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Bruce Bosco
Bruce Bosco
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The Keys to Modernization: An Insurance-Focused Approach

Modernization involves more than replacing a core application. It also requires insurers to address cloud, analytics, mobility, and social media.

For years, the insurance industry and its CIOs have had to address the modernization of their environments with limited technical assets -- often having to settle on a rip-and-replacement of a core application system as the only means to modernize environments. Simply replacing a policy admin or claims processing system will deliver some new functionality, and maybe some new technology, but in 2014 companies could be missing the big picture and bigger opportunities to improve.

[What Comes First: Core Modernization or Innovation?]

Today, there are a number of new and now-proven technologies that insurance companies should take into consideration in conjunction with the historical emphasis on core applications. These new technologies -- namely, cloud computing, big data/analytics/data-management, and mobility/social media solutions -- have matured to the point where they are no longer considered bleeding edge and only suitable for early adopter firms. As such, we are rapidly witnessing their adoption across industries, including insurance. For example, 90 percent of companies are using the cloud in some capacity, according to a recent Right Scale survey. Nearly 70 percent of companies either are already implementing or are planning to implement big-data-related programs, according to an IDG study.

For insurance companies, these new technologies cut across the insurance business value chain, impacting customer engagement, from policy sign-up and bill payment to claims processing. They enable business insight into product performance and introduce a level of agility not seen before. 2014 is the right moment for the insurance industry to leverage the experiences of other industries and include these new technologies in their modernization initiatives.

Where to start?
Getting started down the right path requires developing a business case for your modernization program. What are your current pain points that need addressing? Is there a business process that’s causing customer dissatisfaction? A product line that’s underperforming? What business metrics will improve as a result of your modernization initiative?

Once you’ve defined the business case that anchors your modernization efforts, it is important to create an IT roadmap that takes into account the current capability gaps, capabilities of the new technologies, and the real functionality and capabilities required for a company’s modernization strategy. A comprehensive IT roadmap plays a fundamental role in ensuring you stay on track with the modernization initiative, leverage the proven technologies that are available, and prioritize the right tasks based on the demands of the business.

Leveraging the cloud
Modernization initiatives in 2014 must consider cloud computing. Cloud computing is unique in the solution landscape as it can provide efficiencies and economies of scale, while also freeing funding for other innovations. As companies are able to save 15 to 20 percent on their computing by leveraging the cloud, leadership can redirect the savings toward strategic innovations such as big data and analytics, business intelligence, or new applications.

A good place for insurance companies to start with the cloud is in an area that isn’t overly intrusive but can provide real value, such as leveraging a private cloud for infrastructure -- infrastructure-as-a-service, or IaaS. Infrastructure is often not strategic when compared to core applications, yet requires constant monitoring and maintenance. By using IaaS, these IT departments can focus their time and resources on more strategic innovations that make the business more agile.

Big data, analytics, data management
Another consideration for insurance companies looking to gain an edge over their competition is the use of big data, analytics, and data management. At this point, most insurance companies are able to consolidate their data, pulling from multiple sources. The challenge and opportunity is to be able to organize and provide access to the data in a manner that provides for meaningful, fact-based decisions. This is not a new challenge but one where the tools and processes that can support the proper organization of the data have developed and are proven. From detailed market segmentation to more accurate product pricing and product development, the insurance industry has the data for this analysis embedded in its platforms. Leading firms have adopted new technology to provide real-time views into their businesses for their distribution channels and executives, doing so on mobile devices for convenience and usability.

Since big data, analytics, and data management can cover almost every aspect of your business, it’s important to focus your initiative where it could provide the most visible and immediate benefit. It’s best to focus on a particular part of the business, such as a piece of the sales process, and determine where having a better view would provide benefits to the executive team or distribution channel. The problem isn’t that the data doesn’t exist -- it does. It’s that the business requires the right view into the data to provide it with meaningful, usable information.

Embrace mobility, social media
It is difficult to interact with any firm in any industry without being directed to a website, Twitter feed, or another form of social media. In the last 10 years insurance companies have witnessed a 180-degree turn in how they are expected to interact with clients, whether they are the distribution channel or the end consumer. Previously, the insurance company was able to dictate how its clients interact with it (call center, direct mail, home office personnel). Now the consumer dictates interaction with the insurer.

Similarly, a mobility strategy is a key requirement in today’s market. Having the same view from multiple devices and providing meaningful information across channels is quickly becoming the new normal. In a world where we often change our own mobile devices every six to nine months, it is a great challenge for insurers to develop and maintain the expertise required to stay current. Simply stated, the carriers that are the most easily accessible and available via the channels of today will gain the most market share.

It’s important to remember that across all these channels, whether it’s a mobile application for your client or employees, agent portal, or social media platform, the look and feel, as well as the branding, should be clear and consistent. People need to be able to recognize at a glance that they are looking at the same company right away in order to build trust and loyalty.

Begin your plan now
Fifteen years ago, technologies like cloud computing, big data/analytics/data-management, and mobility/social media applications either didn’t exist or were very early in the maturity process. In 2014 they are everywhere. To truly modernize your environment, you need to look beyond replacing a core application. The opportunity and the benefits to be gained from a comprehensive modernization initiative are greater than ever. Insurance enterprises that embrace these new technologies in their modernization strategies will be the next generation of industry leaders.

[Learn more about the Internet of Things at Interop's Internet of Things Summit on Monday, September 29.]

Bruce Bosco has 25-plus years of experience in the insurance solutions marketplace across both Life/Health/Annuity and Property/Casualty in domestic and overseas positions. From his experience Bosco is able to provide unique perspectives on modernization and the evolution of ... View Full Bio

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SrinivasanM902
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SrinivasanM902,
User Rank: Apprentice
9/13/2014 | 6:48:22 AM
Re: Keys to modernization
Every aspect of technology is indeed critical for an insurer in today's market place. All these latest technologies - telematics, analytics, SaaS, etc will certainly help insurers achieve operational excellence, deliver service quality, and build a loyal customer base. Apparently, all of these will depend on how the market for insurance behave. World-over, including emerging markets like India & china - the growth has plateaued over the last 36 months. Premium income has not grown commensurate to the risk and multitude of cat events over similar period. When every IT initiative is perceived to as an investment over the long-term, top-line revenue has to grow to substantiate this. Perception of people to buy insurance has to undergo metamorphosis for rest all to take shape.

 

Regards,

Srinivasan Mahadevan, AIG, India
Kelly22
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Kelly22,
User Rank: Author
9/12/2014 | 5:35:29 PM
Re: Cloud
Absolutely, the growth of data is going to be a challenge for insurers going forward. I think we'll see use of the cloud escalate as they recognize the need to capture and manage all of that data for practical use. 
Nathan Golia
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Nathan Golia,
User Rank: Author
9/12/2014 | 3:54:04 PM
Cloud
Thanks Bruce. I actually think the cloud is moving even faster than you suggest here. I've talked to insurers who have started multiline core replacement plans thinking they would go mainframe — and after changing a couple lines to mainframe solutions, cloud versions have emerged that have caused them to change their plans. The scalability is important to insurers looking to leverage increasing amounts of data.
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