The Greenfield Solution

The Greenfield SolutionInsurance companies have been attempting a slow move to digital capabilities for years. The real push to invest precious budget dollars, talent, and time into digitalization came as a result of the pandemic, as lockdowns and stay-at-home orders highlighted the need for digital capabilities. We all realized that the ways we purchase and service everything needed to be easy, accessible, and, in the case of insurance, collaborative. Now the genie is out of the bottle and isn’t going back in.

The need to be flexible, make product changes, introduce new products, and address market needs is also clear. Different generational expectations for products are evolving quickly. Projects that take months to develop requirements and business cases only to wait longer for overcommitted IT resources to address them will not allow product, underwriting, and rating innovations to occur quickly.

The Legacy Problem

The root of the issue usually lies in antiquated, legacy policy administration systems (PAS) on which our businesses rely. Some insurers have chosen to “wrap and extend” legacy systems, but this has limitations. Many insurers have embarked on large transformational efforts to replace their PAS systems with varying degrees of success.

The business case that had always prevailed was cost savings. Replacement efforts held the promise of retiring legacy systems once the new system was in place and ready to handle all in-force and new business policies. But the conversion process was grueling. Many insurers needed to make the new system mimic the old processing or accommodate decades-old products with multiple riders sold to a small subset of customers. These factors complicated the new systems.

Data integrity issues reared their ugly head as people tried to understand inaccurate data or data converted from paper files and other older processing methods. Documentation was lacking for the older business, and the institutional knowledge of how these products and processes worked was in many cases nonexistent. The legacy system was the key and had worked well to support the business for many years. In short, conversions took longer, required more resources, cost more, and were sometimes left incomplete. These projects weren’t considered successes.

The Greenfield Approach

Armed with the knowledge of past mistakes, CIOs are looking at a cleaner, forward-focused approach to updating legacy environments: the greenfield implementation. Promising to deliver new capabilities and address the legacy prudently and cost-effectively allows for a successful transformation. Sheila Burke’s quote seems to apply well: “The journey is much easier when you are not carrying your past.”

Greenfield implementation is an approach that uses a new product, market, or distribution as the point of entry into the new PAS. CIOs who look to this method can work with business partners to create a business case that looks to the capabilities that will be created for the future of the business. Promising to deliver new capabilities, uncluttered by the products, processes, and past data is faster and more likely to succeed.

Starting fresh on a new PAS allows insurers to look at how they want to do business and build modern, configurable technologies that enable rapid change to address market needs. Digital capabilities are inherent in the new systems, and APIs allow easy integration with new data sources and capabilities. The greenfield approach allows organizations to acclimate to the new PAS, which generates a deeper understanding of its capabilities and facilitates better decisions in the next steps.

Converting some select legacy business is a reasonable next step. Assessing the blocks of business in the portfolio and making informed decisions on what belongs on the platform will increase the insurer’s ability to deliver. The entire book of business will not need all the future capabilities. That does not mean you will not service your customers well, but it does mean that new functionality will not extend across all legacy products. Understanding customer needs and expectations is vital for these decisions.

If you are trying to transform for the future while carrying the baggage of the past, it may be time to unpack.

To learn more about block analysis, please see our blog on managing transformation risk and our report on life systems transformation. If you’d like to discuss this further, please feel free to contact me at [email protected].

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