Equisoft recently hosted an exclusive CIO Dialogue with 14 CIO’s from Life Insurance, Wealth Management and Banking companies in India. The event featured lively discussion and valuable insights into their digital transformation journeys, the challenges created by legacy systems and the CIOs’ perspective on the road ahead for IT transformation in Financial Services in the region.
The most passionate discussions throughout the session were around the issue of: “Why replace legacy systems at all?” There were many divergent opinions within the group—increasing speed-to-market, responding to market changes and enhancing customer experience for example. However, the forum agreed that one life insurer is going to have to bell the cat for others to follow suit.
The time is now for legacy system modernization
The Indian life insurance industry is now 20 years old. In many companies the Legacy PAS has now really become a “System of Record.” Dismantling it and moving into a Modular System is very cumbersome given the complexity of the transformation. As the core systems age they become increasingly difficult and expensive to maintain.
They have closed architectures and are hard-coded, meaning product updates and changes, let alone new product development takes a long time and is also resource intensive. The time has come for modernization.
CIOs would love to replace their aging PAS but the hefty investment is a big hindrance. Making a compelling CBA and ROI for modernization has always been a challenge.
Moreover, given the profitability stress in the life insurance industry, the businesses are not keen to invest in core system replacement for the time being—though they understand the issues and are willing to evaluate it in the next 2-3 years.
Investment aside, most CIOs are also concerned about the perceived risks of data migration in any conversion to a modern policy admin system. One of their biggest questions was how to migrate Unit Linked Policies (Market linked) from the legacy PAS.
The best approach to modernization
Most CIO’s agreed that it is the culture and mindset of the organization that drives the need for any IT transformation. The group was clear about the need for cross-functional teams; viz. Sales, Operations, Customer Services and IT in order to successfully execute any digital transformation journey. Onboarding, co-opting and collaborating with all stakeholders in the company is the mantra for success.
The CIOs were also aligned on the fact that the classic debate between “Build vs Buy” is over! Insurance companies don’t have the experience or expertise to build replacement policy administration systems.
Partnering with the right vendor—one who has a proven track record, competency and the ability to successfully implement a modern rules-based system—is the way to go.
SaaS models are especially attractive since they further reduce the need for the insurer to devote IT resources to upgrading and maintaining the core systems. In such a partnership the CIO’s felt strongly that collaborating with vendors and strengthening their ecosystem results in a win-win for both.
End-to-end solutions are in demand
It was clear that there is a big opportunity for innovation at the front-end for agent-facing tools in life insurance. The entire solicitation and Financial Needs Analysis (FNA) should be taken to the next level to better uncover and align with the prospect’s goals.
Most life insurers are excited about and keen to launch new products which will be sold only through the digital channels and wanted to know more about illustration and electronic application tools. In particular, CIO’s from the banking industry stressed the need for a robust front-end tool for insurance solicitation and a partnership model to drive implementation on the ground.
On the wealth management side, the CIO’s were eager to see our portfolio design and analysis offerings, given our experience and proven track record in partnering with several global players in USA & Canada.
What became very clear during the CIO Dialogue was that life insurers in India are feeling the pressure owing to the challenges presented by their legacy PAS. They are especially concerned with what they see as the next big growth phase for them—capturing the mind-share of the huge millennial market.
These digital-born customers and potential agents want omni-channel, self-service offerings—and they want them to be as fast and personalized as those they encounter in other industries (like Amazon and Apple). The digital front-end tools that deliver superior online experiences are not compatible with most legacy systems—making PAS modernization a must.