As I think about how many insurers have implemented creative solutions to address the challenges of COVID-19, I am reminded of this quote about Band-Aid solutions:
“A critic looking at these tightly focused, targeted interventions might dismiss them as Band-Aid solutions. But that phrase should not be considered a term of disparagement. The Band-Aid is an inexpensive, convenient, and remarkably versatile solution to an astonishing array of problems. In their history, Band-Aids have probably allowed millions of people to keep working or playing tennis or cooking or walking when they would otherwise have had to stop. The Band-Aid solution is actually the best kind of solution because it involves solving a problem with the minimum amount of effort and time and cost.”
– Malcolm Gladwell, The Tipping Point: How Little Things Can Make a Big Difference
During the pandemic, many insurers have implemented these types of solutions to allow their systems and processes to support the new work-from-home paradigm. Many Band-Aid solutions were tabled in the past to ensure that architectural standards regarding the “-ilities” were preserved: availability, reliability, security, maintainability, flexibility, etc.
However, out of necessity, insurers waded in and found new ways to integrate current digital technology with existing legacy solutions. Video conference services, robotic process automation, cloud computing, and network expansions have been implemented with lightning speed, forcing many insurers to adopt more Agile development methods and innovative solutions.
This approach has served many insurers well, and they have been able to keep their operations and workflows running for the past four months. Many of these solutions were indeed Band-Aids—meant to be in place for the duration of the pandemic, which was hoped to be short. Unfortunately, there is still much we do not know about the virus and a potential second wave that could require these stop-gap measures to continue into 2021.
The Evolution of Insurers’ Band-Aid Solutions
The technical operating environment for many insurers contains legacy systems that are over 40 years old. Legacy systems, though important, are only a small part of the comprehensive architecture of these companies. Countless solutions were implemented as mainframes, then gave way to client servers, then were distributed, then became web-based, and then changed to cloud computing. In many cases, these solutions were themselves Band-Aids on top of existing legacy systems. They contain complex integration layers that need to accommodate the inflexible architecture of these older systems.
As technology evolved, new Band-Aid solutions were patched together with old Band-Aids as the quickest and safest way to move the business forward. Many well-intentioned enterprise architects proposed transformation projects that could streamline the infrastructure and enable it to interoperate more seamlessly with modern-day architectural patterns. Unfortunately, these Band-Aid solutions continue to function, and the cost of transforming them is becoming prohibitive. Additionally, for some insurers, M&A activity has resulted in the acquisition of additional legacy systems along with existing complex patchworks of Band-Aids.
One insurer I worked with recently set out to document its environment, including systems, workflows, processes, and data sources. To convey the complexity, it developed floor-to-ceiling system diagrams that encircled a large conference room. These were then shown to senior executives at the company to help them understand the many points of failure that exist and the fragility of their operations. It was enough to drive the point home and get them to focus on a transformation program to modernize and simplify their infrastructure. Then the pandemic happened, and they have yet another set of Band-Aids to rationalize.
Unfortunately, the way forward does not have a simple, one-size-fits-all solution. Transforming the many core systems and integration layers requires a multi-step approach that may result in multiple solutions for each core system. It requires a business-focused approach that looks at each block of business and the systems, processes, and operation models currently in place. By assessing the transformation options and risks associated with each option, a block-by-block plan can be developed that allows the insurer to address each of the Band-Aids one at a time rather than ripping all of the Band-Aids off at once.
A related report on this topic, Block Analysis and Life Systems Transformation, addresses these issues and provides an overview of benefits and approaches to block analysis.
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