Many insurance companies associate replacing their core systems with automation and with streamlining processes. While integral, those benefits ignore a large and fundamental attribute of new core systems. That attribute is flexibility. When flexibility is built into a new core system, insurers can innovate, collaborate and expand beyond levels they previously thought possible.
Insurers must go beyond the idea of mere speed and automation to imagine the best possible future for their companies. The first steps towards selecting a winning core system involve dreaming big, thinking strategically, not going at it alone and designating a torch bearer.
It is important that a replacement core system addresses known pain points. Equally crucial, however, is that insurers scan their business and broader value chain for new opportunities. A strong core system generates benefits that extend and network outward, making processes not only faster, but better.
Decision makers must brainstorm as though anything is possible. Insurers might ask themselves:
- If we weren’t limited by the technologies of the past, that we’re still living with today, how would we really want to serve our customers?
- Without limitations, how would we want to engage with our agents and brokers?
- Which new lines of business and products would we want to offer?
- Into which jurisdictions would we want to expand?
- What kinds of new and different coverages, endorsements, and options will bring us more business and revenues?
This “dream big” approach should extend into all areas of the organization. Core systems should accommodate flexibility in internal workflows, customer service and agent capabilities as well as innovations in lines of business and coverages. For example, as new exposures emerge, such as those for green buildings, electric vehicles or cyber liability, insurers can launch new coverages rapidly with the knowledge that their core system will support them.
Insurers should be able to strategically address the areas where the company is falling short and held back by legacy systems. What markets will present the most attractive opportunities for the company? Where does the company lack competitive products? Where could processes be re-imagined to be more accurate in selecting and pricing risks, proactive in handling claims, or engaging to boost customer loyalty?
One example of how a strategic approach radiates benefits to both company and customer is the now-dated traditional insurance service paradigm. A customer calls their local insurance agent with a question. The agent in turn calls the insurance company for information and then calls the customer back—making for rather unimpressed customers.
A new core system successfully addresses the fact that people want answers now. Web- and mobile-enabled customer service places more capabilities in the hands of the agent and the customer. Agents can focus their energies on things that matter, like giving advice to their policyholder, rather than spending time on the phone asking questions of the insurer or relaying information.
A customer may start a quote online, but want to clarify things by talking to a person. The new core system would make it easy for the agent to see what the customer has done online, work together with them to complete the submission, engage with the underwriter if needed, and finish issuing the policy. Meanwhile, even insurers that don’t sell directly to consumers can develop their core system to make it as easy and compelling as possible for prospective policyholders to engage through their preferred channels, including the web.
Today, a good number of insurers have successfully implemented new core policy, billing or claims systems. There’s a large and growing body of collective knowledge about what is most effective. Insurers need not reinvent the wheel. Leveraging others to help make decisions on what works will help the insurer gain value more quickly.
Those just embarking on a core system replacement should tap the expertise of their peers to gain insight that will help clarify their vision and improve their plan. Becoming familiar with others’ successes can empower an insurer and its team.
Knowing areas where others needed to mitigate risk, as well as those that proved easier than anticipated, allows for the focusing of critical management attention. Industry associations, events and peers are excellent sources of information on industry-leading practices. Insurers should also consult with their peers to understand the human dynamics and change management, which are as pivotal to success as the technology choices.
Identify a Torch Bearer
Finding an internal champion for core system replacement ties together all the components above—dreaming big, thinking strategically and not going at it alone. It requires courage and fortitude to make the choice to go forward with such projects. Having a well-respected and credible member of the organization represent the project will smooth the inevitable bumps in the road and help in navigating tough choices.
This internal champion needs the leadership skills to convince critics, motivate colleagues, and maintain project momentum. He or she must be an exceptional communicator who is respected by company leaders and individual contributors alike. Equipped with a thorough understanding of the business, the torch bearer must be willing to evaluate and commit to delivering strategic benefits.
When staff in all affected departments get a clear, compelling view of project goals and direction, and know they can trust the source of their information, they’ll be less resistant to the changes accompanying the new system and processes. This is why some of the best torch bearers are people who have cross-functional business expertise. This person should also be well connected and able to recognize whom to tap for the best ideas.
Likewise, they must know how to avoid political landmines. Because core system replacement is such a joint effort, the partnership between business and IT departments should be strong and integrated, with a key IT leader on board partnering with the torch bearer.
A Vision for the Future
We’ve been privileged to see more than 100 of our insurance customers go through the process of core system replacement. From our eagle-eye vantage point, we’ve been able to see what works well.
When insurers dream big, think strategically, avoid going at it alone and find an internal torch bearer, they maximize the benefits of implementing a flexible new core system that works for them in all possible ways. And the insurer who embraces new innovations in collaboration, customer experience and offerings will be well-positioned for the ongoing changes that will impact the industry in the years to come.
About the Author:
Neil Betteridge is vice president, strategy at Guidewire Software, a provider of flexible core systems to the global property & casualty insurance industry. He can be reached at firstname.lastname@example.org.