containers, enable flexibility and customization that were not possible in the past. 

Conclusion

The central challenge in developing technological solutions for the insurance industry is the combination of the need for a stable, evolving, and innovative product, with the requirement for precise adaptation to customer needs. The hybrid model we've developed provides an answer to this challenge through the combination of an expert software house and a product company under one roof. For insurance companies seeking technological solutions, our recommendation is to look for suppliers who can demonstrate both strong product capabilities and experience in unique customizations. This combination will allow them to enjoy the benefits of technology while maintaining their business and competitive uniqueness. In an era where digitization is becoming a critical component in the survival and growth of insurance companies, choosing the right solution is not just a technological decision – it's a strategic decision that will affect the company's future for years to come.