Navigating the Digital Evolution in Insurance: A Blueprint for Legacy Transformation

In a world where digital evolution is less of an option and more of a necessity, the insurance industry stands at a crucial crossroads. The path towards digitalization, while not without its challenges, offers a beacon of innovation and agility in a sector historically rooted in complex systems and processes.

In the first of a series of blogs, INSTANDA's Business Development Director, Andy Watts, explores the complexities of innovating within the insurance industry's tightly woven tapestry of tradition and technology.

The Journey So Far 

The insurance industry has shown commendable progress in weaving digital threads into its traditional fabric. As INSTANDA shared in its 2024 global thought leadership report, there are insurers all over the world who are leveraging advances in technology to better serve the customer and price risk. This momentum reflects a broader industry acknowledgment that while the road to digitalization is complex—given the nature of insurance products and processes—the strides made so far are promising. 

The impetus for digital transformation in insurance goes beyond simplifying the “quote and buy” process. Today, the imperatives of digitalization encompass a full spectrum of processes across the insurance value chain from policy changes and renewals to claims management—all demanding seamless digital orchestration. 

Understanding the Shift 

The move towards end-to-end automation within the insurance industry is propelled by changing customer expectations. The modern consumer expects seamless experiences and products tailored to their unique needs, preferences, and lifestyles. As the consumer research from our global report reveals, customers are seeking the following:

• Lower cost of insurance
• Greater transparency and trust
• A more personalized experience, with products tailored to them
• The ability to make policy changes on their own
• Faster claims payment

The overarching message from all 40 contributors to the report was clear: there’s an amazing opportunity to meet customers where ‘they are’ and ‘how’ they want to engage.

These expectations transcend traditional one-size-fits-all offerings, ushering in the need for personalized insurance solutions. Furthermore, the industry is already starting to adopt a more preventative stance, working with customers to help them reduce risk.

Additionally, the value of embedded insurance, operating seamlessly within a consumer's everyday activities, can only be unlocked in a fully connected ecosystem. If estimations prove correct, and the P&C embedded market grows to $722 billion USD in gross written premium by 2030, the need for interoperability will only intensify.

To get the right cost and right service proposition in this ‘new world’ order, an insurer’s value chain must be connected and automated.

Legacy Systems: The Elephant in the Room 

One of the most significant hurdles in the quest for digital transformation and connectivity is existing systems. These are more than just outdated technologies; they represent a deep-seated challenge in integrating older, often cumbersome systems with the nimble, innovative solutions that digitalization promises.

A Dual Approach to Digital Transformation 

Understandably, insurers are seeking solutions that provide a quick return on investment (ROI). There’s very little appetite for spending 3-4 years ripping out and replacing enterprise-scale systems.

The answer lies in moving to best-of-breed component architectures. If an insurer has an open architecture with a ‘kernel in the middle’ (a no-code modern policy administration solution like INSTANDA) that acts as the ‘heart and lungs’ of an insurance operation, there’s far more room for innovation. So, what options are available to insurers?

A Layered Approach 

Firstly, there’s a strategic approach whereby insurers can “wrap” their legacy systems with modern technology solutions, thereby thinning out the old while incrementally transitioning to the new. A compelling example of this strategy is leveraging INSTANDA, which offers fully automated digital capabilities out of the box. By implementing a layer atop existing legacy systems, insurers can facilitate external engagements while keeping their core systems intact. Through such integration, the once cumbersome back-office operations become interoperable with front-end digital services, transforming legacy systems into bookkeepers rather than bottlenecks. 

Separating the Old from the New 

Alternatively, insurers might opt for a more segmented (vertical co-existence) approach, distinguishing their legacy operations ("the Old Company") from their digital endeavors ("the New Company"). This method allows for the old to remain as is—serving its purpose without hindering the development and deployment of new, digital-first insurance products. With platforms like INSTANDA, insurers can rapidly bring new products to market, circumventing the prolonged and capital-intensive overhaul typically associated with core system modernization. This agility not only accelerates time-to-market but also significantly enhances ROI, marking a departure from the traditional, back-end-heavy technology upgrades of the past. 

The Future Is Now 

The insurance sector’s digital transformation is not just about overcoming the inertia of complex systems and processes; it's about reimagining how insurance operates in a digital-first world. By adopting a scalpel-like approach to modernization, insurers can carve out a future where innovation thrives.

Innovating within the existing framework or establishing a new one aside, the goal remains clear: to offer seamless, end-to-end digital experiences that meet the evolving needs of both the insurer and the insured and at a favorable price point.

To learn more about the INSTANDA’s platform capabilities and to find out why insurers, MGAs and brokers across the world choose us as their technology partner, please book a demo.