If you’re like many other medical professional liability (MPL) insurers, your organization’s core software and IT infrastructure are stuck in an outdated, legacy core system. Over time, such systems—originally built with older technologies—are difficult to maintain, scale, and integrate with newer systems and technologies. For MPL insurers, these consist of policy administration, underwriting, claims management, customer relationship management, billing, and accounting.
When considering a migration of legacy core systems to the cloud, a new core software and IT infrastructure system, a systems modernization effort, or a digital transformation initiative, you need a carefully considered roadmap, no matter the motivation or drivers behind the decision.
In this article, you’ll learn about nine key factors for a successful legacy core systems migration. While this list is by no means comprehensive, and each carrier has unique circumstances, ignoring any one or more of these factors may be a shortcut to the graveyard of failed implementations.
Factor #1: Vendor/Platform Selection
Digital transformation unlocks efficiency, growth, and innovation. Do you replace your legacy core system with another core system or are there other options to consider? While vendor/platform selection is a vast subject and beyond the scope of this article, it’s important to understand that many insurers are replacing core systems with insurance value chain platforms.
There are key differences between a core system and an insurance value chain platform. Traditionally, core systems enable business processes and workflows within an insurance carrier enterprise and focus on internal users and departments. Most legacy core systems don’t provide business functionality for policyholders, healthcare providers, agencies, law firms, or other service providers. Insurance value chain platforms not only perform all the functions of a traditional core system but also enable key business processes and workflows for and between external users as well as internal users in real time.
Insurance value chain platforms support execution of complex end-to-end workflows with industrial strength security. Most modern insurance value chain platforms also include collaboration with messaging, alerts, reminders, and emails. Push and pull strategies blend offering unmatched efficiency, ease of use, and robust communication. Push strategies employ direct promotions to generate sales and increase demand, while pull strategies create demand through brand buzz and other tactics. Insurance value chain platforms also provide the backbone for effective digital transformation providing workflows for new business processes or process redesign.
When considering modernizing your core system, it is worthwhile to also evaluate vendors that offer an insurance value chain platform.
Factor #2: Governance
Think beyond “on time” and “on budget.” To achieve a successful project, managing time and budget milestones is important but it’s far more effective to manage scope, schedule/resources, risks/issues, and budget. These are four legs of the governance table and will help you stay on top of an implementation. Here are four tips for managing this process:
- Control scope creep and scope changes especially after requirements are signed off
- Review and manage changes to schedule and resources in case of escalation
- Identify and manage risks and resolve them in a timely manner so they are mitigated instead of turning into issues
- Manage changes to the budget for overriding criteria such as a change in priorities or objectives
Factor #3: Business Process Design/Redesign
Replacement of a legacy core system provides an opportunity to create efficiency and innovation through review and implementation of new or redesigned business processes. Your vendor/system selection should focus on differentiating solution offerings regardless of whether you choose a core systems or an insurance value chain platform.
There are significant gains in efficiency to be realized by integrating workflows between carrier departments, agencies, policyholders, law firms, and other service providers. External user business processes are not well served by legacy core systems. These are areas where significant efficiency may be created by implementing a new insurance value chain platform. This effort requires active participation and sign-off by business users and may result in multiple swimlanes of work—each lane represents a specific department, role, team, or stage of work. It adds to the implementation effort; however, the payback is significant.
Factor #4: Program/Project Management
The program/project management structure is another critical component contributing to overall success. Typically, migration projects of any size utilize a steering committee, project committee, and swimlane project structure. A swimlane project structure provides visual maps for processes across multiple participants using vertical or horizontal lanes to represent specific systems, individuals, or departments that are responsible for a specific project related activity.
Although some legacy core system migrations are very complex requiring multiple project managers and a tiered project structure involving multiple lines and countries, most small to mid-size carriers do not require a program manager/project managers structure. Regardless of the size, you can give your project the best chance to succeed with the following 12 project management controls/activities:
- Specify project objectives and drivers and ensure the project team understands them
- Adopt formal change control processes managing scope, schedule, resources, and budget
- Articulate the formal technology ecosystem
- Clarify internal and vendor roles and responsibilities
- Develop solution design prior to work plan/project milestone development
- Perform swimlane identification and resource assignment
- Define/educate the team about cross swimlane communication & escalation processes
- Manage project status updates and dependencies
- Manage risks and issues
- Oversee quality, perform assessments of requirements, processes, and proposed solutions
- Develop and deploy an effective communication plan
- Implement formal change management addressing organizational change including resistance
Factor #5: Requirements, Resources, and Budget Commitments
There are several effective requirements gathering methods/tools available. Pick one that has worked for your organization previously or select one that you may train your internal users as well as your vendor project team. The tool needs to be one that both your business users as well as your IT staff understand and are willing to use. Ensuring quality requirements gathering with formal sign offs acts as an insurance policy keeping carriers and vendors committed to delivery of mutually agreed upon business functionality.
As an executive sponsor of an implementation, you’ll need to empower your program/project manager to put together a team with the best available internal resources. This might mean freeing up internal resources fully or partially from other commitments. Negotiate with your vendor to make sure their first-string resources are assigned to your project. Staffing your implementation with quality resources is a necessary success step.
Your steering committee and program/project management will need to implement formal change control to manage scope changes and their budget impact. After initial requirements and a budget are baselined, formal change control practices will help you decide if a scope change is required, desirable, and to be included in a “go live” cutover.
Flexibility is key in keeping project schedules and budget on track. Some scope change may be scheduled after going live. There are a handful of reasons that scope changes and budget changes originate. As a best practice, your vendor should be completely transparent and list what these might be from their perspective. Identifying these formally—and if needed contractually—helps in managing change. While change control reasons may differ due to unique carrier circumstances, as an executive sponsor, you have the option of adding a budget buffer. The final budget and buffer approved by your executive team and your board is a confidential matter that you may decide not to share with vendor resources or possibly with your internal project team.
Factor #6: Technology Ecosystem – AI, Cloud, and Mobile Inclusion?
Agents and policy holders want speed, self-service, and collaboration in terms of policy purchases and servicing, according to a Nationwide Insurance survey. Implementing new or redesigned business processes requires more than a few new transactions performed by external or internal users. Your external users, which include agencies, policyholders/members, law firms, etc. are demanding a seamless and real-time experience that may only be offered by an insurance value chain platform with an open and connected technology ecosystem.
Your implementation roadmap should identify and prioritize business partners and vendors that provide open systems and connectivity. This may require a cross-organization and cross-department teams to be put together and of course will create multiple work swimlanes for your project implementation team.
Artificial intelligence (AI), cloud, and mobile technology are digitally transforming user experience and collaboration. Your implementation should address how AI may help address business areas such as product development/rate-making, agent-underwriter interaction including straight-through processing, price optimization, and claims processing, just to name a few. In addition, your legacy core systems migration plan should include mobile apps. Customer demographics are changing rapidly and providing cloud-based web applications and native mobile apps let carrier customers and agencies pick the device of their preference to conduct business with carriers 24/7. These capabilities future-proof your investment in a new platform.
Factor #7: Data Migration
Data migration is a high-risk area in a legacy core systems migration. Older systems have cryptic, difficult-to-understand data representation under the covers. Data may not be normalized or in some cases it may be over normalized. Typically, this leads to significant challenges if a decision is made to automate data migration.
Automated data migration is very prone to slippage in implementation deadlines. The simple fact is that the state of data in legacy core systems is poor. While this may be an oversimplification, it is largely true. We recommend customers perform cost benefit analysis for any automated data migration. Unless there’s an overriding reason to automate data migration, we recommend using a combination of manual and automated processes to migrate to a new platform.
For example, running off policies and billing on a legacy system and renewing policies on the new platform may be far more effective than attempting to automate migration. Historical policy and billing data may be brought across electronically in a read-only, non-transactable state. Similarly, claims may be moved using a combination of automated and manual processes. If you do decide to perform an automated data migration, here are a few steps from our methodology that may help:
- Source Data Inventory
- Source Data Quality Audit/Validation
- Source Data Transformation
- Source-Destination Cross Reference
- Source-Destination Programming
- Interim and Destination Data Testing
- Destination Control Reports
- Perform Multiple Iterations
Factor #8: Operational Readiness, Training, and Cutover
It is critical to conduct an operational readiness assessment well in advance of a cutover, which occurs when you switch from your old system to the new system. Whether you choose direct training delivery or you leverage a “train the trainer” approach, well-trained users are just one part of a successful runup to going live. New business process or re-designed processes require change management procedures to be implemented side-by-side with systems training.
Most organization eschew formal testing and evaluation as part of operational readiness assessment however performing some degree of evaluations may help expose gaps that can be addressed in a timely manner.
There is no substitute for formal cutover planning. A step-by-step detailed task list or work plan with resource assignments is a must, no matter the size of your implementation.
Factor #9: Support and Improvement
Previously established success criteria may be used post cutover to perform an evaluation of milestone achievement. Your project team and vendor will specify support processes mutually; however, you’ll need to ensure that the vendor’s service level guarantee is adequately detailed. For example, at a minimum, your vendor should specify their cloud availability service level agreement, backup schedules, restore schedules in case of failure, environmental software versions supported (browsers, database, operating system, iOS and Android versions, any middleware, etc.), and vendor software support service level agreement. Ideally, business users should have access to a staging environment that they may use to test any new features that are scheduled for release.
Ongoing improvement requires the setup of an internal project team that may be resourced from the original project team. This is highly recommended as new platforms and new processes may have favorable results that may be leveraged further. It also creates a vehicle for implementing ongoing regulatory, compliance, and business changes.
Set Your Legacy Core System Migration Up for Success
In closing, the above is a handful of factors affecting legacy core systems migration success. Having implemented platforms successfully for organizations ranging from several billion dollars to a few million in size, I can say that while there are broad guidelines for success there is no canned out-of-the-box formula as each carrier has unique circumstances, and any implementation approach will need to be tailored.