Many insurance organisations struggle to implement digital transformation on a tight budget.
Ian Chisholm, a partner with Frazer Walker, a Sydney-based management and technology consultancy, says digital transformation needs a well-considered business model, the right skill sets and capabilities to safely transition the business, and a clear understanding of customers’ changing needs and preferences.
He offers insurers, brokers and underwriting agencies’ boards a range of options on how to achieve digital transformation without breaking the bank.
Tried-and-tested pathways include:
Wrap-around technology which means hiding old core insurance technology behind newer user experiences and better workflow capabilities, while also serving as a customer contact engine.
Hollow-out modernisation which progressively externalises functions from older monolithic core systems to best-of-breed standalone or cloud-based applications.
Core replacement which is a high-cost, high-risk, lengthy process that can deliver significant benefits but will almost certainly require specialist external expertise to achieve success.
“Whether organisational budgets, a board’s risk appetite, or the corporate capacity to absorb change can support a core replacement approach is always contentious,” Mr Chisholm said. “Many insurance organisations are moving away from core replacement due to the risk factors and costs.”
Newer approaches include composable technologies, where ready-made elements of software are brought together to compose a new application, such as an insurance policy or claims engine.
“This method has inherent advantages, such as easy integration, the ability to make rapid changes, and lower costs,” Mr Chisholm said.
“Composable technology is designed for the cloud. It can give innovative insurers better platform changes than the tried-and-tested pathways to modernisation, often reaching quick value for customers at a lower cost.”
Mr Chisholm advises insurance industry boards to:
- Select the technology approach best suited to their organisation’s business strategy, value drivers, risk appetite and the benefits to be delivered.
- Assess the organisation’s capability to change and map what needs to happen to increase transformational success.
- Select the right business partners that can stay the journey and add true value before, during and after the transformation.
- Roadmap and meticulously plan the transformation journey, ensuring benefits are harvested along the way, phases and initiatives are manageable, and resources adequately allocated to each activity to increase the likelihood of success.
He also advises insurer boards to consider establishing board technology and innovation committees, often with one or more external advisers, to remain current with opportunities and risks presented by tech trends.
“Staff running day-to-day operations already have their hands full. Adding to their workload by requiring them to keep pace with technological change and tasking them with the ability to identify and assess emerging tech trends is generally not feasible,” he said.
“Insurers’ boards need to be aware of what else is coming. The focus on cyber security will remain and should be intensified. A technology and innovation committee can help boards keep pace with today’s ever-changing requirements.”
A detailed report on digital transformation on a budget for insurers is available on the Frazer Walker website here.
Released by: Kate Tilley, Frazer Walker Communications Consultant
P: 07 3831 7500
About Frazer Walker:
Frazer Walker is a Sydney-based independent management and technology consultancy, established in 2002. Frazer Walker works with clients across its core industry sectors – insurance, banking and finance, wealth, health, transport and government – in four service practices:
- Technology: gaining strategic advantage through technology.
- Data: implementing information and data strategy, governance and ethics.
- Transformation: creating and delivering transformation programs and portfolios.
- Assurance: independent program assurance and technology reviews.