IT modernization in insurance: Three paths to transformation

Hrvoje Š.
4 Min Read

IT modernization plays a crucial role in the insurance industry, improving processes and ensuring customer satisfaction. Companies will benefit from upgrading to the Insurance Core System, and the approach depends on their needs. The insurtech wave has motivated many businesses to follow suit and use technology to develop their products and assess claims. 

IT is a key part of the process, but still, it needs to improve in some areas such as lowering costs and improving application development and maintenance. And yes, some insurance companies still use their old IT infrastructure, leading to higher maintenance costs and adding new features. Also, companies invest only in front-end tools that are visible to customers.

As digitalization experiences rapid expansion in this industry, the front-end changes aren’t enough. To fully benefit, companies need to implement real-time data access and agile core systems while also undergoing a major business model transformation. They are left with three options: updating the existing IT platforms, buying a standard software package, or building a new platform. Each option has pros and cons, so companies can choose according to their needs. 

IT modernization in insurance: Three paths

More sales

Product innovation is easier when companies have a digitalized system. They can also quickly respond to market changes, such as new rates or products. The technologies are easy to integrate into current processes, provide a better user experience, and support the agency or broker process. As a result, the company will have an increase in sales.

Enhanced productivity

Introducing a new core system often encourages the company to improve workflow and operations, which enhances overall productivity. According to Insurance 360°, companies with modern IT systems are more productive than those with old infrastructure. For example, they can handle 40% more policies per employee. 

IT cost efficiency

The initial cost of implementing a new system might be significant, but keep in mind it contributes to long-term savings. Modern IT systems rely on cheaper hardware and have 41% less costs per policy. However, some insurance companies can’t cut down on costs because they can’t shut down old systems or have project management issues.

Relying on automation to handle claims results in reduced costs and improved accuracy. How can this be done? Well, the claims and policy systems can be connected to better match the claims with the policy details. However, many insurance companies will still experience challenges when it comes to IT improvement. It is important to note where the insurer starts, how they handle organizational changes, and how they rationalize products. 

One of the big mistakes that insurers make is considering the IT change as an IT project. However, the right way would be to consider it a major business transformation that affects the business in various ways. The modern core systems will create changes throughout the business and insurers must adapt their model. Also, be ready to face high demands on resources and skills. 

Final take

Each of the paths comes with pros and cons, so companies need to choose carefully. Also, they need to consider the timing and extent of existing policy migration. Start with the current situation, capabilities, transformation preferences, and goals. To understand how the organization can handle digital change, analyze the health of the current systems, invest power, IT capabilities, and goals you want to reach with modernization. 

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