Rotten to the core: The case for modernization

What do you do when the digital world demands more – and more sooner – than your core system is used to supporting? The short answer is you feel the strain, especially if your core technology is outdated.

The gap between insurers with modern core systems and those without is only going to grow wider. Insurers still getting by with legacy technology may be able to sustain their business for some time, but without the robust capabilities of modern core systems, the foundations of their business just might be rotten to the core.

Demands are piling up, and insurers are asking their core systems to support greater requirements. The legacy core environments still bolstering many insurers are crumbling under the weight.

In fact, four out of five insurers are actively investing in core modernization or replacement in 2017. And those trying to get along without it are likely at a disadvantage. If you want to make the case for modernization in your organization, note the advantages modern core systems give insurers, and how they set any given insurer up for further success.

Here are four reasons why you need to modernize, or fall behind:

1. The digital customer

In the digital economy, customer expectations drive demand for certain technical capabilities. Customer service that policyholders expect from their insurers demands back-end systems that support how they want to do real-time business.

Customers want to talk with their insurers through different channels, without the lags or downtime caused by batch processing. They need an insurer’s systems to intercommunicate, so they can accomplish tasks like requesting an endorsement on a policy and changing their billing period – during the same interaction.

These customer expectations are now firmly established, and even insurers who have built these capabilities around legacy core environments should anticipate that the “table stakes” of customer service will continue to rise. And the importance of the digital experience is not limited to policyholders. Prospects, agents/brokers, service partners, and a company’s own employees have expectations about interactions and capabilities in the digital world.

2. New technology

InsurTech, emerging technologies, and new data sources challenge all insurers. To meet this challenge, insurers must have core systems that can expand into new territory. Modern core systems have the open APIs and integration capabilities that this flexibility requires.

In contrast, legacy systems were not designed to flex to accommodate new technologies and new ways of doing business, which is where InsurTechs are strongest. Many of the new capabilities InsurTech firms are exploring are most effective with strong, real-time integration with core systems.

Without that linkage, insurers will struggle to get the full benefit of any new technology or approach, whether it’s a digital agency for sales and service capabilities or emerging technologies like AI for robotic process automation, drones for inspections, or augmented reality for claims adjusters.

3. Increasing data needs

As with new technologies, the efficacy of new data sources and previously untouched “dark” data (e.g., the unstructured data found in claims notes) depends on how insurers put it to use. Data for the sake of data gets you nowhere; insurers need to be able to leverage the right data at the right time.

This is where modern enterprise content management (ECM) solutions, working in concert with modern core systems, can provide the increasingly advanced rules and workflow capabilities that streamline transactional processes and enable enhanced digital capabilities. For example, new data solutions for underwriting can package information, provide new scores, and deliver new data such as aerial imagery to give underwriters new insights and streamline operations. This takes sophisticated workflow management to choreograph the flow of unstructured data and structured transaction data through the system, optimizing the underwriters’ time and skills.

4. Speed of business

Not only is the world changing faster, more data is generated than ever before. Insurers need to collect and interpret that data, then act on the resulting insights. To take advantage of new market opportunities as they occur, insurers need flexibility in their core systems to create or configure new products, to expand to new distribution channels, or to move into a new line of business.

After all, legacy technology was never meant to act and react at the speed of today’s market.

Insurers must take a good, hard look at the current capabilities of their core environments and compare them with the modern functionality available to address these needs. Even “modern” systems implemented a few years ago may fall short in one or more of these areas. It is equally vital for modern core systems to be paired with advanced ECM solutions as the digital data available to insurers continues to increase.

Mark Breading

Mark Breading

Mark Breading is a partner at Strategy Meets Action. Mark is a recognized expert in advanced technologies and their implications for the insurance industry. He has exceptional knowledge of the... read more about: Mark Breading

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