Improving Your Handicap

At a recent golf lesson, the pro told me that fundamental mechanical issues with my swing prevented me from improving my handicap. I went to the practice tee before the next lesson and implemented the recommended improvements. Back on the course, I reverted to my old swing; it was more comfortable and seemed to be the best way to score well in the short run. I couldn’t reconcile the investment in a new swing necessary to up my game.

This scenario is akin to what many companies face with legacy policy admin systems. They have optimized core environments around 40-year-old systems, solving for the highest level of operational efficiency and function, just as I optimized my golf game around the faulty mechanics of my swing.

As companies look to implement innovative business processes, three primary technology areas are essential to their delivery: data, digital, and core. Much like the mechanics of a golf swing, they depend on each other to deliver change to an organization. Insurers cannot achieve transformative digital experiences if they have not optimized data and core environments across all insurance business functions. (Much like a new golf driver is ineffective if a golfer’s swing mechanics and course management are not sound.)

The technology ecosystem for insurance has become more complex and componentized over the past 40 years. A single homegrown or commercial policy administration system supported all business functions for the enterprise in the early days. Companies designed their processes and operations around the capabilities the system provided. Insurers enabled additional functions as new technologies evolved, implementing them as add-ons to the core system for primary business functions:

  • Product
  • Marketing
  • Distribution
  • Underwriting
  • Customer Engagement
  • Billing
  • Claims
  • Finance and Operations

These enhancements improved on the existing capabilities for each function, incorporating the latest advances in customer experience, networking, databases, and analytical tools. Insurers developed and added numerous subsystems and components to the ecosystem at various times over the years, implementing each using the technology du jour.

Many insurer system environments are a patchwork of technologies integrated via complex and fragile infrastructures. At the center of this infrastructure is a 40-year-old legacy admin system, or systems, that still represent(s) the authoritative source for most policy-related information and processing. Some companies process all of most of their new sales using those systems.

The limitations of older system technologies hamper current efforts to deliver digital capabilities that consumers have come to expect. They also inhibit timely, cost-effective access to new markets.

Many insurers are embarking on transformational journeys to address these issues. There are three key steps they should take before developing their transformation strategy:

  1. Take stock of the existing environment by mapping application portfolios using an organized method. The Novarica Insurance Core Systems Map provides a standard frame of reference for insurer executives to discuss their current systems.
  2. Understand the state of the industry as it relates to data, digital, and core technologies for all critical business functions. The Novarica 100 (N100) is a list of 100 technology capabilities that represent the new standard for insurers. Insurers can use it to assist with benchmarking capabilities, understanding current capability deployment rates, and gauging how fast new capabilities will become table stakes.
  3. Assess current blocks of policies, open and closed, to determine their optimal disposition in the new environment. Block analysis provides insights into how a transition will affect different products and lines of business, creating a broader understanding of relative costs and benefits and providing a rational framework for executive decisions.

Insurers can take these steps to improve the underlying mechanics that constrain innovation and learn how best to incorporate the new tools, systems, and methods that necessary to unleash new digital capabilities.

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