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Transformation as the core, not just of the core

Lawrence Krasner
July 23, 2020

As the financial services market undergoes seemingly real-time changes, life insurers find themselves compelled to examine the way they do business.

Transformation offers the opportunity for a blank-slate organizational redesign that streamlines processes with a better customer/agent/employee experience – and at a lower cost. Automation without modernization is often referred to as “repaving the cow path” (it’s been said that automation without transformation simply allows for executing bad processes faster). Modernization of a carrier’s core platform can help to reshape functional business processes and refocus priorities on dynamic sales and service that continually exceeds the expectations of its most valued customers.

However, modernization via system replacement is still not the end goal. System replacement doesn’t transform business; system replacement enables transformation. Business process redesign can selectively realign resources with the needs of agents/brokers, customers, and market opportunities. It can transform the experiences of valued current and prospective customers by converting homogeneous “transaction centers” into differentiated “sales engagements.” System transformation can substantially increase the digitalization of both direct and indirect delivery channels.

Transformation can do many things across all aspects of a carrier’s business. One of the most important is to shift a carrier from a policy-focused, agent-focused, or account-focused approach to a relationship-focused approach that allows a carrier to participate in customer engagement even in an agent-driven model.

Another key outcome of a modernization program should be to raise the bar on operational effectiveness. Improved operational effectiveness in end-to-end process integration is the core driver for the operations elements of redesign and the key to leveraging straight-through processing (or as close as possible where manual steps are required). A modern platform can simplify, streamline, and often eliminate, cumbersome, manually intensive, redundant procedures by automating routine tasks and centralizing operationally intense activities.

End-to-end process redesign will form the platform for a timely, integrated sales process at the front end of clients’ experience, and prompt, effective service and problem resolution at the back end of the relationship between carriers and clients.

With many options available, choosing the best path to modernization requires three essential phases:

  1. Methodical assessment and planning
  2. Transformation
  3. Management of the modernized portfolio (once in place) using an efficient approach.

At the outset of any modernization initiative, as a best practice, insurers should adopt a methodical but flexible framework that includes components to analyze, align, modernize, manage, and continuously improve application portfolios. The framework should be able to serve a single application, a full platform assessment, a transformation project, or an entire global enterprise portfolio. It provides the foundation for real work as insurers assess the opportunity, transform the business, and manage the implementation.

These three distinct phases build upon each other but enable modernization projects to proceed concurrently.

Portfolio transformation roadmap

The first phase is methodical assessment and planning. Begin by thoroughly assessing the current state of the application portfolio and its alignment with the current business strategy. Dive deeply into high- priority areas and quantify the business value of an optimized portfolio. Phase one also includes the development of a modernization architecture and a roadmap to be used during phase two, the transformation.

Insurers that are transformation leaders embrace systemic change, especially when it comes to organizational structures, cultures, and human talent. These dimensions are frequently overlooked or undervalued by less mature firms (or leaders who don’t embrace change), and by those just commencing their transformation journeys. Transformation leaders should also clearly focus on customer needs and new business models.

Measure success holistically and beyond purely financial metrics (such as cost reduction). High-maturity transformation organizations and leaders think, organize, and act differently and more holistically in these areas:

  • Strategy: Mature transformation organizations create holistic strategies that embrace continual improvement centering on customer outcomes rather than just departmental success.
  • Structure: They organize around cross-functional, customer-centric structures.
  • Culture: They socialize customer-obsessed values to create a culture that prioritizes and rewards outside-in perspectives while nurturing digital skills that enable innovation.
  • Technology: They use modern, off-the-shelf software packages (or when needed – but only when packages aren’t available – modern software design, development, deployments, and delivery models) to automate processes and legacy systems, drive speed and agility, and eliminate redundancies.
  • Security: They build customer trust through accountability, transparency, and security while maintaining excellent customer experiences, weaving security tools, and best practices into all aspects of the enterprise technology portfolio and the company culture.

The second phase is transformation. At a tactical level, the carrier prepares, tests, and releases new and/or newly optimized applications into production. This step may include data conversion, new infrastructure introduction, and integration with other systems. At a strategic level, the most advanced organizations deeply weave transformation and innovation together.

In some cases, strong innovation teams drive transformation. In others, successful transformation leads to increased innovation in terms of output (such as new products or business models) and organizational capabilities. Whether innovation drives transformation or transformation drives innovation, the following outputs and capabilities often result:

  • Agility to enable digital strategy and flexibility to effectively respond to industry changes and market opportunities in line with overall business strategies
  • Advanced data and analytics capabilities that apply real-time artificial intelligence (AI), machine learning, and predictive analytics to determine next-best actions to deepen customer relationships and drive efficiency
  • Viable products that are clearly defined and well-executed, that address key business and technology challenges, provide automation opportunities and improve CX across the value chain
  • New business models that operationalize innovation and transform the customer experience (CX) across segments and channels
  • Use of packaged/third-party business and IT platforms to shorten time to market and streamline product development and launch
  • Creation of a transformation program foundation by focusing on innovation at all maturity levels while enabling technology and increasing automation (note that broad-based, multi-dimensional change that prioritizes organizational and human factors is often the critical difference between leaders and laggards)

The third phase is the management phase. The carrier introduces new, streamlined processes for internal operations and external vendors and partners. This step focuses on both cost transformation and operational goals, including increased speed, improved services, and other improvements to processes that impact customers, agents, and employees. The ability to measure transformation success sets leaders apart. There is a direct correlation between objectives, metrics, and impacts experienced by leaders versus laggards. For instance, firms achieve the best outcomes when customer satisfaction is the top priority. We have found that digital transformation leaders treat tracking customer satisfaction as a discipline and proactively use those measures to adjust their course as needed. Without the KPIs or other metrics to measure these types of improvements, it is impossible to track and measure them, and the outcomes tend to be noticeably worse; however, tracking metrics without using them to guide the business is nearly as bad.

Assess, transform, and manage is a modular strategy that considers the entire lifecycle of the portfolio. This framework helps organizations know when to replace platforms and when to look for other opportunities for modernization. Many carriers are at the beginning of their modernization journey, and it makes sense to start with portfolio planning. Other companies are underway but need to evaluate emerging options, such as cloud-based deployment. Regardless of the circumstances, it is essential to remember that modernization is an ongoing program and not a one-time project or initiative.

In the upcoming weeks, we will share a series of posts that explore:

  • Critical systems insurers must address
  • How to address system challenges, whether via replacement or other options
  • Best practices for modernization and transformation to achieve business goals

This blog was co-authored with Chad Hersh. To continue this conversation, connect with me or Chad on social media. You can also write to