Last time, we spoke a little about the difficulty of changing the way that people think and do things as we face the challenge of digital transformation. The other legacy challenge we discussed in the Digital Insurer Network workshop is, of course, that of technology.

When we’re contemplating the flood of new digital technologies and the kinds of business opportunities they open to us, the question of technology is primary. It’s simple to state the problem: insurers have been investing in technology for decades, but all too often within business units or silos. When implementing new technologies, they therefore face a choice: to bolt the new technology onto the outside of existing systems, potentially compromising the agility and flexibility that is at the center of the digital value proposition, or to rebuild one of the core systems to embed digital capabilities in the inside.

Most often, the first option is chosen. The good news is that there are indeed many opportunities to create new digital capabilities “on the outside”—provided the basic core capabilities are in place, most notably a comprehensive view of the customer. The major challenge is to make sure that the customer experience remains consistent.

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All too often, though, limitations appear and some of the core capabilities have to be digitally enhanced or even replaced to achieve the next level of customer experience: one prime example is creating a new product catalog and rating capability, another is creating a new multichannel first-notice-of-loss capability.

I often wonder whether a third option—creating a separate digital company that starts from scratch—isn’t the most realistic solution. Who knows, in time this digital upstart could exceed its parent in size and profitability; indeed some of the largest players have created greenfield operations to start afresh and address the needs of their most digitally oriented customers.

Of course, technology is inseparable from business processes these days, and that raises the other big issue of legacy thinking, which I looked at last week. In any case, the approach and priorities must be informed by a clear value-generation strategy as well as a sound assessment of existing capabilities. (For more on this topic, read What does it take to be a Digital Insurer? Four capabilities insurers need on the journey to digital mastery and high performance.) Once the evangelization is over, the next part of overcoming the legacy mindset is to make sure that the new way of doing things, and of thinking, is integrated into the corporate culture. That, of course, is a long-term project, and an important one.

Next time, a few thoughts on the question of talent.

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