India’s Insurance sector has seen rapid digitization over the last decade, however, innovations in product constructs, onset of AI/ GenAI, cloud computing, and digitalization, now place a “once-in-a-lifetime” pressure to innovate. As insurers go down on this path, their efforts are often being materially bottlenecked by their legacy core systems. These transformations are a unique opportunity for Business & Tech teams to collaborate to deliver new experiences and products. 

BCG India’s latest report “Winning with Core Transformation: Pathways to Enhanced Value and Efficiency” provides a comprehensive perspective on the challenges and opportunities facing Indian insurers and potential strategies in driving holistic business-centered technology transformations. The report highlights critical insights and learnings around navigating Core Transformation programs that can make or break the fortunes of insurers.

The report identifies three key levers for value unlock from Core transformations for insurers:

• Customer delight: Drive-up modular and pre-underwritten offers for customers to seamlessly select what works for each of them. All interactions should be governed through automated decision-making and accompanied by seamless journeys, 360 degree communication and customer centricity
• Processing efficiency: Replace high-touch Ops or Underwriting heavy processes into streamlined automated models, supported and enhanced by AI and rules. Eliminate redundancies and pain-points by streamlining journeys and deliver higher share of self-serve capability in an omni-channel manner
• Business impact: Insurers can drive-up penetration by leveraging the new re-imagined processes and modern technology to deliver personalized offers, drive-up up/x-sell and accelerate claims processing

The report also further showcases how insurers can undertake these complex transformations involving Core & adjacent systems in a more agile manner by shaping a stack-architecture which is inherently microservices based and de-coupled. Insurers can significantly improve the ROI of the core transformation by taking an MVP approach with clear value milestones helping fund-the-journey along the way than make onerous 4-5 year investments with back-ended value creation.

BCG’s report synthesizes the potential strategies for Core transformations and guides insurers to select the appropriate pathway based on their own unique business context, starting position on technology and data as well as the availability of Core platforms or lack thereof.

“The obvious & disruptive moves by insurers have been made, now winners will take the more difficult and bold step of attacking the core. The aim with the core is not to re-platform or to move to a new modern core; the aim must be to create value and deliver delight via new products, processes and experiences”, said Mr. Swayamjit Mishra, Managing Director & Partner, Leads Technology in Insurance for BCG India

Key Strategies for Core Mordernization in Insurance

1. Hollow out the Core: This approach involves building a microservices layer that abstracts out key functionality around the legacy core system, using the legacy system only as a system of record. This is an approach typically adopted by incumbent Life Insurers or players with significant long-term back-books
2. Replace the Core: Insurers can choose to replace their current core systems by setting-up a 2^nd new parallel core as a challenger. BCG recommends moving products or Lines of Businesses one-by-one rather than attempting one big-bang cutover. Resultantly, insurers will need to manage a period of multi-core existence in transition, but unlock agility by focusing on the high-value flows and not re-building the low-volume complex edge scenarios of the past.
3. Build your own Core: A select group of modern insurers with significant in-house technology expertise and robust platforms are going the full-hog and building out their own core systems, thereby, delivering even more differentiated products, journeys and experiences. Though a less common pathway, leading digital insurers evolve with their own platforms becoming more self-sufficient and lowering cost of run materially.

The report lays out the nuances around each of these pathways and re-iterates key commonalities as key drivers of success around business-centred tech transformations: adopting micro-services-based architectures, investing in robust in-house and partner-led ecosystems and driving a re-imagination in the ways of working. As per BCG, there is a clearly laid-out 12-step approach for insurers to follow in driving such large-scale transformation exercise. A robust Control Tower driving the entire program as an orchestrator across techno-functional areas is an essential marker of success and improves the odds of full value-capture significantly.