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Systems Leaders Discuss Digital Transformation

Author

Mary Trecek
Associate Research Director, Workplace Benefits
LIMRA and LOMA

June 2024

During LIMRA’s Enrollment Technology Strategy Seminar in San Antonio, Texas, Stephen Brandt from Vitech, Anthony Grosso from EIS and Chuck Johnston, formerly with FINEOS — all with deep core systems technology experience — participated in a moderated panel. With over 80 years of experience among them, they covered the evolution of the workplace benefits ecosystem in the last five years, current challenges and what the future might look like.

Regarding “digital transformation,” a popular topic at the event and in the industry, the speakers gave their own definitions of that term. Digital transformation has been considered an operating model, a journey, a mindset and a goal. All the panelists agreed that this is a journey, but successful transformation is a matter of mindset. Johnston started the discussion, pointing out the differences between change management and digital transformation: “The goal for most products is minimize change management, minimize the impact — digital transformation is the opposite. The goal is to mess up [operations’ and sales’ lives] and then make it better.”

Grosso agreed, noting that if a company is going to go through this transformation process, they really need to go through it as a full transformation, not a piecemeal process. He recalled a quote from LinkedIn calling out “the difference between digitalization and digitization; just two letters in the words mean a whole world of difference in the meaning.” It isn’t just making some processes simpler or more customer-friendly; a company has to really rethink how business is conducted end to end — “that is a fundamental shift in your entire business process.”

Looking at developments in this digital journey, even considering the difference from just five years ago, Brandt pointed out that the industry has shown the ability to be flexible and adopt new technology and formats, if needed. He cited how many companies were able to move quickly to a digital format during the pandemic, joking “who would have ever thought the insurance industry could move that fast … and make it happen with success?” Even though insurance, particularly workplace benefits, is considered a slow adopter of change and new technology, the industry came through.

Brandt expressed his surprise that the group insurance industry accomplished what it has over the past 10 to 12 years in technology advancement and technology adoption to get to a digital experience. “I do think there is a point of inevitability now, where the market really understands modernization of core systems to fulfill that this vision is critical. … We're no longer talking about digital transformation as portals, right?” Brandt asked, as he paused for a chuckle from the room, with Johnston agreeing on the opportunity in the market.

Keeping in mind this positive outlook on the ability for the industry to embrace change and modernization, Grosso offered a reminder on where the workplace benefits space needs to grow. Citing research from Eastbridge, he noted 90 percent of insurance executives said that they're going to need to do digital transformation within the next five years. He then noted LIMRA recently did a study asking insurance executives the same question, and almost all the respondents indicated they needed to do a digital transformation in the next five years. So, within that time frame, it doesn’t seem like transformation has actually happened. The core of the business remains the same, with new technologies laying over it, working, but not necessarily in a cohesive way. And while this is “okay for now,” Grosso questioned if this method is sustainable over the long term, particularly when consumers start to demand a better digital experience.

Panelists also discussed how legacy systems are a barrier — not necessarily the systems themselves, but the mindset. Johnston pointed out one of the issues that comes up is how the term “legacy” is used overall.

“Until 1965, the word legacy … it was a noun. Your family path is a legacy. You leave a legacy. It became an adjective when, basically, computer systems started to have upgrades. It literally became an adjective because people said, ‘you have the legacy software.’ It was, well, this is the older one, and you've got to go to the new one. Then it became a pejorative. ‘Oh, it's a legacy system, therefore it's X-Y and Z.’ I'm not defending legacy systems, but my point is it's a word that disguises what you really want to think about. Because if a ‘legacy system’ is 25 years old and it does exactly what you need it to do, then there's no real issue.” Johnston then pointed out the problem from these older systems really comes from their ability to participate in something like application programming interface (API) file feeds and other movements within the industry that are becoming basic expectations.

As for when we see the push for more cohesive technology at the core — whether the system is older or newly installed — Grosso offered that the biggest push will come from brokers pushing for a better experience for sales and consumers: “They've seen what a good billing experience looks like. They've seen what a good enrollment experience looks like, what a claims experience is, what a quoting experience is. They've become educated, but they haven't seen it all in one place, right? … They know it exists now. … That's when they need to start demanding that.”

Wrapping up, the leaders of these core systems firms pointed out that things will not actually transform in the digital space if companies do not understand how to integrate new features into their systems before implementation. Johnston and Brandt agree that the “death of digital transformation” is when someone decides to do something new outside the system because the build would be too complex, meaning that the processes become fragmented again. Grosso noted that buyers need to consider that, “it's your core system that's going to allow you to enable an ecosystem, so that you can have these independent capabilities. But unlike today, plugged into your core system, that data is in your system, that you can leverage that data. That's the distinction that doesn't happen today if it's just an API base into legacy technology.”

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