Path to Modernising Insurance Core Systems

June 12, 2023

The path to modernising insurance core systems: A perspective on digital insurance archetypes and how to modernise legacy systems

The course of digital transformation never runs smoothly. Even to the extent to which some insurers have gone is not through choice, but necessity. Some find their core systems approaching end-of-life while others recognise the importance of agility and innovation to enhance customer offerings and experiences. Yet, there are always so many moving parts that progress seems to take forever or is never fully achieved.

Most digital transformation initiatives over the past years have led to a patchwork of automation tools (like RPA), as well as API and other digital layers, sitting on top of fragmented legacy systems. This approach has helped bridge some of the capability gaps, without delivering a fundamental shift in how the business is run – and without addressing the escalating risks of the legacy systems approaching end-of-life.

Opinions regarding the extent of transformation and the required pace of change often depend on which spectrum your business is positioned. While each business is unique, we have identified three prevalent digital archetypes that exist today in the insurance industry.

1) Digital Opportunist

TThe Digital Opportunist archetype refers to insurers that have recently embarked on their digital journey. This may include insurers that are interested in expanding their digital footprint, are mindful of staying current with the digital trends, and may have initiated small tactical plays.

However, they retain some level of scepticism of the potential of digital or the need for digital transformation. For this reason, they have not allocated substantial resources towards these efforts.

The Digital Opportunist archetype refers to insurers that have recently embarked on their digital journey. This may include insurers that are interested in expanding their digital footprint, are mindful of staying current with the digital trends, and may have initiated small tactical plays.

However, they retain some level of scepticism of the potential of digital or the need for digital transformation. For this reason, they have not allocated substantial resources towards these efforts.

2) Digital Adopter

The next archetype is the Digital Adopter, which covers insurers that have evolved their thinking and strategy beyond the Digital Opportunists. They have a more rigorous and well-defined perspective on digital distribution and operations – and have already experienced some success with various digital campaigns or products. While the realized impact may still be small, the conviction in the strategic importance of digital is large.

These insurers have built dedicated digital teams and capabilities. These teams are experimenting with and working through different types of distribution and operations models, while forging long-term partnerships with ecosystem partners to embed insurance into their products and services.

3) The Modern Insurer

The last archetype is the Modern Insurer. These are often insurance companies for which digital is intrinsic to their core business – it’s their bread and butter. It is easier for these businesses as they are often born digital natives. However, we have observed an increasing number of Digital Adopters that have understood the full value of digital for their business. They are now shifting the focus to their core business, holistically modernising the core – instead of the previous patchwork approach, eliminating the term ‘digital’ as a separate project, initiative or channel.

The golden thread

Once we identify which of these three archetypes an insurer broadly fits in, we can jointly formulate a tailored plan to support them in their desired transformation journey.

The first two archetypes – Digital Opportunist and Adopter – will have different technology requirements. While both will have some form of legacy systems in place, the overall approach would vary. A Digital Opportunist may have used simple off-the-shelf systems to market and distribute their products, while a Digital Adopter may have bespoke systems that are great at doing one thing with limited flexibility compared to the modern insurers.

Regardless of their current development stage, they need to start their journey with modernising their core capabilities. In fact, this is the golden thread that holds all these types of insurers together – to position yourself as a Modern Insurer and leapfrog your competition, you need a modern digital-first core.This may seem a rather obvious conclusion, but not all digital core systems are equal.

What does a modern insurance core system actually do?

Peak3's Graphene is the first true SaaS, digital-first core and distribution system for any product line in life, health, and P&C insurance – across distribution models and geographic borders.

It can accelerate digital transformation and bring the power of digital to all business models – whether you are exclusively selling innovative digital propositions through ecosystem partners, or traditional products through your agency, broker or bancassurance channels. By unifying a patchwork of legacy systems (e.g. for different product lines and functional modules) and digital layers into one future-proof, highly configurable core system, Graphene can reduce complexity, accelerate your time to market and cut tech spend by half.

Graphene has been designed to be able to adapt to a rapidly evolving digital future and make use of the most modern architecture and technology standards with ongoing upgrades. As a full-stack, digital-first core system, it has already proven itself at scale by empowering leading insurers and digital platforms globally.

Peak3's Graphene is the first true SaaS, digital-first core and distribution system for any product line in life, health, and P&C insurance – across distribution models and geographic borders.

Integration capabilities and flexibility

Graphene is flexible to adjust to the digital strategy of each of the above insurer archetypes to empower innovation, growth and operational efficiency. Graphene’s flexibility is a standout advantage for businesses in their digital evolution and adoption journey.

For instance, at the lower end of the curve, it can unify and extend core capabilities, through integration on top of life, health, and P&C legacy cores. It can then be used to create innovative product bundles or standardized APIs for partner integration.

A subsequent stage of the implementation would be to run Graphene as a standalone adjacent core, facilitating the launch of new and innovative products without being held back by any limitations and integrations with the legacy core(s).

Finally, Graphene can fully replace the existing core systems or form the bedrock for the launch of greenfield businesses, providing insurers with a full modern core system, allowing them to harness the power of digital across the whole value chain.

A seamless experience is the key to customer satisfaction

Reducing friction between insurers and their customers is the path to digital excellence. This means that insurers need to be able to quickly test and adjust their products and journeys. Through extensive out-of-the-box configurability, Graphene not only allows insurers to quickly launch new insurance products, but subsequently also run experiments and iterate the products as needed – with no to minimal coding.

Graphene drives growth by offering customer-oriented insurance models, like usage-based or micro-insurance.

Its streamlined processes within the core eliminate the need to be redirected to external apps or websites. It enables seamless data integration with any other system, eliminating the need for manual inputs – resulting in smoother transactions that can enhance customer satisfaction, engagement and retention.

Fundamentally reviewing your technology needs

Insurers need to understand the technical and functional capabilities needed to ensure long-term competitiveness – aligned with their respective business strategies. With this understanding of critical foundational elements, insurers can confidently determine the significance of digital transformation and modernisation and appropriately invest in core capabilities.

For some non-banking partnerships become critical for the future of customer acquisition and engagement. Others firmly believe in their ability to innovate dynamic insurance products and iterate at the fast pace necessary to meet the ever-changing demands of customers. Some prioritise optimising their agency experiences, while others seek to leverage their extensive data resources to enable generative artificial intelligence.

Graphene has supported a wide spectrum of such clients along their journeys. For example, a Singapore-based client started with innovative digital products at first and eventually we enabled them to achieve operational efficiency and faster go-to-market for their traditional business.

While the functional and technological requirements depend on the chosen business model and strategy, it is important to maintain a flexible tech stack that provides the required strategic optionality. Graphene has been designed to offer exactly that.

“In our earlier years of experience, digital was a very hot term and often interpreted in different ways as online-only, embedded or ‘digitised’ offline channels, but most importantly a catch-all to be different to the existing technology or business models. As digital becomes commonplace, the lines get blurred whether digital is merely a modern, technology-enabled way to do any business. Now, we are seeing systems reaching their end-of-life, and it’s time insurers need to bring modern technology into their traditional businesses. When that happens, do we still need the term ‘digital’?”

Ian Lee, Chief Commercial Officer, at Peak3

Future-proofing is essential

Selecting the right core system is a pivotal decision for insurers. It is a commitment for the next decade(s) to come. A system that may be fit-for-purpose today, but may not be five, ten or fifteen years down the line. Customer preference, business and regulatory requirements and technology standards are continuously changing. For this reason, it is critical to select a core system that is upgradable and is continuously enhanced by a strong team with a clear roadmap.

Peak3 develops a new version of Graphene every two weeks – making new functional capabilities and technological features available to its customers with no to minimal operational impact. This ensures that

insurers using Graphene are at the forefront of insurance innovation, while ensuring that the tech stack remains modern and secure without needing to spend on add layers of patchwork customisations over the years. Imagine investing in a system today with the knowledge that ten years from now it will still be modern, supporting the latest business models on the latest tech architecture.

Insurers who are seeking to embark on a journey of modernising their core system or simply wish to gain a deeper understanding on what Graphene entails, you can reach out to the Peak3 team by clicking here.