Distribution

Technology Change in Insurance: Evolution not Revolution

Keith Aylwin , Neil McMillan , Henry Dalton, Joe Harris

Introduction

In the past, organisations have struggled to achieve truly rapid change. It is incredibly easy to get dragged along by large scale transformation programmes, whilst attempts at differentiating services provided to clients fall flat.

Insurers have historically opted for re-platforming core administration systems and large parts of their application estate to achieve business value. Of course, this inherently increases the complexity, duration, and risk of technology change, and ultimately has been a key reason for many failures.

Typical pain points from a re-platforming include:

  • Time to value – Due to the evolving digital ecosystem, the needs of the business/customer may have changed and new architecture may already be outdated by go-live
  • Cost and timeline – It is very common for re-platforming programmes to run over budget or time – and often both – as a result of the number of stakeholders, cross dependencies, and complex migrations
  • “Like for like” rather than enhancements – There is no business value in implementing new technologies which do not deliver additional functionality or increased efficiencies, even if the technology gives the impression of being more effective

Rather than a complex and risky large-scale transformation, an ‘evolution not revolution’ approach can be effective for many organisations in achieving business benefit more rapidly.

Strategy and Target Technology Stack

Defining a clear technology strategy is key to understanding where improvements can be made in the current stack, as it should focus on where an organisation wants to differentiate from competitors.

Policy administration, legacy books, and finance systems are rarely areas of differentiation. As such, differentiating elements should be separated (via APIs and digital solutions), meaning organisations can incrementally deliver change without re-platforming.

The design of the technology stack can benefit from the ‘evolution’ concept, and organisations should focus on how to optimise their current architecture,  from infrastructure to security:

  • Infrastructure – Organisations should employ a design principle of ‘cloud first’. However, there is no instant requirement to migrate all current applications to the cloud; this should be deployed on a phased basis
  • Applications – The use of low code/no code applications enables ease of change and allows business users to manage applications without a need for complex coding skills
  • Data Layer – Key considerations include future-proofing any design of data storage, curation, and analysis to be able to handle the varying SaaS/low code applications with ease
  • Security – Ensuring the architecture is secure is a top priority for a CIO, especially when changes or new applications are introduced into the ecosystem

Each layer of the technology stack should be considered as part of the target state design – with the goal of a nimbler ‘evolution’ to this end-state.

Delivery of Change

To best deliver the technology strategy, organisations should create a multi-modal change capability, with agile teams focusing on the systems of differentiation.  More traditional project capability should manage changes to back-end systems that have not been agile-enabled.

To perform an ‘evolution’ of an organisation’s architecture and unlock business benefit early, there are three key enablers which encompass a mindset and methodology shift:

  • Test and learn – Software providers are acutely aware of the push for fast-paced implementation and thus have transitioned to a ‘configurable’ approach to reduce delivery timelines
  • ‘Agile’ portfolio delivery – Integrating the delivery of multiple applications and embracing a ‘DevOps’ method of continuous integration allows business units to isolate their components and release independently, avoiding technical debt and workarounds
  • Embracing open architecture – Adopting modern, open architecture systems with deployment options (including on-prem, cloud, and SaaS), can simplify an organisation’s technical ecosystem and increase flexibility in delivery

These three enablers are pivotal to building a cultural foundation to ‘evolve’ the architecture, focusing on the particular components which provide true business benefit.

What Does This Mean for Insurers?

Organisations can start to see the benefits of an ‘evolution not revolution’ approach in months as opposed to years, as implementations can be incremental and at pace. However, it is also important that organisations do not assume that everything will work together and drive value without planning and preparation.

If designed and implemented effectively, the key overarching business benefits that can be achieved include:

  1. Ease of implementing enhancements to customer journeys and processes
  2. Increased self-service within internal teams
  3. Agile product and propositional changes with short timeframes of delivery
  4. Integration with best-in-class providers using APIs and digital solutions
  5. Reduction in the total cost of ownership

As the majority of insurers have made the move to a modern core system, the key to unlocking business value is through incrementally evolving the architecture through best-of-breed SaaS/fintech solutions, an agile mindset, and the ability to flex to the market and stakeholder needs.

How Can Alpha Help?

Here at Alpha, we are experts in supporting clients with implementing new and existing technologies to enrich the customer experience, improve operations, and drive business change. If you would like to find out more about the topics raised in this article or would like to discuss any wider challenges faced by your organisation, please get in touch.

About the Authors

Keith Aylwin
Director

Keith is a Director at Alpha FMC and leads the Life & Pensions practice. He brings extensive global experience with over 20 years in the Insurance industry and has successfully led engagements covering Strategy Development, Core Technology Change, Target Operating Model Design and Implementation, Process Improvement & Re-engineering, Business Process Management, and Distribution.

Neil McMillan
Senior Manager

Neil is a Senior Manager in Alpha FMC’s Life & Pensions practice. He has over 20 years of experience in defining, prioritising, and leading the delivery of business-critical change principally within the Insurance sector. He has successfully delivered programmes covering strategy definition and implementation, target operating model design, process optimisation and technology transformation.

Henry Dalton
Consultant

Henry is a Consultant in Alpha’s Insurance division with five years of experience working on strategy and technology transformation programmes across Financial Services. Henry’s main area of focus is supporting clients deliver value through technology enablement, and he currently leads Alpha’s Conversational AI offering, aimed at delivering enhanced customer experiences and operational efficiencies through chatbot functionality.

Joe Harris
Consultant

Joe is the methodology and architecture lead at Alpha FMC within the Insurance Technology Enablement practice, focusing on Extended Technology Change through Business and Solution Architecture. He also has experience with Agile Methodology, advising clients on Agile Principles from typical Scrum through to Behaviour Driven Development (BDD), DevOps and SAFe.