For insurers that are considering a digital transformation of their business, technology is at the heart of the endeavor. How companies transform their IT can be as important as where they end up.
Most insurers have been slower than other types of financial services companies, such as banks, to rethink their business from the customer’s point of view—and to invest in end-to-end transformation of legacy technology systems that makes shaping customer journeys possible. It’s a long, complex, and expensive undertaking, to be sure, but as digital technologies upend all aspects of the business, from consumer engagement to policy administration to claims, delay becomes a less and less viable option. Comparisons with industry peers no longer define customer expectations. Instead, digital leaders, such as Netflix, Apple, and Google, or new players, such as Oscar, Lemonade, and Wealthfront that aim to disrupt the industry, serve as reference points. The pace of change is fast and the future unpredictable; companies need technology platforms that provide maximum flexibility.
Forward-looking insurers first need to alter their approach. Industry leaders are making the transition from digitizing products and processes to delivering digital customer journeys that serve all of their customers’ needs, and from offering more guidance and advice to tailoring coverage to individual requirements and providing seamless omnichannel interaction, online and offline. (See, for example, “Digitizing Customer Journeys and the New Insurance IT Model,” BCG article, August 2016.) But almost all insurers in the US and Europe use complex legacy technology that constrains their ability to operate in today’s digital world. (See “Building a Digital Technology Foundation in Insurance,” BCG article, August 2016.)
Full-scale transformations may take years, and most require massive investment. They can also be highly disruptive to the organization. Insurers still have businesses to run, customers to serve, and investors to reward. How do insurers balance the need to transform their technology with the equally critical need to manage their business during the transformation? How do they transform IT and avoid a costly multiyear program that generates value only at the very end?
Drawing on our transformation experience, we have developed a flexible, staged solution that produces value fast and resolves the digital versus legacy system question for both the near term and the long term.