How Carriers Can Successfully Transform Their Core Platforms

By David Kuhn

Change management is a term people have thrown around a lot over the last few years, especially in relation to digital transformation. As companies transform, or try to transform, they face new and often unexpected challenges that force them to rethink the way they’ve done almost everything to that point: hence, the need for change, and for change management. 

As insurance carriers modernize their core platforms and other technical underpinnings, they would be remiss to ignore how industries like banking have approached change—what they’ve done right and wrong, and how they’ve miscalculated or overstepped. 

There are certain things every successful (and unsuccessful) core transformation has in common, no matter the industry, and these things certainly apply to the insurance world as much as anything else. 

Let’s take a look at what core transformation for insurance looks like, starting with the most common mistakes to avoid. 

Core transformation missteps

Core transformation mistakes almost always involve some lack of foresight around what’s to come. This usually manifests itself in underestimating the change to people, processes, and technology. 

• People: Issues can stem from communication breakdowns and poor personnel change management
• Processes: It’s typically about lackluster adoption of new ways of working
• Technology: Companies often lack adequate understanding of how a given solution will impact, or is already impacting, the business

Insurance carriers trying to achieve core transformation face these pitfalls, and when you mix in the complex dependencies of insurance underwriting, policy administration, claims management, and other core functions unique to the industry, the potential for failure is relatively high. 

The three most critical mistakes associated with insurance core transformations are:

• Failure to align. Specifically, companies fail to define a clear destination that includes benefits for every employee. 
• Forced culture change. Culture can and must change—but you can’t force it faster than employees can accept.
• Weak internal ownership. Companies that expect vendors to lead the deployment of the new system are at a high risk of failure.

Each of these pitfalls naturally affects the others in a kind of domino effect. In the case of forced culture change, for example, new processes come up against opposition, which results in a reevaluation of the tech solution, which then results in reduced trust in the vendor and/or implementation team. Before you know it, you have a failed core transformation project that you need to rebuild from the ground up.

Ultimately, avoiding the mistakes above comes down to effective change management in the key aforementioned areas of people, processes, and technology. 

Here’s how to successfully transform your insurance core. 

1. Implement people practices that drive successful change

For a successful core transformation, organizations must understand that people drive any organizational change.

Proper alignment and expectation-setting tend to start strong but break down during the scoping and building process as challenges emerge. This tends to happen in companies viewing the project through a waterfall lens—i.e., with a neatly defined scope, budget, and timeline upfront.

But the thing is: You can’t plan for every event. If you’re driving across the country, would you plan for your car to break down? No. But if it does, then you need to change your plans quickly and on the fly to address that issue and prevent it from derailing your trip entirely. 

Anticipate and answer natural questions

The specifics of getting from point A to point B are important, but they must fall in line after proper internal alignment.

For example, key stakeholders should understand:

• “What’s in it for me and my team?” Beyond digital transformation for its own sake, how will this project benefit claims, underwriting, distribution, etc. and help the team achieve their goals?
• “What are the project milestones?” Breaking the project down into broad, iterative phases will help you avoid the trap of rigid thinking. It will also illustrate how the timeline may be affected if one milestone is shifted or prolonged.
• “What role am I playing?” Stakeholders will benefit from knowing what hard and soft skills are required of them, with an emphasis on the latter. When role change is imminent within an organization, visionary and compassionate leadership helps departments shift gears.

With a shared high-level understanding of the project destination and the anticipated milestones on the way to getting there, implementation teams have more power to contribute in meaningful ways. 

Having a team that’s adaptive is essential. Transformation needs to be top-down and bottoms up. Everyone involved understands why we’re going somewhere.

Form your implementation dream team 

Successful implementation teams are truly cross-functional and include reps from all sides of the business that the transformation will touch.The best teams include future-forward decisionmakers from within each department. These people may not be your longest-tenured but they’re the ones who understand the most about the future that’s needed and they have a burning desire to change.

Successful implementation team members are collaborative and action-biased. The best teammates I’ve ever had were great communicators. I don’t mean they were great orators—I mean they could listen. They could understand the challenges and make decisions based on that understanding.

Focus on roles, not titles

Members of your implementation dream team must have substantial knowledge of and experience in:

• Enterprise architecture, for evaluating the structure of existing and new solutions and ensuring it all fits together.
• Change management, for managing people, processes, and tech changes.
• Program and/or project management, for roadblock removal and staying on target.
• Business analysis, for ensuring the solution aligns with business goals.
• Engineering leadership, for helping the business, architects, and systems integrator/tech partners think critically and communicate around technical challenges effectively.

One person may be able to fulfill several roles on the same team, but more often, teams will have more than one person fulfilling each function. It is also beneficial if a team member has a good historical understanding of how the company got to the place it is now.  This can help in choosing how hard to push and which processes are culturally-based vs system-focused.

2. Use reasonable processes that fit your org’s pace

Some companies expect to change their processes only after the new core policy platform is about to go live. This can result in a variety of undesirable outcomes: 

• Fast, forced culture change
• Unnecessarily prolonged launch
• Development and oversight process mismatch

Process transformation needs to start at kick-off and happen at a reasonable pace for your company and the way it operates. 

If your company wants to deliver in five weeks, is your culture going to allow that? If not, how do you get out in front of that culture early to change that? 

The same principle applies to your development team, including vendor-driven processes if applicable. While some form of agile development is likely practiced within insurance businesses, it may not be at the level agile tech requires. Plus, true agile has weaknesses of its own and a complete shift may not be needed.

At the beginning of your project, run an agile session or training. Ask: what are the things that we can implement today? What are things that the company is going to push back on and why? Okay, let’s put that in the change management plan and start greasing the wheels.

The outcome should be an empowered team that can make decisions and implement them.  

Maintain ultimate ownership 

Vendor selection is a lengthy and eye-opening process. After weeks of reviewing technical data sheets and eyeing high price tags, insurance companies are vulnerable to either granting or demanding too much project ownership from the technical experts. But tech is only part of the formula for a workable tech update. 

Insurance companies hire vendors to provide best practices but are still the experts on their own company and culture. Insurers must guide their partners on that cultural aspect, including where they see the project coming up against opposition.

Keep in mind that vendors are always changing their products and processes in response to customer demands. There’s anxiety that helps you learn and anxiety that makes you freeze. The anxiety that makes you freeze is the one that contributes to implementation failure.

3. Adopt technology that makes sense in the modern world

Finally, successful insurance core transformation comes down to adopting the right technologies. In a competitive tech ecosystem, it’s easy to forget that the tech exists for you—for your customers, employees, and business—not the other way around. Just as keeping the end in mind is critical when it comes to effective people management, it’s true in vendor and tech selection as well. 

Keeping the end in mind looks like:

• Understanding today’s software engineering best practices and the costs of supporting them.
• Knowing how a given solution would connect with existing applications and potential future applications. Remember that you have already invested in other applications, new systems should help capitalize on those investments.
• Refusing to select a vendor based on price and opting instead to select based on industry experience and product vision and quality.

There’s a saying: “Buy cheap, buy twice.” This is all too common with software vendors. Choosing inexpensive vendors can lead to complexity and over-customization, which ultimately leads to scope creep and significant drainage of internal resources. 

In contrast, vendors offering industry-proven products that are complete (workable without heavy customization) and flexible (light lift to integrate with existing systems) allow insurance companies to meet basic project goals quickly and iterate from there.  

What insurance core transformation success really looks like

Carriers that emphasize the core in core transformation will succeed. View updating your outdated core systems not as a cost of doing business but an opportunity to stay true to your company’s vision and values. 

Every successful cory transformation looks slightly different, but they all include:

• Alignment on the why, including a companywide understanding of the desired destination and what it means for the business.
• Empowered, cross-functional implementation teams that drive the project with a top-down, bottom-up mentality (as opposed to the vendor driving).
• Process transformation that starts at kick-off and at a reasonable pace for your company.
• A solid technical foundation that’s comprehensive yet flexible.

Socotra for successful insurance core transformation

Socotra is the first truly modern core platform trusted by innovative carriers. The digital core platform of choice for leading insurtech MGAs and carriers around the world, Socotra empowers the next generation of insurers to: 

• Transform their policy admin system in months instead of years
• Reduce costs by running lean teams and making product changes in minutes
• Power nearly any insurance product for any distribution channel or geography
• Launch brand new products in as little as two months
• Deploy integrations rapidly through a no-code app marketplace

Ask us how Socotra is bringing unprecedented speed, flexibility, and agility to insurers. 

About David Kuhn

David Kuhn is Deployment Strategist at Socotra, where he helps carriers and insurtech MGAs adopt modern core technology. Previously, he worked as Insurance Solutions Director at Mendix and Chief Architect at Erie Insurance Group. David is an insurance technology and digital business strategy expert who has been working with companies for more than 20 years to ensure they achieve strategic goals

This article was originally published in Insurance Thought Leadership.

Sources: McKinsey.