Building a digital foundation in the insurance industry
Insurers today face a host of digital to-dos if they want to stay competitive—much less gain an advantage. These undertakings include digitizing the customer experience, building digital offerings and business models, and constructing in-house digital capabilities. Underpinning them all is the question of how to adapt legacy IT systems and architectures to the needs of digital business models. This challenge can require new front-end architectures to mimic the mobile-first customer experience of digital natives. It can also necessitate a fundamental overhaul of core insurance systems to digitize end-to-end customer journeys and automate decision making in basic functions such as underwriting and claims handling. The prospects are daunting.
Most insurers need to overcome significant constraints in their current IT landscape. For example, BCG research shows that about 35% of all applications in the industry run on legacy technology stacks that are not “cloud ready” and that a similar percentage of incumbents still rely on static HTML-based digital channels that do not work well on mobile devices—the consumer’s digital device of choice.
We recently understood the readiness of insurers to go to digital transformation. We interviewed CIOs and IT architects at leading insurance companies and we analyzed the main IT trends on the basis of four years of architecture benchmarking with top insurers in the market.
Insurance CIOs and other IT executives will not be surprised to learn that we found multiple pain points at all levels of IT architecture. For example, only 36% of insurers use a central customer-data repository or CRM application to engage with clients, and only 64% have mobile apps. Such shortcomings limit insurers’ ability to gain a full view of client needs and to provide omni-channel interactions. The average age of core insurance systems in the companies we interviewed and benchmarked was 13 years.