Gaining the Competitive Edge via Core Modernization
2015 promises to be an exceptional year in the insurance industry. We will see exciting strategies and some very bold actions. Insurers are making noteworthy investments– positioning their organizations to capitalize on maturing and emerging technologies. By deploying these technologies, insurers can make significant advances in their product and service offerings as well as the processes that support the administration and servicing of those offerings. Technologies such as cloud, drones, driverless cars, telematics, and analytics and big data are gaining acceptance and prominence. The important thing to note is that they are being championed by insurers that have already modernized their technology platforms. Insurers understand the greater business value and competitive differentiation that is possible thanks to the digital revolution. And, most know that it is time to take the next step. For some insurers, the next step takes them directly to increased growth and profit. For others, that next step puts them a giant step closer to those goals.
Innovation is all the buzz, but in our industry, the reality is that many insurers are just starting the journey or are currently in the middle of core system modernization. For some, the progress is slow due to the sheer number of resources needed to achieve success. Modernization is complicated. It is no longer enough to implement a so-called modern core system that basically mimics the capabilities of the past and delivers incremental efficiencies. What is required is a broader approach to modernization.
Far-reaching modernization of core systems and technology platforms gives insurers the power to drive real differentiation in the marketplace. Insurers that have implemented comprehensive, truly modern core systems are reaping the benefits by improving customer service, profiting from increased efficiency and accuracy, and more effectively managing their business and operations. Modernization provides insurers with three essential competitive differentiators.
Modern Core System Breadth
SMA defines a modern core system as a solution that includes a service-oriented architecture, dynamic configuration capabilities, and standardized APIs to support integration with other systems, data, and technologies. Each of these components plays a critical role in helping an insurer transform the business and the organization itself. A modern system lays the foundation for improving service platforms to meet current and future needs. It provides a flexible and scalable environment that can be optimized to meet expanding business demands. Modern core systems gives insurers the flexibility needed to capitalize on new opportunities, something that is all but impossible with the silo structure currently found in many organizations. It is a foundation for transformation–helping the organization improve business processes, strengthen skills, and deliver innovative products and services.
Robust Configuration Capabilities
Dynamic and robust configuration capabilities have been a key selling point for many of the vended solutions being offered over the last few years. Unfortunately, the benefits of these configuration capabilities are limited unless the business can use them to accelerate speed-to-market for new products, as well as modifications to existing products. The reality is that configuration responsibilities are spread throughout an insurer’s organization, mandating improved communication and collaboration between IT and the business. Consequently, a modern core solution must deliver not only robust configuration capabilities, but also an environment where these capabilities are readily usable by the right people at the right time with the right communication and collaboration tools that will optimize productivity and quality.
Maturing and Emerging Technologies Integration
The most exciting technologies sweeping the industry– maturing technologies like mobile and telematics and emerging technologies such as aerial imaging and the IoT–provide the most value when they can be incorporated into an insurer’s core systems. Standardized APIs are the gateway for that integration. These APIs create linkage to other systems, new sources of data, and maturing and emerging technologies. Embracing new technology is no longer a choice–it is a business imperative. The pressure is on! Insurers must continually incorporate new technologies because of customer and market influences. As the organization expands capabilities, the use of new technologies, especially in novel and experimental ways, fuels a holistic culture of innovation that spreads throughout the organization. It all starts with the foundation–the basic capabilities of truly modern core systems.
Although insurers are making substantial progress in modernization, there is still significant work to be done. One point is abundantly clear: core modernization is a fundamental element in the equation for optimizing today’s business and technology environment to position an insurer to innovate and effectively address tomorrow’s challenges and opportunities. Fortunately, there are insights to be gained from the experiences of others. Customer expectations are becoming increasingly sophisticated and insurers are stepping up their game in delivering exceptional customer experiences. We are witnessing significant change in the entire business of insurance as our traditionally “slow and steady” industry embraces the rewards of the digital revolution.
Today, in more ways than we envisioned even just five years ago, competitive differentiation is intrinsically linked to the creative application of new technologies. The transformational capabilities they enable are astounding. The leading insurers of today interact with their customers and operate their businesses very differently than the insurers of yesterday. Consequently they have increased the value they can deliver and that is apparent in the marketplace.
Core modernization is a crucial step on the path to becoming a Next-Gen Insurer. It’s an all-important journey that all insurers must take. A Next-Gen Insurer is equipped to optimize business models, products and services, infrastructure, and customer experience—ready to innovate for true competitive differentiation.