Two-speed approach to addressing transformational legacy and ‘leapfrog’ investments and move the organization forward.
Today's insurers are caught between conflicting pressures. The changing regulatory landscape, evolving customer needs, and the disruptive impacts of technology are clear challenges to current operating models, while new entrants to the marketplace compound pressures on market leaders. Insurer's business models must evolve; however, legacy systems, processes and skill competencies present significant roadblocks to change. How can insurers address the needs of their legacy transformation while moving at pace in the new, technology-driven paradigm?
There is no singular way to simultaneously meet evolving market demands and adopt new technologies while addressing the challenges of legacy systems. Instead, insurers and their technology organizations need to take a “two-speed” approach to these challenges, creating a roadmap that outlines two distinct plans that work in parallel to move the organization forward.
Legacy transformation is an area that most insurers are already giving significant time and attention. While legacy systems may be comparatively simple and easy to run, they do not provide the rich functionality that customers want, nor do they allow the insurer to gain full value from the data in their possession. Yet the process of moving from legacy is about more than reducing dependency or replacing existing systems. Instead, insurers need a clear plan that outlines not only how they are going to move over time to a more flexible model, but also provides a “step-down” approach to indicate what parts of the business are going to move from the legacy systems at what point. From an operating perspective, this means creating a strategy for where internal people resources should be placed and which legacy customers should be transferred at what times, with full consideration of where the organization can achieve the best service levels and price point.
In parallel to the legacy plan, the business must have a “leapfrog” technology plan in place as well: a dynamic digital agenda that looks to use new technologies and models to address the changing demands of today's customers and regulators alike. This plan needs to look at more than the implementation of specific technologies, such as AI, predictive analytics, or telematics to solve particular business needs. Instead, the focus should be on how a range of technologies can be used to create a collaborative, omni-channel ecosystem and customer-centric operating model. This may include working with best in breed technology and service providers, and opening the business to new ways of thinking. Understand, too, that the company will require a very different type of person with different skill sets --people unencumbered by the legacy business model --to create and drive this ecosystem forward.
The balance between legacy and the new paradigm is a difficult one to strike, and the critical steps, market impacts, technology models and timelines for implementation will necessarily be different for every organization. Transformational investments, whether legacy or leapfrog, must also be balanced against operational and capital expenses to create the right time horizons for change.
However, there are a few key elements that insurers should keep in mind when developing their two-speed business transformation roadmaps:
This is an exciting time for the insurance industry. Despite pressures and challenges across the business, technology provides a myriad of avenues to not only improve customer service and satisfy increasing regulatory demands, but also reduce cost and improve operational efficiency.
Article original published in The Digital Insurer: Technology and the transformation of the insurer's business model