Insurers, brokers and underwriting agencies undertaking digital transformation should elect to only “do one monster project at a time” to increase the chance of success, Sydney-based consultancy Frazer Walker Partner Ian Chisholm says.

Even large organisations have become “unbalanced” and suffered by not maintaining day-to-day business operations efficiently throughout transformation, Mr Chisholm says in a blog detailing how to go digital on a constrained budget.

“An organisation has only so much change capacity while concurrently keeping the lights on,” Mr Chisholm said.

He recommends breaking the transformation into phases, ensuring business value and benefits are fully tracked and delivered for each phase, and considering “quick-win elements” to maintain staff engagement, while also managing less visible changes that deliver lasting value over time.

"Good partnerships are the key to successful transformations,” Mr Chisholm said. "No one wants to suffer the brand damage that follows a painful transformation but doing nothing is not an option.”

Wrap-around technologies can hide old core insurance technology behind newer user experiences and better workflow capabilities, while hollow-out modernisation progressively externalises functions from older core systems.

Traditional core replacement is a high-cost, high-risk, lengthy process that can deliver significant benefits but will likely require specialist external expertise.

“Many organisations are moving away from core replacement due to the risk factors and costs,” Mr Chisholm said. “Whether organisational budgets, a board’s risk appetite, or the corporate capacity to absorb change can support this approach is always contentious.”

A new approach is composable applications, where the end application is composed of smaller elements that can be assembled into the final product. Ready-made elements of software can be brought together to compose a new application, for example, an insurance policy or claims engine, with easy integration, the ability to make rapid changes and lower costs.

“That provides flexibility, given the Lego-style architecture required, using multiple APIs for data transfer,” the blog says.

Many smaller insurers or underwriting agencies do not have the capital or the appetite to risk an all-or-nothing core replacement approach, and Mr Chisholm says they are often better suited to a hollow-out modernisation.

“Their risk appetite better aligns to a progressive transformation – picking specific and discrete elements of the transformation journey and running with those initially and gradually replacing significant parts or the entire core system over time.”

Frazer Walker has worked with several insurers to assist them through digital transformation, using a mix of the pathways outlined.