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Get Set For Transformation: Life Insurance Modernization Challenges and Success Factors

Article

IT modernization in insurance

Competitive advantage is difficult to maintain in an industry where the change curve has been become so steep in recent years. Insurers need to be responsive—but developing that ability as an on-going organizational capability can only happen when you are able to clearly define priorities, execute the right strategies to achieve those goals and transform your IT landscape so that it supports agile responses to changing conditions.

The impact of modernization on your IT infrastructure

End-to-end digital transformation of your IT infrastructure creates a robust platform that more easily adapt to business needs as they arise. It makes it possible to enhance new business development, drive growth and increase engagement with all stakeholders. IT modernization can:

  • Improve data management and accessibility to leverage BI and analytics
  • Enhance digital sales and underwriting
  • Create the possibility of superior end-to-end digital customer engagement/experience—with real-time, omni-channel access to data
  • Ease expense pressure through increased operational efficiencies and automation

But experienced CIOs recognize that modernization projects can be thrown off track by any number of potential pitfalls.

What are the biggest IT transformation pitfalls?

1. Poor scope definition

Modernization projects can range in size from relatively small, contained undertakings (i.e. implementing a new illustration software solution) to Big Bang, career-defining policy admin system replacements. When project scope is not clearly defined before the project begins initiatives of any size can be impacted by time and cost overages—leading to missed deadlines and unmet business needs.

2. Data accessibility

Carriers have long been warehousers of generations of client data. Today they in the process of transitioning to becoming modern data-driven enterprises that leverage the value of that strategic asset. Unfortunately, many companies’ transitions are being held back by the difficulty of accessing data trapped in legacy silos and older systems which aren’t API-enabled.

3. End-to-end system integration

Insurers have complex IT landscapes evolved over many years of development, acquisitions and upgrades. They include the carrier’s own systems and also the many third-party external systems that are utilized in many parts of the policy lifecycle. Integrating new back end systems or digital sales and service solutions into this complex ecosystem can be complicated and time consuming. Mistakes put business operations at risk.

How can carriers avoid modernization pitfalls?

1. Your business needs define the optimal scope of your project

Only when you have clear definition of your business needs can you determine whether you need a mammoth big-bang transformation or if incremental modernization over time is a better strategy.

Carriers who don’t modernize core systems face the prospect of falling behind the technical debt curve, losing the staff who can support their legacy systems and finding themselves unable to take advantage of new digital solutions that speed product development and create superior customer experiences.

On the other hand, investing today in large-scale infrastructure projects that either don’t pay-out in the near term, or fail under the weight of their own complexity can be devastating for an organization.

The right modernization path may be different for each company. But, choosing the best path will entail:

  • Clearly defining your unique business needs for the coming years
  • Auditing your current IT landscape to understand what changes are necessary to meet those needs when the time comes
  • And, most importantly, clearly and concretely defining the scope of your project

However you define the scope of your project it will become the North Star that guides all elements of the initiative. It should keep you from following development paths that don’t directly align with your core business priorities.

The best way to avoid succumbing to scope creep is to envision the project as a series of short races rather than a marathon. Start with the easier wins. Build on your successes. Make sure each sprint is tied to a direct business outcome that provides tangible value for the organization.

2. Pre-plan your integration approach

Most companies have multiple internal systems that a new solution needs to be integrated with like: underwriting, accounting, actuarial, and corporate support systems. New technology also often has to integrate with external systems like:

  • Underwriting rules engines
  • Medical information databases like MIB, MVR, Rx, EHR, etc.
  • Predictive models
  • Data Warehouse and Data Lakes
  • Business Analytics and Financial reporting
  • Reinsurance administration solutions
  • Workflow automation systems
  • ODS/Replication for downstream extracts and reporting
  • Electronic application(s)
  • Distributor and agency management systems
  • Needs Analysis
  • Illustrations
  • Agent and client self-service portals
  • Correspondence solutions

To ensure the successful implementation of a new solution, all the required integrations and integration points need to be mapped out—before the project kicks off. Dependencies amongst all the elements of an insurer’s IT ecosystem can become failure points if they are not recognized and addressed.

3. Define your data strategy before the project begins

Not every modernization project requires the conversion of existing policy data to new systems. But the idea must be considered as part of the planning process, before the project kicks off. When the data strategy is left until ‘later’—somewhere down the line, once the implementation is underway—then companies often find that budget has not been allocated if a migration is needed, the approach to migration and the resources it will require have not been defined, and the ROI of the project can be put at risk.

The impulse for many companies is to try to accomplish their conversion with staff and tools they already use. Unfortunately, what most discover, often too late in the game, is that conversion of legacy data blocks can be a complex task, that is hard to pull off without putting your business at risk—unless you are an experienced veteran of many migrations and have a methodology and tools specifically designed to ensure success.

Eliminating risk and ensuring the potential ROI of a modernization project is fully realized, requires careful consideration of data conversion or integration as an integral part of the project so that it can be planned, budgeted and resourced.

Critical considerations before starting your IT modernization project

Before starting any modernization, large or small, carriers should take care to plan the project in a way that addresses the key challenges that most often derail valuable initiatives.

  • Identify your desired outcomes ahead of time
  • Right-size the scope of the project to avoid over-runs and deliver value quickly
  • Identify integration dependencies and the changes that will be required if they are altered
  • Create and fund a comprehensive data conversion and integration plan before you begin the project

The more you anticipate and plan for the risks that most often plague modernization projects, the faster and more effective the implementation will be. A well-executed transformation will provide your company with the foundation for sustainable future growth.

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