Modernization is not a new topic in insurance, but it is certainly an ongoing one. The most important consideration when discussing modernization: It is not a destination as much as it is an ongoing journey. The market continues to change, technologies evolve, and insurance consumer expectations regarding how they want to do business is a persistent challenge for carriers.
A solid plan, a vision for the future, setting the right priorities, and establishing and maintaining a culture that embraces continuous change set the foundation for modernization projects. After all, as the saying goes, “Rome wasn’t built in a day.” P&C insurance systems have benefited from the progression of developments from the relatively ancient 1970s to the present day. The evolution of insurance systems is the result of the insurers responding to change -- regulatory requirements, technological advances, and market shifts and demands.
Since the beginning of the information age, most insurers have built or implemented an IT infrastructure that requires continuous maintenance and development. Insurers have been working hard at modernizing IT infrastructure and processes, and most are realizing that the effort is a never-ending one with the definition of "modern" changing almost daily.
[More on modernization: Put Customers at the Core.]
The insurance industry comprises insurers that fall loosely into three modernization mindsets:
- Some insurers are comfortable on the bleeding edge of technology and change. They experiment and take risks today with the hope they pay off in a competitive advantage tomorrow.
- Some are excellent at maintaining existing systems. They may not look too far into the future, merely building bridges as needed with plans to move forward with a bigger modernization initiative when circumstances seem right.
- Some are ready to invest heavily in modernization today, but don’t have the budget or program management strategy to maintain the required continued investment to stay current. The hope is that the modernization efforts completed today will be sufficient for the next decade or more.
No matter what the mindset, the best approach is dependent on the insurer’s technology risk tolerance, budget, resources, and business priorities. Regardless of which approach is right for an insurer, there should be a common understanding that modernization is a continuum, requiring constant operational improvement and technological change to keep up, whether modernization is for competitive advantage or competitive viability. Once an organization is able to think and operate as a path-based culture, the focus changes to an ever-evolving journey rather than a one-time transformation.
Momentum will prevent roadblocks
Most insurer CIOs recognize that maintaining momentum on the modernization path is a significant challenge given the complexity of issues regarding resources, financial investments, and prioritization -- all while adequately serving a business that is continually shifting its own priorities.
The nature of the business of insurance -- a business based on risk -- creates an environment with unavoidable unpredictability that insurers need to plan for (as best they can) and react to. What seems like a moderate calculated risk today could be a disaster tomorrow. The climate changes, the economy fluctuates, regulations pile up, market pressures encroach on plans, and catastrophic losses come without warning. How can all of these factors not impact the core of an insurer’s business?
Often, the business side of the organization allows outside circumstances to determine IT discretionary spending -- freezing spending when times seem tough and freeing up spending when circumstances look favorable. Unfortunately, this results in inconsistencies with little modernization progress during economic valleys and less than effective modernization investment in the peak years.
While it’s tempting to determine the IT and modernization spend based on the current business climate, the ideal is to maintain a steady and healthy investment in modernization regardless of the ebbs and flows of the business.
With a commitment to a never-ending modernization effort, what’s next?
Over the next few months I will be exploring a wide range of topics relative to modernization in insurance. I look forward to sharing my perspective and my own lessons learned working with P&C insurers of all sizes as they’ve tackled the modernization challenge. I hope you’ll join me in the conversation as your organization determines and follows its own modernization path.
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Anil Chitale, Senior Vice President & Chief Product Evangelist, leads the P&C division at MajescoMastek. Anil was the Co-founder of STG and a principal architect of the STG suite of products. View Full Bio