Since the early 2000’s, industries all over the world have begun their digital transformation journeys. Beyond going paperless, digital transformation also involves using innovations to support or enhance traditional methods, automating processes, and replacing old technologies with new ones.
The insurance industry is no exception to this trend. It’s safe to say that insurers now rely on technology more than ever, which therefore necessitates such a transformation. Specifically, many insurance firms have adopted new core systems or are in the process of doing so, so that they can adapt to changing customer needs and promote business growth.
If you’re still a little hesitant to undergo a core system replacement, here are just a few reasons that could convince you to do it today:
You Have Access to Newer, More Flexible Systems
Some insurance companies think that core system replacement is complicated. However, while updating your core insurance system does take some effort, it’s not entirely rocket science. There are insurance management systems designed with flexible applications that can be used by health, life, casualty, and property insurers to accommodate their unique needs. This not only simplifies but also fine-tunes their operations. The ultimate result is enhanced revenue growth, together with better customer experience.
Legacy systems, on the other hand, are constrained by dated programming and architectures. While they may still be able to do the job, they are likely not as efficient as when they were first implemented. Moreover, many legacy solutions lack features such as real-time transactions, analytics, and customizable features that new core systems now offer.
Finally, some developers of legacy systems may simply decide to withdraw any further support for their product. If your firm’s developer partner will not be releasing further updates for your current core system, you should definitely consider a more modern option, or risk seriously compromising your operation.
You Can Save on Costs and Maximize Revenue
Another problem with legacy systems is that they are not future-proof. This means that they aren’t designed to accommodate newer technologies as they come. Thus, the longer they’re in operation, the less efficient they get. Many legacy systems also have redundant processes. These slow down operations, while often increasing maintenance costs as well.
With a core system replacement, you can easily reduce operational costs by improving efficiency through simplified business processes. Through automation, you can also reduce manual data entry errors and shorten business cycle times, thereby increasing productivity. Compliance with current-day regulations will also be improved with a system that’s been built alongside them, saving your firm from fines and the embarrassment of delinquency.
This simply means that modernizing core systems can maximize revenue. It can help you increase growth through improved pricing and increased cross-selling opportunities, not to mention faster product development. The latest core insurance systems also have better reporting and analytics capabilities, which are valuable for gaining relevant consumer insights.
Last but not least, improving technology and using it the right way can help improve customer experience. This is a huge contributor to retention, and also a big factor in attracting new customers.
You Have the Option for Staggered Implementation
There are many reasons behind the decision of insurers to delay core system replacement. One of them is cost. However, there are actually many ways to manage the costs associated with modernization.
If you have the budget for it, you can go for what is called a “big bang,” where you replace everything that can be replaced. On the other hand, if cost is an issue, you can instead work on smaller upgrades before scaling up. For example, you can start by moving your data management systems to the cloud. This can then free up some resources that can be used to streamline daily operations.
The bottom line here is that there’s no cookie-cutter method that will suit every insurance company. It all depends on your organization’s available resources and current capabilities. It’s also important to inform your team, so that everyone’s on the same page as the changes happen.
You Can Minimize Risks
Customers buy insurance policies to have a measure of peace of mind. It’s your job as an insurer to ensure that their investments don’t fall by the wayside. One way to accomplish this job is to modernize your core insurance system, thereby giving you opportunities to improve your risk management solutions.
Some of the risks you can minimize through core system replacement include regulatory risks, especially with regard to compliance. You can also minimize risks related to customer service, particularly for customer-facing services such as claims.
Finally, you can minimize security risks with a new core insurance system. With the latest technologies in place, you’ll have improved disaster recovery capabilities and fewer cybersecurity concerns.
Of course, this is not to say that legacy systems no longer work—they most definitely still do. However, the “if it ain’t broke, don’t fix it” mentality can seriously hamper business growth.
It’s true that core insurance system replacement takes a lot of time and work. Moreover, there’s no one-size-fits-all solution that will work the same way for every company. Nevertheless, putting in the effort in finding the most suitable system for your organization is guaranteed to yield benefits. The key is to understand your needs and assess all your options before making the choice. This way, the transition will process more smoothly and everyone’s goals can be met.
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