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FINEOS: The legacy system of yesterday is not suited to support digital transformation

Written by Roger Peverelli and Reggy de Feniks - Founders The DIA Community on Dec 30, 2021

It’s become evident that for insurers to transform themselves into true digital businesses, they must start with the core systems that run the business. To dive more deeply into this topic, we sat down with Chuck Johnston, CMO of FINEOS. FINEOS is an innovative provider of core systems for life, accident and health insurers globally and an AWS partner with the Financial Services Competency.

When insurers think about innovation, they don’t always start with core system transformation. Why do you think innovation starts at the core?

Chuck: It must start with the core system which is the center of the total insurance value chain. There are a number of great innovative approaches one can take in the insurance value chain and along the edges of the insurance system architecture. But if your innovation strategy is not grounded in a core system that can keep up with and support that innovation, you will be carrying an anchor that will weigh you down. The business of insurance carriers is to manage policies, customers, and the interactions between the two, which is where core systems become essential. I anticipate we will see a lot of opportunity for product and service innovation in the next few years. A purpose-built, modern, and proven core system enables innovation in areas like artificial intelligence, Blockchain, non-traditional distribution value chains, and in meeting constantly-evolving customer service expectations. 

There are a lot of core systems out there. What makes the FINEOS Platform so unique?

Chuck: In two words, purpose built. At FINEOS we believe being purpose built to the Employee Benefits market is critical to our long-term success. We provide an end-to-end core system platform, tuned to meet the market’s unique complexities. FINEOS is also unique in that we combine a modern cloud native approach with a proven system that supports large insurers across a complete portfolio of Employee Benefits around the globe. The investment and effort to become a naturalized cloud core administration system is extensive. We believe that making the decision to exit on-premise provides our insurance carrier clients a comprehensive list of new advantages while preserving the extensive insurance intellectual property the FINEOS Platform has in the box. It’s interesting that to really fulfill the promise of SaaS software on the cloud, our insurance knowledge and in-the-box content is as critical to our customers’ success as the latest technology stack. It’s essential to have both.

What kind of obstacles are preventing insurance companies from moving their core systems to the cloud and how are you helping them overcome those obstacles?

Chuck: There are several hurdles to moving core systems to a SaaS based cloud supported model especially in the Benefits market. Many carriers have core insurance systems that are decades-old and served them quite well for the business models of the past. However, the legacy system of yesterday is not suited to move to the cloud and take advantage of emerging SaaS models. It is very difficult to make a business case to move an existing system to the cloud if the insurer can’t take advantage of the unique capabilities found in systems designed to live in the cloud natively. Carriers still have a big hurdle to overcome with legacy core systems when it comes to the uncertainty around security/privacy issues, performance, and the overall control of their business.

We’re finding that the driver to move to the cloud amongst our customers is the need to re-examine service cost models, more quickly bring new products to market and connect with ecosystem partners that live in the cloud as well. The best way to overcome the insurers’ legitimate concerns is to provide a very high-functioning modern and proven system. To achieve this, it must live on the cloud leveraging those capabilities as a citizen rather than a quick adaptation of an on-premise system that relies on containerization or other tools to enable it to live on prem and in the cloud simultaneously. We found that making a permanent upgrade of the FINEOS Platform hosted on the AWS Cloud as a naturalized citizen has greatly increased performance, reliability and cost savings for FINEOS and our customers. That’s a win-win in my book.

Tell me a little bit about your relationship with AWS and why you chose to work with them

Chuck: AWS is critical in our success and our customers’ success. FINEOS did the full measure of due diligence, evaluating other cloud providers and considered the options across a single vendor, hybrid cloud or cloud agnostic model. We discounted hybrid cloud and cloud agnostic models early as we saw them as just a means to avoid making a true commitment to cloud. FINEOS takes our commitment to care and protection from injury and loss very, very seriously. As a global company with global customers we needed a cloud provider we could feel comfortable with, that could provide cloud service securely, address varied compliance standards and have the consistency and level of service our customers demand. Our customers range from the largest insurers in the world to smaller regional insurers but in every case their core insurance systems are mission critical to taking care of the people that depend on the insurance safety for themselves and their families.

FINEOS concluded that AWS best met our demanding criteria given its size, capabilities, services, and global reach. Beyond being the global leader in cloud, AWS has a good vertical market program with people who understand the insurance market and make sure their offerings meet our needs. Their focus on both the platform and providing innovative management and development tools makes it easier to maintain our scalable FINEOS Platform while simultaneously continuing to innovate in areas like micro-services, machine learning, leading edge user experience and other emerging technologies.

In your opinion, what does the insurance company of the future look like?

Chuck: That’s a really big question given the current social, political, economic, and technological changes that have gone into overdrive over the last decade. I can tell you three major trends I believe we will see in the next few years.

  1. Shifting from Rich User Experience to a Smart User Experience
    Insurers have done some good work to make their customers’ user experience richer to meet the bar of mainstream digital e-commerce companies. I believe the next stage for insurers is to move to a smart, minimal-touch model for as much of the end-customer experience as possible. A combination of better process automation, machine learning and digital connections will make it easier to minimize the work the customer will need to do and present the best options to the customer without requiring deep research. When I’m in the ER, I don’t want someone to ask me 20 questions about my injury claim; just tell me I’m covered, the check has been deposited in the bank and let me text you if I have a question or issue.
  2. Reductions in ecosystem overhead and friction
    Ecosystems are a hot concept in the tech industry and integral to the Employee Benefits industry in particular, but they are still quite complex, expensive to maintain and slow to implement. We see a combination of emerging industry standards, and the integration of machine learning models, digital engagement concepts and stable open cloud platforms driving down the cost, time and effort of connecting insurers, brokers, benefit administration systems, employers and employees – all leading to new business opportunities that are not economically feasible today.
  3. SaaS-based core systems evolving toward a utility model
    Core insurance systems are a critical need for insurers seeking to deploy cutting-edge products to the market and provide excellent, cost-effective service, but core systems should not be the barrier to agile business. Core insurance system vendors will be most successful in the next decade if they can provide an easily-deployable core insurance system in a SaaS model that will contain the IP needed to meet the insurers’ needs. That includes only requiring customer-specific configuration to be completed by the customer. This again puts a burden on core insurance system vendors to have a lot of purpose-built functionality and intellectual property in the box, staying on par with and always leaning into the future of where the market is going.

Curious about FINEOS? For more information on FINEOS visit their website here.

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