As core systems have evolved with client and end-consumer expectations, so have the reasons insurers seek out core replacements.
Replacement projects may once have been about solving current pain points with specific functionality, but insurers today should look to where potential solutions are headed.
The question is whether a given core solution will evolve to meet tomorrow’s needs with flexibility and speed. Insurers should evaluate systems on criteria that fall under three broad categories: functionality, architecture, and implementation.
Functionality
Transactional requirements have become more granular with increased automation for exception processes and navigation by persona. Configuration requirements have expanded beyond tables for product definitions to include graphical interfaces for UX and business rules and other configurations at a user preference or role level. Transactional requirements and product configuration used to be the primary evaluation criteria for a core system, but evaluations of ecosystems and third-party integrations are now a significant part of core solution functionality evaluations.
Architecture
Architectural differentiators have moved beyond real-time, web-based processes. Core systems are no longer policy- or claims-centric. Instead, they are increasingly customer-centric, supporting account numbers and creating customer records shared by all the respective components. Monolithic core solutions have also been steadily unbundled to enable more focused implementations and provide superior functionality. Finally, core system capabilities must be exposed to create cost-effective digital processes. Requirements in these areas are constantly evolving; they necessitate flexible architectures and the ability to extend core systems into digital processes.
Implementation
Insurers can best address the duration and high risk of core system implementations with repeatable implementation processes and strong strategic partner networks. Insurers are now demanding migration to DevOps processes and continuous development rather than the traditional annual upgrade approach for base releases. Core solution providers are targeting cloud-based implementations and beginning to leverage cloud-based services; they would like to migrate to multi-tenant implementation approaches to lower support costs. These different approaches can impact the risks and benefits of the chosen solution.
Assessing out-of-the-box functionality and approaches will remain important. However, architects will be increasingly involved in evaluating the potential impact of emerging architectures and approaches on speed to market, scalability, and total operating costs. Investments in digital capabilities will also require reevaluation as more advanced integration and configuration approaches are brought to market. Not all existing solution providers will be able to incorporate these changes effectively while remaining competitive.
CIOs should continually evaluate their current core system providers’ solution roadmaps and progress against these trends to ensure that today’s core systems are fit for tomorrow.
For a deeper dive into this subject, see Novarica’s executive brief Core Systems of Tomorrow.
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