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🧩 '''Microservice architecture''' is a software design approach in which an application is built as a collection of small, independently deployable services — each responsible for a discrete business capability — rather than as a single monolithic codebase. Within the insurance and [[Definition:Insurtech | insurtech]] sector, this architectural pattern has become a foundational strategy for modernizing legacy [[Definition:Policy administration system (PAS) | policy administration systems]], [[Definition:Claims management system | claims platforms]], [[Definition:Billing system | billing engines]], and [[Definition:Underwriting | underwriting]] workbenches that were historically built as tightly coupled monoliths. By decomposing an insurer's technology stack into loosely coupled services — for example, separate services for [[Definition:Rating engine | rating]], [[Definition:Policy issuance | policy issuance]], [[Definition:Endorsement | endorsement processing]], [[Definition:Bordereaux | bordereaux]] generation, and [[Definition:Claims adjudication | claims adjudication]] — carriers and [[Definition:Managing general agent (MGA) | MGAs]] gain the flexibility to update, scale, or replace individual components without destabilizing the entire platform.

⚙️ In practice, each microservice in an insurance technology environment exposes well-defined [[Definition:Application programming interface (API) | APIs]], enabling other services, partner systems, and third-party applications to interact with it through standardized protocols. A [[Definition:Policy administration system (PAS) | policy administration platform]] built on microservices might route a new business submission through a quoting service, which calls a rating microservice, which in turn queries an external [[Definition:Catastrophe modeling | catastrophe model]] API, before passing results to a [[Definition:Binding authority agreement | binding]] service — all orchestrated through event-driven messaging or API gateways. Each service can be developed, tested, and deployed by an independent engineering team using the technology stack best suited to its function, and individual services can be scaled horizontally to handle volume spikes such as [[Definition:Renewal | renewal]] season surges or post-catastrophe [[Definition:First notice of loss (FNOL) | FNOL]] floods. Container orchestration platforms like Kubernetes are commonly used to manage deployment, and [[Definition:Cloud computing | cloud-native]] infrastructure from providers such as AWS, Azure, or Google Cloud offers the elastic compute and storage resources that make this model economically viable. The architecture does introduce complexity in areas like distributed transaction management, data consistency, service discovery, and observability — challenges that require mature [[Definition:DevOps | DevOps]] practices and monitoring tooling to address effectively.

💡 The shift toward microservice architecture is reshaping how insurance organizations think about technology investment and vendor relationships. Rather than committing to a single monolithic vendor suite for end-to-end [[Definition:Insurance operations | operations]], carriers increasingly assemble best-of-breed ecosystems where specialized microservices handle specific functions — a [[Definition:Document management | document management]] service from one provider, a [[Definition:Fraud detection | fraud analytics]] engine from another, and a proprietary [[Definition:Underwriting algorithm | underwriting algorithm]] built in-house. This composable approach directly supports the rise of [[Definition:Embedded insurance | embedded insurance]] and [[Definition:Open insurance | open insurance]] models, where insurers must integrate rapidly with external distribution partners, [[Definition:Aggregator | aggregators]], and digital platforms. For legacy carriers burdened with decades-old mainframe systems, a microservice strategy enables incremental modernization — often called the "strangler fig" pattern — where individual capabilities are migrated to modern services progressively rather than through a risky full-system replacement. Across markets from London to Singapore to the United States, regulators' growing expectations for data granularity, real-time reporting, and cyber resilience are further accelerating adoption, as microservice architectures make it easier to adapt to evolving compliance requirements without wholesale re-platforming.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Application programming interface (API)]]
* [[Definition:Policy administration system (PAS)]]
* [[Definition:Cloud computing]]
* [[Definition:Legacy system modernization]]
* [[Definition:Embedded insurance]]
* [[Definition:DevOps]]
{{Div col end}}

Definition:Microservice architecture - Revision history

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