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In With the New, In With the New

In With the New, In With the New

Shifting gears to find a realistic modernization approach


In my many years in IT, I have come to recognize that pressure is a good thing. Without it, we don’t move. If necessity is the mother of invention, pressure is most certainly the perpetual driver of innovation.

In insurance, however, we don’t have just one pressure or one simple driver. And we don’t have just one system to innovate. So, the idea of just one modernization conversation is obsolete. The idea of “modernizations” is relevant. No part of the enterprise exists unconnected, but many parts of the enterprise DO require a different modernization mindset.

In November of 2014, Gartner began discussing Bimodal IT, predicting that by 2017, 75% of organizations will be bimodal in some way, with spending and modernization running along at least two different tracks. In December of 2014, McKinsey released an article on two-speed architectures (essentially the same concept) to split the digital architecture modernization conversation and the “low-speed” back-end architecture conversation.

No matter what you call it, the hybrid modernization architecture is a tool that will help insurers innovate to meet the pressures. The goal isn’t to completely disconnect consumer-facing systems from administration systems, but to build a cohesive unit from separate modernization initiatives running on different schedules and using different gears — gears that match the speed that is needed. In this way, insurers can bring in the new, fluid, responsive digital technologies at the same time they are bringing in the new, secure, solid, foundational technologies. In with the new (light speed delivery), and in with the new (well-paced, well-tested delivery).

Bringing in the new while focusing on opportunities

Hybrid architectures are good in theory, but they have to overcome several hurdles in practice. The greatest pain point for insurers that wish to modernize is the cost, the point at which Modernization conversations often get sidetracked before they even start. “We don’t have the budget to take on additional modernization.”

If we consider that most essential functions within the enterprise may need modernization, and that multiple modernization tracks adds cost to IT, then we realize cost it is a valid and reasonable sticking point.

Insurers that wish to bring in new technologies will quickly realign their IT budgets and all consumer-facing , digital initiative budgets to focus on opportunities. This makes sense. If the marketing department used to spend $1.2 million per year on mailings or $4 million on media and they are now attempting to focus on service upsells, cross-sells, mobile, omni-channel experiences and data-driven targeting…is it reasonable to expect IT to absorb so many of the new technology costs that are replacing traditional marketing vehicles?

These investment shifts are real opportunities with much greater potential to convert sales than the broadcast, mass mailing mindset of decades gone by. Dollar for dollar, these investments will yield higher response rates. Funding should be framed outside of the IT budget as opportunity costs with associated ROI. Marketing is just one example of how many digital initiatives should be budgeted based upon the opportunity for investment payoff.

The bonus to framing modernization investments in light of opportunities is that no matter who is in charge of the project, they have a clear justification tied to a clear initiative in every case. It is surprising how quickly priorities fall into place when the business grasps the vision of untapped potential. I love it when I see influential managers who were once unenthusisastic, turn into positive advocates as they grasp the full ramifications of new capabilities.

Brining in the new while hanging on to the old

The most appealing modernization scenario for many insurers is to modernize the consumer-facing front end, start from scratch with a new modern back end and NOT let go of the legacy admin system right now. Using a twist on the hybrid approach by involving a vendor partner in legacy system upkeep, this can work exceptionally well.

The insurer offloads maintenance of the legacy system for a predefined number of years. The cost savings is used to fuel both digital modernization and a future admin system modernization. The vendor, knowing the unique integration needs of the client, manages the two modernization tracks to reduce transformation risk. We call this “trading old for new” and it is worth serious consideration for any insurer as a hybrid modernization alternative.

Front-end modernization and channel unification

The pressure for two-speed architectures acknowledges that at least one area of the business is going to have to adapt and modernize quickly.  This approach will require new types of project management, new types of testing and a plug-and-play approach that lends itself to smaller, more flexible products. These applications won’t be built to last into the next decade. They are designed give the highest level of functionality they can provide today and for the next year or two. This top layer of applications will be “ever-new,” renewing themselves continually as technology improves and innovations occur.

If insurers build in data layers, they will be structured to adapt quickly, with integrated systems and warehouses that can remain in place while the smaller components are swapped in and out. In this way, insurers will be preparing themselves to not be caught in a legacy position again, but to be “built to last” by being built to renew.

Are hybrid modernization concepts such as these helping your organization to bring in the new without the fear of losing the old? In the coming weeks, we’ll discuss practical approaches to developing two-speed architectures that will help to accomplish digital goals

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