26 Nov Three Approaches to Modernize Insurance Companies
Insurance companies can benefit a lot from adopting the most modern insurtech solutions that are designed to increase their efficiency and save money by automating numerous business processes. Relying on digital technology to develop products, process claims and provide satisfying customer experience will result in improved sales and customer retention, increased operations productivity and reduced IT costs.
However, adopting a new technology means overhauling the core system and transforming the overall business model. This is a very sensitive process that can go wrong if you choose the wrong technology or procedure. In this article, we will examine the 3 most common approaches to modernize insurance business process. Each of these 3 approaches has its pros and cons, choosing the right approach that suits your organization is critical in successful digital transformation in the insurance industry.
Three Paths to Insurance Digital Transformation
- Modernizing the Legacy Platform
- Creating a proprietary platform
- Buying a Software package
Modernizing the Legacy Platform
Insurer Legacy system modernization means relocating or migrating the core system of an insurer to a better, secure and modern configuration. This is done to streamline business operations and to create better and new business opportunities.
Insurance organization with the well-maintained and stable system but still use outdated technologies might want to choose this path. But often, IT systems that use outdated technologies will be having very limited options to modernize.
If the architecture of the existing system is incapable of supporting the latest digital technologies, organizations might want to consider the “refactoring” method which involves changing the systems internal architecture without modifying its functionality. Modernizing a legacy system using refactoring method may involve 1:1 code migration.
There are some advantages and disadvantages to this procedure, let’s examine them.
Why you should modernize legacy systems?
Retain functionalities that are highly customized for specific business needs while upgrading to modern technologies.
Customers and insurers are least affected since there is no need for a significant change in the business model.
Functionalities can be enhanced in future.
What could go wrong while modernizing legacy systems?
If not planned well, legacy system modernization has these major disadvantages of ascending costs, and complex as well as time-consuming processes.
Code migration often results in a lost possibility for modern system integration and data architecture that reinforce digital requirements.
Modernization approach is as appealing as always but to get long term effects the existing core systems have to be well-maintained, stable and documented.
Creating a proprietary platform from scratch
Building a proprietary platform involves more risks in terms of cost and usability. This approach is advisable to organizations that don’t rely on a legacy system or if the legacy system is incapable of any type of modernization.
Creating a proprietary platform enables organizations to have a system architecture that fits their unique requirements and seamlessly integrates with other software used by the organization. Some organizations seem to take this path when they need a highly unique system functionalities that are not readily available in the market or cannot be implemented using their legacy system.
Who Should Consider Building a Proprietary System?
Perfect for those businesses who are keen on having a thorough check/ownership over applications and processes.
- Seamless integration with 3rd party apps
- Highly customized functionalities
- Easy to maintain and update
Factors to Consider While Building a Proprietary System
Higher costs, extended timelines and many other hidden risks are always drawbacks when compared to modernizing a legacy platform or purchasing a ready-made software package.
There are chances that the internal platform easily gets outdated if it is not flexible enough to meet the ever-changing market demands.
Buying a Software package
Many insurers are increasingly looking at reinventing and remodelling their core systems by purchasing standard software packages. This is perfect for those types of organizations that want rapid solutions/packages at a lesser cost along with easier implementation features. This has several advantages and most of these packages come with ready-made functionalities that perfectly fit into the insurer budget and requirements.
Advantages of buying an insurance software package
- Standard software packages are more streamlined and contain numerous functionalities for pricing, customer self-service, underwriting, automation and claims processing.
- These software packages increase enterprise efficiency by improving process workflows and reduce overall cost.
- Quicker and less risky implementations is another advantage.
- Regular and ongoing product/process innovations and best-practice functionalities as well as meeting regulatory requirements is a main benefit.
- Shared development between multiple insurers ensures greater cost benefits.
- Access to an outsourced pool of skilled resources is yet another benefit.
Who should not consider buying insurance software packages?
Sometimes standard software packages might lack customization features which can have a negative impact while adapting to unforeseen market changes.
At times, reconditioning/refurbishing the included functionalities can turn out to be cumbersome and time-consuming as well as expensive.
Higher chances of vendor dependency.
From a neutral point of view, Insurers are to be kept well informed about the benefits and risks involved while taking this crucial decision of modernizing the Insurance business as a whole. This industry thrives on huge amounts of data flows, hence the chosen systems should be proven as responsive and adaptive to quick changes in market/competitive scenarios. The entire process involves a fine blend of people’s perspectives and system capabilities so that modernization target is achieved with minimal flaws and little error rates.
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