Managing the cost of technology implementation

Many insurers are faced with lengthy, costly development cycles to release new or modified products and pricing due to the limitations of legacy systems. Case in point: An insurer I talked to recently wanted to eliminate a single underwriting question from one of their products. Their estimated cost to update their screens, forms and policy administration system (PAS) was $1 million, and they were told the project would take three months.

Related:  This insurance agency sees benefits in its legacy technology

Scenarios like this make many insurers that are still using legacy systems feel pressured to simplify their products and pricing. Unfortunately, we see some carriers mistaking simplicity for uniformity, offering oversimplified one-size-fits-all products that run contrary to customers’ expectations of tailored solutions for their unique needs. Instead, to achieve speed, agility and low costs, I recommend a process I like to call “Sophisticated Simplification” to drive faster and smarter product innovation.

Related:  Claims processing in the 21st century

It’s not complicated

Sophisticated simplification means giving users the ability to select fit-for-purpose solutions in an intuitive manner, from a sophisticated product portfolio built with a modern core systems platform. The right product portfolio and architecture allows maximum re-use of minimal components with varying granularity, thanks to single-point-of-change attribute inheritance. What this means is that each product feature is specified only once and then propagated throughout all applicable products in a carrier’s portfolio.

For example, taxation and levies would be added at the base level, since they apply to the entire portfolio, and that single change would update every product in the portfolio. On the other hand, a unique price proposition for a specific customer segment, channel and product would only need to be specified at the individual product level, requiring minimal testing as this change only affects a small part of the portfolio. This strategy lets carriers rely on a smaller set of base products, making fast and easy modifications to each to create more specialized versions for specific scenarios.

Related:  Keys to developing customer-centric technology

The benefits of sophisticated simplification include:

• Speed: Price updates within hours; rating factor/product feature updates within days; new products launched within weeks.
• Re-use: Decreased product element duplication.
• Standardization: Decreased product and feature design time, leveraging proven products and features.
• Comprehensiveness: All product information captured, from eligibility, pricing and packaging to underwriting guidelines and forms.
• Rationalization: Overall product quantities decreased.

Product development

We see many insurers releasing large numbers of products with minor differences for varying channels such as adding loyalty factors, discount structures or pricing tables. This is an expensive and time-consuming process that could be avoided with the help of sophisticated simplification; changes like these can be applied to hundreds of products simultaneously in as little as a minute with modern core systems – at no additional cost – by leveraging attribute inheritance. The full product development lifecycle, including requirements, testing and deployment, can take just days if automated testing is used. This principle applies not just to pricing, but also:

• Underwriting logic
• Product eligibility rules
• Bundling and packaging
• Discounting
• Screens (intuitive and dynamic question sets)
• Forms (automatically and dynamically tailored to specific offerings)

This kind of speed and agility can only be achieved if insurers use the right technology, product architecture, product development process and operating model. The importance of moving beyond legacy systems to grow in a P&C world is increasingly driven by consumer expectations. It’s no small challenge to make such a dramatic transition, but we may find the carriers that succeed in the future will be the ones that make these investments now.

Johan Nelis is regional director, APAC at Duck Creek Technologies. Contact him at johan.nelis@duckcreek.com.