Beware the Frankenstack! As Insurance carriers have tried to modernize their technology over the years, many have ended up with a patchwork IT system. A combination of legacy technologies that have been pieced together but are totally impervious to modernization.
While a Frankenstack may have been formed with good intentions trying to take advantage of new technology, it’s just holding you back. Now is the time for digital transformation.
But as many as 70% of transformation programs fail. Insurance industry experts broadly agree that ‘real’ transformation is hard to achieve, due to the siloed nature of carriers. But with modernization so crucial, where do you start?
A new threat
As new insurtech startups appear on the scene, it’s more important than ever for insurers to be able to respond to customers in a timely manner. Three-quarters of insurers believe that the biggest impact to the industry will come from building new products in order to address the changing needs of the customer, according to PwC.
For agile startup insurance providers that aren’t tethered to legacy systems, they will be able to develop new products and services on the fly. Whether it’s vehicle insurers enabling onboard telematics of building insurers providing a mobile app for a friendlier interface, the competition is very real.
However, one thing that the older incumbents have on their side is customer trust – something that takes time to build. For example, would rather pay money to someone like Allianz or ING to insure your home or a new company that you’ve never heard of, but have a flashy app.
“Many insurtechs focus on the front piece – point of sale – of the insurance transaction. But the reality is, trust and other pillars take time to build up,” says Insurance transformation leader Sean Hull.
Giving the Frankenstack new life
Insurers are already dealing with Frankenstack IT estates, which can be hard to manage, hard to protect and hard to modernize. Just because a piece of tech might help a business unit process claims faster or push forward with more innovative marketing initiatives doesn’t mean it should be added.
Equally, it doesn’t make sense to take a rip and replace approach that risks losing years of customer data and business functionality. Instead, look at process layer wraps that can make a big difference to all units and create digital experiences, without the hassle of additions.
“Carriers can use a Digital Business Platform as a thin layer across the Frankenstack to weaponize processes and data. I’ve seen it done successfully and the risk compared to the rip and replace approach is low,” says Hull.
Leading insurance company Generali wanted to streamline its complex underwriting process to increase performance in line with regulations and business objectives. Using Bizagi’s digital business platform led to a 40% reduction in the time taken to prepare quotes and offers, renewals cut from one day to between one and three hours, and 38 automated processes fully operational within two months.
Bizagi’s ‘layered stack’ architecture was crucial to the quick results, delivering multi-company and multi-language deployments that are cost-effective at scale.
That’s a wrap
Different departments will have different requests from IT to enable them to meet their individual goals. For example, the claims department will look to resolve claims quicker, but the underwriters will want to improve their risk evaluation. Naturally, this can complicate matters.
Wholesale transformation is hard to manage and even harder to begin, particularly for insurance companies who will certainly work with multiple stakeholders, and for whom massive change can be like turning a tanker. The risk is always that by the time they complete a program, the parameters of what’s considered modern have moved.
This is why it makes sense to instead consider an agile process layer to wrap around legacy systems, or deploying cloud infrastructures in certain areas where it’s important to have a modern offer (such as a device, trip or journey insurance).
Put simply, any solution involving a thin layer of low-code software that doesn’t require continues support from IT is positive. Instead of adding to the ‘Frankenstack’ that has built up over time as new add-ons have been gradually introduced to the ecosystem, it transforms into something manageable and modern.
If you’d like to find out more about how to keep your Frankenstack at bay, download our free e-book, Transforming Insurance: How digital transformation can make your organization agile enough to keep up with insurtech disruptors.