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Are Core Systems a Commodity?

Are Core Systems a Commodity?

Posté par James McCully le

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Core Systems a Commodity

There has been some recent news coverage suggesting that insurers should start to consider their core operational systems as ‘commodities’ and that their innovations will come from other areas of technology. While I am inclined to agree that insurers must move beyond core processing to find differentiation, I am hesitant to jump forward so quickly and label core systems as commodities. Core systems (and the best practices they bring) establish a platform for the future that enables sustainable innovation and may be the most important decision an insurer makes. I believe that while core processing itself does not provide differentiation, modern core systems enable innovation and the realization of strategic objectives.

At this point, modern core systems are not commodities, though there is reason to believe the insurance market now accepts that there are best practices beyond their own four walls and that these can be found in packaged software. This acceptance comes with the realization that there is more to do beyond core operations and that the innovation journey needs to start now. To get there, insurers need to be able to have in place a reliable, dependable platform that is able to continually support their ongoing innovation. Without this in place, an insurer risks an inevitable breaking point when their internal processes are no longer able to keep pace with changing market demands.

To achieve innovation, we must first understand where we are innovating from. You can’t set out in the right direction if you don’t know where you are… or where you are going! The right core systems not only manage operations efficiently and effectively, they are able to provide insight into the current state of those operations and enable the identification of opportunities to improve and innovate. Further, these core systems facilitate innovation by enabling rapid change with a low risk and cost – those who innovate know that the rewards will be achieved by taking risks and learning from failure quickly.

So, while we should begin to turn our heads and look to a future driven by innovation, we still need to ensure our core operational systems are fit for the journey. Choose your platform wisely!


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