Many insurance companies associate replacing their core systemswith automation and with streamlining processes. While integral,those benefits ignore a large and fundamental attribute of new coresystems. That attribute is flexibility. When flexibility is builtinto a new core system, insurers can innovate, collaborate andexpand beyond levels they previously thought possible.

Insurers must go beyond the idea of mere speed and automation toimagine the best possible future for their companies. The firststeps towards selecting a winning core system involve dreaming big,thinking strategically, not going at it alone and designating atorch bearer.

Dream Big

It is important that a replacement core system addresses knownpain points. Equally crucial, however, is that insurers scan theirbusiness and broader value chain for new opportunities. A strongcore 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, thatwe're still living with today, how would we really want to serveour customers?
• Without limitations, how would we want to engage with ouragents and brokers?
• Which new lines of business and products would we want tooffer?
• Into which jurisdictions would we want to expand?
• What kinds of new and different coverages, endorsements, andoptions will bring us more business and revenues?

This “dream big” approach should extend into all areas of theorganization. Core systems should accommodate flexibility ininternal workflows, customer service and agent capabilities as wellas innovations in lines of business and coverages. For example, asnew exposures emerge, such as those for green buildings, electricvehicles or cyber liability, insurers can launch new coveragesrapidly with the knowledge that their core system will supportthem.

Think Strategically

Insurers should be able to strategically address the areas wherethe company is falling short and held back by legacy systems. Whatmarkets will present the most attractive opportunities for thecompany? Where does the company lack competitive products? Wherecould processes be re-imagined to be more accurate in selecting andpricing risks, proactive in handling claims, or engaging to boostcustomer loyalty?

One example of how a strategic approach radiates benefits toboth company and customer is the now-dated traditional insuranceservice paradigm. A customer calls their local insurance agent witha question. The agent in turn calls the insurance company forinformation and then calls the customer back—making for ratherunimpressed customers.

A new core system successfully addresses the fact that peoplewant answers now. Web- and mobile-enabled customer service placesmore capabilities in the hands of the agent and the customer.Agents can focus their energies on things that matter, like givingadvice to their policyholder, rather than spending time on thephone asking questions of the insurer or relaying information.

A customer may start a quote online, but want to clarify thingsby talking to a person. The new core system would make it easy forthe agent to see what the customer has done online, work togetherwith them to complete the submission, engage with the underwriterif needed, and finish issuing the policy. Meanwhile, even insurersthat don't sell directly to consumers can develop their core systemto make it as easy and compelling as possible for prospectivepolicyholders to engage through their preferred channels, includingthe web.

Don't Go it Alone

Today, a good number of insurers have successfully implementednew core policy, billing or claims systems. There's a large andgrowing body of collective knowledge about what is most effective.Insurers need not reinvent the wheel. Leveraging others to helpmake decisions on what works will help the insurer gain value morequickly.

Those just embarking on a core system replacement should tap theexpertise of their peers to gain insight that will help clarifytheir 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 asthose that proved easier than anticipated, allows for the focusingof critical management attention. Industry associations, events andpeers are excellent sources of information on industry-leadingpractices. Insurers should also consult with their peers tounderstand the human dynamics and change management, which are aspivotal to success as the technology choices.

Identify a Torch Bearer

Finding an internal champion for core system replacement tiestogether all the components above—dreaming big, thinkingstrategically and not going at it alone. It requires courage andfortitude to make the choice to go forward with such projects.Having a well-respected and credible member of the organizationrepresent the project will smooth the inevitable bumps in the roadand help in navigating tough choices.

This internal champion needs the leadership skills to convincecritics, motivate colleagues, and maintain project momentum. He orshe must be an exceptional communicator who is respected by companyleaders and individual contributors alike. Equipped with a thoroughunderstanding of the business, the torch bearer must be willing toevaluate and commit to delivering strategic benefits.

When staff in all affected departments get a clear, compellingview of project goals and direction, and know they can trust thesource of their information, they'll be less resistant to thechanges accompanying the new system and processes. This is why someof the best torch bearers are people who have cross-functionalbusiness expertise. This person should also be well connected andable 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, thepartnership between business and IT departments should be strongand integrated, with a key IT leader on board partnering with thetorch bearer.

A Vision for the Future

We've been privileged to see more than 100 of our insurancecustomers go through the process of core system replacement. Fromour eagle-eye vantage point, we've been able to see what workswell.

When insurers dream big, think strategically, avoid going at italone and find an internal torch bearer, they maximize the benefitsof implementing a flexible new core system that works for them inall possible ways. And the insurer who embraces new innovations incollaboration, customer experience and offerings will bewell-positioned for the ongoing changes that will impact theindustry in the years to come.

About the Author:

Neil Betteridge is vice president, strategy at GuidewireSoftware, a provider of flexible core systems to the globalproperty & casualty insurance industry. He can be reached at[email protected].