Executive Summary: ISG Provider Lens™ Insurance Platform Solutions - U.S. 2023
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Modern core systems means speed-to-market & service = speed-to-deliver-value
Successful insurance carriers are characterized by their ability to easily analyze/assess and deeply understand the underwriting risk they take, instead of relying on probability. To remain competitive in the U.S., they must be aware of the evolving macro-environment, rapid climate change and increased inflationary impacts and be responsive to their consumers’ ever-changing demands, adapt to meet them and take on risks.
Insurance requires a paradigm shift away from policies and premiums and toward connected services, real-time analytics and risk removal.
Insurers may face difficulty transitioning from invisible coverage to the most conspicuous protection; their annual results reveal a mixed bag of successes and failures. Whether or not insurers meet their quarterly targets, the industry appears to be in peril.
Insurance carriers’ inability to meet customer expectations, leading to poor customer experiences (CX), makes the customers lose their trust in insurance carriers. Unless insurance carriers focus on customer journeys beyond onboarding, they will fail to deliver the real value of insurance to their policyholders and lose their business.
Honest product design manifestation supported by data-fluid, interoperable and intelligent capabilities can enable carriers to deliver a differentiated CX and build better emotional relationships. Most insurance customers want more than just financial protection during unforeseen circumstances. They want pure protection through risk reduction, prevention and possibly removal too.
However, insurance carriers struggle with risk coverage and are far from risk removal. Their business design, operating model and technology landscape are too rigid to ingest and leverage the data required to do risk management (reduction, prevention and removal) successfully.
Insurance will continue to be not so relevant,an imposed purchase, which may at best act as a license to:
● Keep business operating because it is hypothecated to a bank or financed by a bank
● Allow individuals to drive a car or go overseas, among other things
With these determinants, many customers will just opt for the cheapest option because no provider can differentiate themselves on CX or relationship value. Intermediaries will continue to push commoditized offerings that give them maximum payouts.
To be innovative based on changing customer needs, insurance carriers must break constraints in their value chain models, where the exchange of value to create a product or service is simply linear.
If insurance were invented today, it would not resemble the present business design. Although it would operate within the scope of assisting individuals in recovery from tragedy and financial stability, it would operate differently. It would be more relevant and basic information on paper. Insurance has the potential to become one of the ecosystems in which other businesses operate. All that is required is forward-thinking insurers that execute these new business models to benefit society and their enterprises.
Regardless of carriers’ unique aims or concerns today, a modern core insurance system is critical for their short- and longterm commercial survival. Carriers require a new core system built to remain relevant into the future, with features that enhance productivity and enable growth, whether they want product line and business expansion, cyber-proofing, disaster recovery, increased security, decreased workload and improved profitability for their distribution channels, more competitive features for customers, or they want to increase process efficiency and save time and resources.
The question is not whether to modernize but when. The sooner the insurers act, the sooner they will be able to reap the benefits and take their business to the next level with competitive differentiators.
Legacy systems may be a major impediment to innovation, prohibiting insurers from using cutting-edge technology. But there is a solution: legacy modernization.
Legacy modernization is updating, upgrading or replacing obsolete core systems with new, more efficient solutions that enable firms to remain competitive in today’s fast-paced environment. Legacy modernization is a primary driver of change in the insurance business, where disruption looms.
Incumbent insurance carriers juggling with- antiquated legacy or outdated homegrown core systems and struggling with their interoperability will continue to see rising IT costs and performance issues, leaving them with no/low time to focus on business priorities such as customer service, growth and innovation.
Speed-to-Market and Efficient Services Can Improve Speed-to-Value
New methods to access crucial services are introduced daily to fulfill insurance carriers’ increasingly complicated technological requirements and remain relevant in an increasingly competitive, data-driven and security-conscious landscape.
If carriers can’t design, develop and deploy newer products or underwrite more insurance business without increasing the number of employed workforce, employees will surely grow the tendency of becoming indispensable and will certainly no show active interest in upskilling themselves. Insurance carriers may invest heavily in their distribution channels (agents and brokers) by streamlining and automating day-to-day activities and processes so that they can spend more quality time with their customers.
The core systems are the most complicated component of the world’s most complex industry, but complexity isn’t an impediment to transformation; rather, it’s a chance to reimagine the future of insurers on new foundations optimized for quick and safe change. The modern-day core system offers a significant reinvention with surgical precision and an aseismic transition with excellent continuity. It provides carriers with a once-in-a-lifetime chance to de-risk and future-proof their businesses.
Transitioning from antiquated systems to new solutions may provide a plethora of benefits for insurers, such as increased efficiency, superior CX and enhanced security, that can contribute to insurance carriers’ amazing development and success. It is not easy to modernize archaic and outdated systems. Identifying important stakeholders, prioritizing the most vital systems and managing change are all necessary for a successful modernization project.
Legacy system modernization may decrease manual procedures and improve operations, resulting in cost savings and greater productivity. Decision automation in insurance activities such as claims processing, underwriting and risk assessment can be facilitated by modernized infrastructure, leading to shorter turnaround times and fewer mistakes. This enables insurers to cut operating expenses while increasing efficiency.
Modernized infrastructure allows insurance carriers to respond swiftly to changes in the business environment, helping them to remain agile and competitive. Insurers can be certain that their infrastructure can expand with their business and adapt to new market possibilities, consumer needs and regulatory requirements rapidly and efficiently.
Modern and applied technologies enable insurers to leverage the power of data, resulting in more informed decision-making and the development of new products. Insurers may obtain and analyze consumer data from various sources to generate better products and services that match the specific needs of their customers. These data-driven insights can also assist insurers in identifying new risks and opportunities, allowing them to make better decisions that improve their bottom line.
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