It is only 7 years ago that The Co-op Insurance, IBM and Innovation Group embarked on the digital transformation project. Whilst poor planning and project management is at the heart of this doomed transformation it can equally be argued that trying to hard-code a platform designed a decade ago to deliver the future insurer planned by the carrier was a step too far.

How many other carriers and brokers are trying the same feat with the established gorillas in the core technology market? Even though there are cloud deployments of these platforms it is still a case of the the on-premise product being shoe-horned into a cloud-version with all the inflexibility and hard coding of the original. They work, of course, unlike the Co-oP experience, but often only as a result of an army of analysts, architects, developers, systems integrators putting their hefty shoulders to the wheel at an enormous cost in time, money and delayed opportunities.

And guess what! In another few years it will be necessary to upgrade again. 

It was not such an issue when customers wanted little more than the lowest prices on offer and were happy with a pretty static range of products. But the pandemic hastened the faster deployment of online engagement, virtual inspections, increased automation and faster responses to buyers, claimants and supply chain partners. And an ever growing range of products and services to match the changing requirements of customers. 

Agile new kids on the block introduced new products and delightful digital and customer experience backed by human empathy and intuition when needed. ManyPets ( formerly Bought by Many),Simply Health, Vitality Health, ZEGO, Laka, we fox are all examples of these insurers.

They work from the customer backwards and not being hindered by old technology platforms like most incumbents are able to innovate fast, test and iterate and look to deliver an ecosystem of products and services that customers value and buy. we fox claims to be the #1 full-stack insurtech globally and plans to be the #1 Insurer by the end of the decade all the while professing to be profitable with world-beating loss ratio unlike smaller growing rivals Lemonade, Root, Hippo and others.

Many carriers are happy with an incremental approach to transformation and innovation. White label a new product here, deploy eNOL and FNOL on more products there and experiment with touchless claims on simple accidental damage say. Steady improvement.

But others have set an ambitious and challenging goal to leapfrog other carriers and brokers and be an insurer for the future in the next year or so. This is exactly the challenge McKinsey set out in a recent paper.

"Creating value, finding focus: Global Insurance Report 2022" by McKinsey describes 9 key strategic policies to pursue with one being 'Modernise Core Technology Platforms'. Insurers may well be highly constrained in achieving the other eight policies without the right core systems."

  • Modernize core technology platforms. From 2012 to 2020, technology’s average share of operating costs rose by 36 percent (for P&C) and 10 percent (for life). The key driver is increasing digitalization—at both the front end, where technology enhances the customer experience, and the back end, where digital drives productivity gains and operational performance. Digitalization is straining legacy systems, some of which are decades old, and many insurers are considering a replacement of core systems with tech platforms that support the requirements of the digital age.

Many insurers have invested very large amounts in what I have described as "new legacy core systems". Guidewire was formed in 2000 and now is the core platform for circa 450 insurers globally. Core platforms like Duck Creek and Majesco adding to these deployments but many insurers still have old legacy core systems and large numbers of technology stacks inherited over many M&As. 

Despite the investment in replacement core systems the actual digital transformation outcomes are patchy and have been focussed on Quote & Buy, Marketing and Distribution.

The Altus DigitalBar measures the digital maturity of UK insurers across 19 criteria every year showing how much digital transformation is still required. Whilst North American and Continental European insurers are not tracked you would not expect them to do better. 

If that's the top imagine the others!

Home, property and contents does not fare too well either.

You can see the detail by insurer across all 19 criteria at the DigitalBar and similar analysis for other classes of business.

The top insurers have generally invested heavily in Guidewire, Duck Creek, Majesco, Sapiens and other core platforms so are the complexity and limitations of these a constraining factor? Why are insurers lagging as in the past few years we have frequently read about active insurers digitally transforming. Are they held back by even the "newer legacy" core technology platforms.

Just as Salesforce disrupted the status quo of comfortable gorillas like Oracle and SAP in the CRM and ERP markets have the gorillas in the insurance core systems market grown too comfortable on large Capex and Opex revenues, profitable upgrades every 4/5 years and "stickiness"?  

Insurers should ask themselves those questions especially as today a new breed of native-cloud core systems featuring micro-services, low-code customisation, low-code API integration and scalability from pilot roll-outs of production spec apps  to full enterprise deployments offer an alternative approach. 

EIS for large Tier 1/2 and 3  insurers and Genasys for Tiers 3/4/5 and brokers/MGAs  are shining examples. Socotra, Instanda, ICE, do the same.

They can offer that collaborate partnership to be able to analyse the present state of affairs and work  on designing the future. Geoffrey Moore of "Crossing the Chasm" fame describes the process below.

To begin that journey, you need to build clear representations of your current state and your desired future state. Capturing your current state involves an act of description.

Capturing your desired future state requires an act of design. If you do not have a clear design for your future state, you have no north star by which to navigate your digital transformation, and it cannot possibly succeed.

So, let us assume we have a clear design for our desired future state. It won’t take you long to realize there is little chance that a single intervention can get you from here to there. So, the next major deliverable must be a roadmap organized around a maturity model. What Moore describes as a stairway to heaven. Each step up the stairway should be designed to deliver value upon completion, thereby allowing the organization to pace its change management, funding things as it goes, building its confidence, and reassuring its various stakeholders. 

With such a roadmap in place, now you have a current-state/future-state accountability mechanism that can govern each stage of the transformation—the software and systems, the systems integrators, the process owners insider your enterprise, and the people responsible for executing the processes. As we have noted elsewhere, digital transformation is not a restaurant. You cannot simply pay for it and have it delivered to your table. It is a gymnasium. You still must pay for it, but to get any value out, you have to actually do the transformational work yourself. Transformational software, in other words, is like a Peloton—it’s cool, but only if you engage.

At Insurtech Insights Europe carrier esure described this very process which was the subject of a major keynote session and described below in a current EIS blog.

At Insurtech Insights Europe, EIS CMO Tony Grosso spoke with Roy Jubraj, chief strategy and information officer of esure Group, and Mike Dwyer, chief technology officer and EVP at EIS, about what it takes for insurance companies to prepare for the future, and how EIS has helped esure in its transformation journey.

Here are their key takeaways from the chat, and how to make real insurance transformation happen by choosing the right technology partner. 

True insurance transformation requires full-scale commitment

According to Roy, esure’s transformation started with their customers and their purpose. “You need a different mindset and approach,” he said. “It’s not just about tech, it’s about our whole business.”

esure sees this as an all-encompassing transformation. There’s a lot to fix, not just in buying or servicing insurance, but in every interaction. esure is plugging in to new technologies, transforming its core technology, policy and claims, but also driving new customer and employee experiences.

esure selected its technologies so the company can create the right foundations to continue to grow, adapt and shape the whole business architecture, with technology as a solid underpinning.

Why EIS technology is different

“If you’re an ambitious insurer, ours is the right platform for you,” said EIS’ Mike Dwyer. The EIS Suite is event-driven, cloud and microservices-based, which makes it easy to integrate into any insurtech.

EIS’ low-code solution lets customers change and adapt, easily making its offering a true reflection of the future technology platforms that are being applied to insurance.

Where esure is heading next

In the last 12 months, EIS has created foundations at esure, plugging into a series of feature-rich platforms, and at this stage, esure is starting to take these new capabilities to market. In Q1 and Q2 of 2022, esure will open up its new “friends and family” offering. Next, the company will introduce new products, and migrate some existing customer services onto the new architecture to enable some of the new experiences, minimizing handoffs between technology and making experiences more seamless.

esure is fundamentally changing its operating model over the next year. It’s hard work, but immensely rewarding as the company sees it start to pay off and improve their interactions with colleagues and customers.

How EIS focuses on its insurance customers

Mike Dwyer explained that at EIS, their focus in its delivery capability is really about focusing on why an insurer is transforming. They recognize that they need to deliver value fast, demonstrating success and building momentum. "EIS doesn’t place strict delivery structures around our customers, so we work with customers like esure in a true partnership, seeing this delivery approach as a key point of difference. Our customers’ success is our success."

What insurers should look for in their transformation journey

Here are some great insights from Roy Jubraj of esure on how insurers can go about their transformation journey:

  • It’s not easy. Insurers need to continue to run a business in parallel to changing their technology. There’s economic impact, and things are continuously changing around you. You need to keep your focus.
  • Talent and culture are critical. People and partners need to collaborate to achieve transformation, and that starts with creating a company culture that supports that and connecting with your talent to make sure everyone’s on board.
  • Keep your purpose front and center. Focus on your purpose during decision making and throughout the entire transformation process.
  • Make sure everyone is on the same page. Adoption and key outcomes need to be understood and tracked by key stakeholders in your organization. Your success criteria needs to be understood by everyone to shape priorities and drive you forward.
  • Look after your people. The environment remains challenging. Show your employees support by treating them well and keeping the lines of communication open, and they will pay you back.

Insurance transformation can be challenging, but by following esure’s advice, and working with the right partners, you can put your insurance business on the path to success.

I have already named potential coretech partners with links to their websites above. It seems only sensible to at least have conversations with these modern coretech alternatives before committing to the more traditional approach of lengthy RFI/RFP processes followed by POC trials and hard coded platforms. Even if you only recently upgraded your current platform it would be better to plan now and avoid being trapped in another incremental upgrade in the next few years.