Core Systems Transformation: 7 Modernization Best-Practices
Continuous planning, execution excellence, strong governance, and robust change management are among the requirements for successful core modernization efforts.
Within the insurance industry today, core system transformation is a top priority and is expected to remain so for the next two to five years. But these multi-year initiatives are time consuming and risky, requiring significant investment, key organizational resources, and senior management commitment.
Some carriers have tried to modernize to mixed results: For every successful investment leading to better service, improved compliance, and greater efficiency, others are doomed by oversold systems, unrealistic expectations, and poor implementation processes. But these core systems are so critical to an insurance company’s bottom line that no carrier can afford to see a transformation initiative go awry.
To help carriers meet their needs for cost containment, flexible new product design/rollout, speed to market, growth, improved customer engagement, streamlined business processes, increased service quality, and regulatory changes, we have outlined seven best-practices insurers must assess and adhere to when implementing a core system transformation program.
- Choose a “fit for purpose” transformation option.
Insurance companies typically implement core systems transformation to consolidate, rewrite, or wrap/extend an existing system or replace a system with best-of-breed COTS (commercial off-the-shelf) vendor solutions. The decision is generally based on priorities, risk appetite, investment budget, people/skill availability, vendor solution fit to its needs, time to market, IT estate, and organizational preparedness towards change. But insurers must build tradeoff metrics and carefully pick the best transformation option that aligns to strategic priorities, future plans, and risk appetite while not allowing organizational constraints to derail the project.
- Business sponsorship, buy-in is critical.
Core system transformations are not IT-only initiatives. Whereas IT is a key enabler for change, buy-in from the entire organization is critical to success. Business and IT must build the target operating model together with inputs from vendors from the outset. The business team needs to play a pivotal role in “to-be” process definition and define requirements that align to the roadmap and strategic vision of the organization.
[In IT, The Business Should Always Be the Winner]
- Change management is key to success.
With ongoing changes to business/market conditions, customer preferences, and regulatory norms, there are often requests to amend/change the original scope and sequence of the transformation program. A robust change management team is needed to govern, prioritize, and execute the changes. It must include representation from the business sponsor, IT owner, program management office, subject-matter expert, architect, and vendor(s). As a best-practice, the change team should be retained till end-of-program, and it must meet periodically to monitor the program.