Jeroen Morrenhof is CEO and co-founder of FRISS. He closely follows the developments in fintech and believes that the importance of platforms (core systems) can never be overemphasized. How to reach platform paradise for your core system?
Selecting the right core system is crucial for insurers. The implementation requires a huge investment and often puts the organization virtually on hold for a number of years. Choosing the wrong supplier can seriously threaten the continuation of the business. This is the reason why insurers go for extensive ‘Requests for Proposals’ and ‘Proof of Concepts’. It takes a lot of time for all parties, but which unfortunately offer only limited certainty. In this blog I will give a more pragmatic advice on how to select a core system that is future-proof.
From custom-made to standard
For decades insurers have invested in the digitization of their business processes. Roughly, we can distinguish the following four phases:
- The first phase of automation resulted in solid core systems that primarily made existing processes more efficient. However, adapting and expanding such systems is time consuming and complex. It also requires a lot of investment in time, knowledge and capital. Each insurer has to develop its own platform.
- Gradually we saw the arrival of suppliers of standard packages that focused specifically on the core business of insurers. From individual customization/homegrown solutions to configurable solutions that were used by different insurers.
- In the third phase the suppliers started offering more and more additional technology, for example for reporting, setting up digital channels and document management. To do this, they sometimes developed their own modules, but often it was done through acquisitions.
- Today we see platforms and ecosystems springing up everywhere whereby the suppliers of the core systems offer their clients a number of (niche) products through an ecosystem of partners. The arrival of insurtech and more and more ‘point solutions’ is making it increasingly difficult to come up with a generic solution that is the best for all elements. Also, it is easier to scale by connecting than by developing. For example, FRISS has connections with several providers that have momentum with both clients and suppliers – such as Keylane, Guidewire, Fadata and Duck Creek.
A Core System market without limits
Not only the way of automating, but also the market is changing. The market is increasingly turning into a global market. Fewer and fewer core system providers operate exclusively locally. This has led to growing competition and a serious consolidation war through takeovers. After all there is insufficient room for the hundreds of suppliers.
This is making it increasingly hard for insurers to select the right core system. You don’t want to end up with a solution that turns out to be end-of-life just after it has been implemented.
Many providers focus on setting up a platform of their own. At the end of the day, however, not everyone will succeed in realizing a vital and lively ecosystem. Suppliers of platforms, such as our company FRISS, also face this difficult dilemma; for which core system do we adapt our software?
If insurance companies choose a specific platform, this to a large extent determines how future-proof automation solutions are. How do you choose the winning platform? I can give you the following advice.
Core System Checklist
The ecosystem of a provider should offer the prospect of continuous, additional, specialized functionality. Not just now, but also in twenty years’ time.
The answers to the following three questions are a good guideline:
- What is the vision of the provider on the development and maintenance of their core system/ecosystem? What goal does the management have in mind and how are they going to achieve it? Are there any visible activities that support the vision?
- How do the current suppliers and partners of the platform/ecosystem support this choice? What are their considerations? Which platforms do they choose? The partners often have a good insight into the developments in their market, so go and talk to them.
- And last but not least: what are the experiences of the current customers with the core system/ecosystem? Which additional solutions are actually being used and do they offer any advantages? Has the vision of the supplier actually been realized?
The answer to question 1 is important for the commitment of the provider. Is the ecosystem firmly embedded in the organization as a whole? Has the amount of work that is required to keep the ecosystem up and running been seriously considered?
The answers to question 2 and 3 give a good insight into the perspective of the clients and users. Ideally, the experiences of these parties should reflect the vision and theory of the supplier.
I wish you (and ourselves) success in entering platform paradise.