Core systems modernization in the insurance industry: Base for advancement and innovation 

In the early third millennium, the insurance industry is experiencing tectonic shifts related to the advent of digital technology products in all areas of its shop floor activities. However, disparate IT modernization initiatives concerning various elements of the insurance companies’ high-tech environment can never yield satisfactory results if they don’t involve an out-and-out insurance core system transformation.  

This article will explore the role of the core system for insurance, the significance of and reasons for its modernization, the major boons insurance companies obtain after the implementation of such modernization, and the most popular approaches to handling this process.  

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Understanding insurance core system modernization

Let’s start with the basics and find out what the insurance core system is. Also known as an insurance software platform, this comprehensive and integrated set of software products is honed for handling an insurance organization’s primary pipeline processes and functions. The scope of its operations includes policy administration management, claims processing, underwriting, billing, and (typically) customer relationship management. It serves as a centralized hub for insurers, enabling them to streamline and facilitate their workflows, automate the lion’s share of repetitive tasks, process business data efficiently, and make informed strategic decisions.  

Being high-quality digital solutions, such systems seem to do their job perfectly well. At first sight. But when you take a closer look, you will spot their inadequacies in many aspects. Very often, the core insurance system architecture consists of a bunch of legacy products operating on outdated technologies that are hardly compatible with each other, to say nothing of cutting-edge solutions that are pushing the high-tech envelope in the domain.  

To let the core system bring maximum value to the company, insurance agencies should initiate their modernization on a broad scale. It means updating and upgrading the environment to turn it into a cloud-based insurtech ecosystem that leverages advanced business intelligence and data analytics tools, guarantees top-notch customer and business data protection, and plays well with disruptive third-party solutions via robust APIs. 

Such revolutionary changes will have a far-reaching impact on the insurance organizations’ personnel. Statista claims that specialized digital systems will have replaced over 45% of existing insurance jobs all over the USA by 2030. This agenda is brought on most rapidly by the intensive growth of digital technologies and numerous companies moving their subordinates outside physical offices after the pandemic hit in 2019. As a result, about 23% of employees in the sector today handle work either full-on remotely or partly in the office, partly at home. 

But one major challenge has arisen in light of the remote work trends — insurance companies must modernize core systems to stick to the market’s common pace of performance. And this is where enterprises need professional guidance in selecting platform upgrade scenarios and picking reliable vendors. So, we outline basic directions and pro tips coming from our own experience to help you see the big picture of the whole process. 

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Insurers must overhaul their core systems: What’s the problem with the existing ones?

According to Verified Market Research, the world’s insurtech niche was valued at about $9.15 billion in 2020, and analysts expect the market to rise to $16.36 billion by 2028. This trend indicates fast development and widespread adoption of digital solutions across insurance niches. And business owners who lag behind risk losing a competitive edge.  

Legacy insurance core systems require more maintenance, work focus, and costs, taking all the unnecessary time and effort that could otherwise be dedicated to competitive performance. 

 As a result: 

1. Legacy software foundations don’t allow insurers to operate efficiently under modern business strategies and models, making them lose income.  
2. Outdated systems are also inconvenient for users, often unable to provide customers with real-time information. 
3. Companies lose existing clients and scare away potential ones, all due to the absence of user-friendly features and smooth user experience.  

Overhauling the existing system to fix all the above can be technically challenging and time-consuming, but the resulting advantages are more than worth the effort. 

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Key benefits of insurance core system modernization

According to Zippia, business owners worldwide spent more than $1.5 trillion on digital transformation and improvement in 2021 (and the tendency is expected to hit $6.8 tln by next year). In addition, 56% of business holders stated that their income increased after implementing digital enhancements. 

Ultimately, timely system upgrades are beneficial beyond figures and stats, advancing client satisfaction rates, smoothing out in-house specialists’ workflows, and boosting business operations. Namely, insurance providers get to improve customer experiences, streamline processes, and cut costs. 

Benefit 1 — Better customer experience 

An up-to-date core system enables insurance clients to get more service options at once and browse the needed information in real-time. In addition, the modern user knows a well-running, reliable system when they see one, so timely upgraded tech can help reduce churn rates dramatically.  

Other significant advantages include the following:  

• Responsive UI. Intuitive user interfaces invite clients and make it easy for them to find necessary offers. 
• Quick support. Up-to-date core systems allow for responding to customer requests faster, simplifying policy registration processes, claims to handle, etc. 
• High scalability. Sturdy technological foundations easily handle intense traffic loads, processing requests of many clients at once without hindering anyone’s experience 

Everybody is attracted by innovation, so timely digital transformation can help organically stimulate more positive client experiences. 

Benefit 2 — Higher operations efficiency 

Modernized insurance core systems allow issuing policies quicker so companies can make up to 40% more daily profit. This is due to an intuitive segmentation of tasks and processes, routine-eliminating automation, and highly-available, intuitive interfaces for insurance specialists.  

Particular benefits of an overhauled system include: 

• Business intelligence solutions. Specialized detailed dashboards help specialists view crucial stats at any time and engage in data and business analytics. 
• Workflow efficiency. Secure multi-level access enables specialists to collaborate efficiently without interfering with non-direct responsibilities. 
• Automated processes. Productivity-hindering routine is eliminated with automation for tasks like underwriting, claims processing, regulatory compliance, and more. 

An upgraded core system is the primary tool for smooth business scaling. Thus, today’s insurers tend to move data and digital operations to cloud platforms, which allow them to scale the most flexibility in line with their budget and capacities. 

Read our latest article about business intelligence implementation.

Benefit 3 — Lower IT costs 

With maintenance expenses cut and essential service processes smoothed out and accelerated, it all comes down to ultimate overall cost savings. According to the stats, renewed platforms may save as much as 41% of corporate expenses compared with legacy ones.  

That is due to several system modernization benefits: 

• Easy customization. Up-to-date, easy-to-configure software is less prone to errors and complex optimizations that spawn business downtime risks. 
• Real-time digital functionalities. More clients can be serviced and supported at once with a convenient interface serving both providers and clients. 
• Reduced operational costs. Fewer employees are required to handle a core system and serve clients. 

Consequently, insurers spend less on maintaining their enterprises, which can eliminate many significant business expenses. 

Learn what experts think about the future of insurance technologies: 

Podcast with a founder of BriteCore: Achieving growth with the help of technology

Two key ways to overhaul a core system

Insurance software may be renewed with the help of two primary methods. You can either build a custom solution from scratch or modernize an existing legacy platform. Both are working options, but there are specifics to each that you should consider before making the final decision. So, let’s take a look. 

Way 1 – Build a custom core system 

A custom core system may improve insurance servicing workflows precisely how you see fit. You get complete control and the freedom to shape a solution that perfectly matches your needs. That is if you have the time and budget because here’s what you will have to do to achieve a custom solution built from scratch. 

Сheck out our core banking software development services.

Six things to know about building a custom solution 

1. Conduct business analysis to shape requirements and set off the discovery phase. 
2. Compose well-specified requirements and shape clear expectations of the development life cycle. 
3. Find a reliable custom software development provider that has relevant expertise and offers collaboration that meets your expectations. 
4. Implement front and backend, add necessary integrations, instill cybersecurity, test the software built, and think of further technical support and maintenance. 
5. Stay in touch with the provider at all stages of development, approving all project decisions and changes. 
6. Cover all the underlying expenses. 

Core system functionalities 

To get into more tech details, commonly, the following functionalities must be put into the foundation of a robust insurance core system: 

1. CRM system to efficiently manage new leads, customer requests, contacts, etc. 
2. Claims management module to automate claims submission, verification, and processing. 
3. Underwriting as well as rating systems to make it easier to calculate and manage risks of insuring customers’ assets. 
4. Policy management module to store and manage policy issues, including information about all clients, search for needed documents, etc. 

While custom-tailored interfaces and functionality are the ultimate benefits of this approach, the only drawback of going custom is the need to cover essential costs. Depending on the target system’s complexity (mind that insurance systems are usually quite complex at the core), a custom project may cost you a pretty penny, so you need to be prepared in terms of time and budget to invest in both qualified talents and their work expenses.  

Need to upgrade claims handling?

We offer insurance claims management software development.

Way 2 – Modernize a core system 

The main problem with outdated insurance systems is that they commonly run on local servers, significantly restricting software capabilities. That’s because local IT specialists should install all the needed programs. Moreover, servers and other equipment should be maintained regularly, which takes time, effort, and cost.  

So, the second essential modernization option is moving a legacy system to a cloud-based platform, optimizing it, redoing certain things here and here, and equipping it with new features and integrations. As a result, the migrated system’s functionality, performance, and security rest on the cloud provider’s shoulders, enabling only some minor inputs and changes on your side. 

This option may fit you better than custom development if you want to save costs and speed up modernization. You also get higher security rates when all cybersecurity is managed and updated according to the latest industry standards. On the flip side, however, you may only decide and control so much, commanding only minor changes to the system.  

You might be interested in reading our article “Cloud migration plan”.

How to choose the right way?

Firstly, an insurance company should strictly determine its business goals when picking the proper way to improve a core system. The following factors should be considered: 

• Functionalities and effectiveness of the current system 
• Business goals an insurance company wants to reach 
• The allocated budget for the software improvement 

Secondly, business owners need to consider that an existing platform modernization allows only adding some helpful options and implementing several new technologies. But on the other hand, developing software from scratch is a magnificent chance to improve the cores of their companies’ working approaches. 

Most businesses worldwide consider digital transformation a vital thing. This is especially relevant for insurance companies. So, they either modernize existing platforms or create new ones. The latter is more complex and expensive but offers positive core changes in companies’ workflow. And modernizing an existing system takes less time and funds yet restricts customizability.  

Whatever approach you pick, remember that companies with modern software gain more profit, cut corporate spending, speed up time-to-market, and offer their clients better services. This significantly sharpens a competitive edge in the current insurance market. 

Contact us to book a call and discuss your needs related to insurance core systems.  

How DICEUS can help you

DICEUS has been serving ambitious insurers for over ten years, offering end-to-end software development services for projects of any scope and complexity. We do everything from business analysis, software architecture, design, and development to testing, deployment, and tech support.  

Our expertise

DICEUS has expertise in insurance core system modernization and custom software development. For example, we helped our client, Fadata, a leading insurance software platform provider, update its platform, INSIS. We improved the existing web app, replacing all key interface elements with new ones.

For another customer, IIZI Group, an insurance broker, DICEUS built a cloud-based platform, Insly, with multiple features that automate paperwork and critical insurance processes.

Our team provides not only core system modernization services, but also develops custom mobile apps and chatbots for insurance companies. For example, recently, we built a chatbot for the insurance company Kniazha Vienna Insurance Group.

Besides, we offer our own product, Vitaminise, which consists of a mobile app, chatbot, web app, customer feedback tool, and data analytics. All these solutions can be implemented separately or as a whole omnichannel system. They proved to improve customer engagement and loyalty, increase revenue, and enhance operational efficiency for insurance companies.

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