DIGITAL TRANSFORMATION
The insurance industry of the future Agility , fresh products and services , and lean business practices will be big factors for many transitioning insurers over the next 12-18 months , says Henriques : “ One of the biggest challenges insurers will have in the next couple of years is how they will tackle legacy system modernisation to become agile in product and service innovation .”
Insurers , she points out , are having to diversify their product portfolio to increase profitability and are competing with startups that are quick , tech-savvy , and have no legacy holding them back .
“ For incumbent insurers , maintaining legacy systems eats away as much as 70-80 % of IT budgets , leaving them little room to innovate . It may take an incumbent insurer 12-18 months to launch a new proposition , as changes to these systems are hard and time-consuming .
“ In the current macroeconomic climate , a full ‘ rip and replace ’ strategy for legacy systems may prove too costly and risky , and insurers won ’ t be able to afford to wait years before seeing the ROI of such projects ,” Henriques says .
She also says companies can look at building digital twins – which essentially operate alongside an insurer ’ s core legacy system – to update its services without compromising on performance .
“ This allows insurers to innovate on top of their existing systems at speed , while giving them a way to continuously modernise without disruption to their business . As such , it might be the best strategy to weather the next three years . Instead of thinking of digital transformation as a process that is ‘ one and done ’, it can be tackled as a form of ‘ ongoing digital evolution ’, that continuously produces business impact .”
52 March 2023