There are several options when it comes to crafting a modernization strategy for a particular life insurer.
The first thing any traveler must do is work out his or her travel itinerary, budget and so on. A similar process holds good when it comes to working out how to approach modernizing an existing life platform. The following four approaches should all be considered in line with the company’s specific circumstances:
Digital legacy wrap. This approach usesvarious digital tools to “wrap” the legacy technologies by creating a standard user interface, adding on new services and eliminating unsupported technologies. It essentially introduces the ability to interact digitally with customers, and uses digital technologies to leverage analytics and become more customer-centric. This can seem attractive because it reduces the business and change impact—but it essentially puts off the decision until later. However it can form part of a phased approach to complete digital transformation, especially if it is combined with a parallel strategy in which new business is serviced via a new modern system.
Legacy renovation. The quickest, safest and cheapest of all the approaches, this uses new automated technologies to convert up to 90 percent of legacy code into Java- or .NET-compliant language. It would also include some new digital, front-end capabilities. However it does mean that the fundamental issue of a new business model is not addressed.
System replacement. A comprehensive approach that allows the insurer to introduce improvements now and in the future. New systems are designed specifically for insurance and offer the biggest cost-reduction and process-improvement opportunities. It can be the most expensive option, though, with great potential impacts on the business—and concomitant risk.
Outsourcing/ operations. A growing number of insurers are taking this opportunity to outsource parts of their technology, business processes and even product lines to gain the flexibility and cost savings without incurring capital costs. It’s a strategy that also allows the company to deploy its own scarce resources to the most strategic product lines. While business process outsourcing has emerged as a real business strategy, it does carry risks and can be perceived as a relinquishing of control.
Whatever approach is ultimately chosen, a systematic and systemic approach is vital. Successful modernization of a life insurance platform must address six key issues within the context of a wider strategy to become a digital insurer:
- Analyze upfront the profitability of the portfolios under management.
- Define the target IT system.
- Migrate to the target IT system.
- Rationalize the portfolio of products and services.
- Totally or partially outsource the portfolio.
- Implement a cross- and up-selling capability for the portfolio in order to maximize return on the modernization investment.
Next time, I’d like to conclude by focusing on the kinds of benefits to be obtained from platform modernization.
For more information and to learn more about Accenture’s capabilities and experience in this area, please download Reducing costs and time to market through life platform modernization.