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State of P&C Insurance Core Transformation - Beyond the First Wave

By Imran Ilyas, Partner with PwC’s FS Insurance Advisory Services, and Josh Knipp, Matt Wolff and Matt Hurlbut, Director, PwC’s FS Insurance Advisory Services

Imran Ilyas, Partner with PwC’s FS Insurance Advisory Services, and Josh Knipp, Matt Wolff and Matt Hurlbut, Director, PwC’s FS Insurance Advisory Services

Insurance carriers are making an unprecedented investment in transforming their policy, billing and claims systems and processes. We expect core system transformations will continue to be a top priority for insurers—regardless of size and product mix—in the coming year. However, we are observing key trends in the following two areas that have recently been dominating our conversations with the industry:

"Carriers have increased their expectations of core transformations and increasingly look to transformation to include robust digital and analytics capabilities"

1. Digital Transformation and Analytics: Carriers are looking to extend their core platforms to develop the foundation for digital transformation and analytics. They have more ambitious visions for how these programs should drive growth strategies and are no longer satisfied with simply implementing a new platform and then searching for ways to achieve benefits in the post-implementation environment. Looking forward, a successful transformation should include broader strategies for 1) data analytics, 2) digital customer and agent experience, and 3) underwriting efficiency. 

2. Greenfield and Cloud: Carriers are looking at alternate delivery approaches that align with their broader organizational visions and some have recently started to explore the business and architectural simplicity of a Greenfield and Cloud delivery scenario.                   

Insurers are looking for more than just up-to-date systems. They also want digital and analytics platforms that can help them realize the full benefits of a core transformation.

Digital and Analytics Platforms

Several carriers have increased their investments in core transformation and recognize the need to add digital and analytic platforms in order to realize the following additional benefits and capabilities:

1. Better Data and Analytics—In recent years, carriers have recognized the value of building or improving an Enterprise Data Warehouse (EDW) in parallel with traditional core transformation initiatives. This has enabled them to plan for strategic data analysis and build necessary components into core systems. Modernizing core systems often leads to more reliable data, and when this data is coupled with strategic data analytics initiatives, it facilitates improved process metrics, work queue volumes, and claims fraud detection.

2. Better Customer and Agent Experience—Good customer and agent experiences most often occur with modern underlying core platforms, most of which now offer self-service capabilities and can even open new customer channels. Carriers are looking to advance core system capabilities by customizing an agent and policyholder portal layer that enable users to intuitively interact with the system. For example, a claims transformation can improve the claims reporting, servicing, and resolution process and fundamentally alter how a customer interacts with the carrier’s claims processing division. Additionally, billing transformation programs also typically include self-service capabilities that can improve the overall customer experience.

Greenfield Implementation

Over the past two years, carriers have become increasingly interested in greenfield transformations. Such a transformation provides simplicity and gives carriers a unique opportunity to reinvent their business, IT, and organizational culture. This is in contrast to traditional transformation programs that unfortunately can “recreate the sins of the past” and implement relatively obscure business scenarios for the purpose of transferring the existing book of business.

A greenfield implementation approach tends to be straightforward; it eliminates the need to integrate with antiquated legacy platforms and thus can lead to speedier delivery time. It also tends to require fairly simple product design, which makes it well suited for mid-tier carriers that are looking to leverage off-the-shelf vendor products.

Some key advantages of a greenfield approach are its product and solution simplicity, increased speed to delivery, and the opportunity it provides the organization to break with the past. However, there are disadvantages if a carrier doesn’t go into this kind of implementation with eyes wide open. For instance, it will limit book of business conversion capabilities in the near term, and can create some intermediate operational challenges by adding to the overall portfolio of applications in the near term.

Greenfield offers design simplicity that can enable carriers to break from the architectural complexity of the past.

Cloud Technologies

Though cloud deployments are not new for insurance carriers, their scope has primarily been limited to productivity applications with minimal connectivity into the broader enterprise ecosystem. However, there is a different expectation of the cloud today. The five key factors behind it include:

1. Aging Infrastructure— Many carriers looking to modernize their core systems are discovering that their on-premise hosting environment is insufficient to support new core system technology, as well as customers’ and agents’ real-time “always on” expectations. Cloud solutions can meet many business and IT needs, and carriers now have a viable option to deploy new core systems in the cloud instead of investing in upgrading and maintaining new IT infrastructure.

2. Expanding Technology Ecosystem—Many small to mid-sized carriers do not have the capital or resources to support the complexity of a large transformation, but without transformations they are constrained in their ability to respond to the market. Technology companies are beginning to offer complete, integrated ecosystems that include all the technology that runs core operations. This includes standard integrations of key ancillary systems (e.g. document generation, document management) and digital front-end portals and mobile, data analytics, underwriting desktops, and predictive modeling. Better yet, automated refresh capabilities keep product versions up-to-date.

3. Need for New Products and Markets—Insurers need to quickly respond to changing market conditions in order to compete in a very competitive landscape. Cloud core systems provide carriers the opportunity to quickly test and learn new business ideas—such as new products or expansion into a new market—with minimal investment.

4. Need to Facilitate Product Development and Innovation—IT is beginning to shift from being a provider of all technology services to a broker or orchestrator of business services and technology innovation. Creativity requires experimentation and, by nature, many experiments fail. Core systems in the cloud can help carriers reduce the cost of the experimentation and failure cycle, enabling them to greatly increase the potential for innovative ideas and solutions.

5. Talent shortages—It is difficult for many carriers to attract enough skilled employees, not least in infrastructure hosting and core development and testing. Cloud core systems alleviate the need for a full complement of IT staff because cloud solution providers already feature many of these resources.

In Summary, Carriers have increased their expectations of core transformations and increasingly look to transformation to include robust digital and analytics capabilities. Many transformation programs are starting to include portal and data warehousing components, and off-the-shelf package solutions are well equipped to integrate those components with the core back office systems.

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