Winning with digital core systems: Tips for navigating the direct insurance revolution

As digital insurance advances, the question for insurers isn't whether to offer direct channels, but how. For most organisations, success depends on modernising core systems in a way that enables business transformation rather than introducing technology for its own sake. And that means knowing how best to modernize your core system to transform, survive and thrive.

Why does direct matter?

Direct insurance is straightforward in concept: insurers engage directly with customers, cutting out brokers and agents. The value of this extends well beyond operational efficiency. When you own your customer relationships, you gain fresh insights into what they need, want and think.

Go direct and the customer intimacy that used to sit with brokers can be yours. If you understand your customer’s travel habits, for instance, you can proactively offer them timely add-ons like ski or health cover. And when you can use all that intelligence at scale, business success follows - increased sales, optimized pricing (thanks to a lot less commission), lower customer churn, more agility and better control.

Here's the thing: it's what consumers expect – the same kind of fast, convenient and personalized digital experience that they get elsewhere. No waiting on the phone for a quote, no delays getting paperwork, no friction.

Core in a nutshell

So what does a direct-ready core system need? Let us break down the five essentials.

1. A powerful product engine. The ability to launch, sell and tailor products rapidly is both a necessity and a quick win. Recently, for example, we worked with a mid-sized European insurer who was constrained on budget and time. With their new product engine, they could start selling their first direct product (travel insurance) after only four months.

2. A seamless omnichannel customer experience, including self-service and support. Everything should be easy for customers – from getting quotes and buying policies, to raising queries and making claims. If not, they'll go elsewhere.

3. Embedded insurance functionality across partners: AI-enabled Insurance aggregators, payment providers, banks, healthcare providers, automotive companies, and more, depending on what you sell. Don't rely on one sales channel: ‘direct’ doesn’t mean abandoning intermediaries – the strongest models blend both. In most transformations, success depends on orchestrating a broad API-centric ecosystem — integrating insurers’ legacy strengths with best-of-breed platforms and specialist partners.

4. Real-time everything because time is money. No one wants to wait 24 hours for a premium calculation anymore. Quotes, updates, policy changes – all need to happen in real-time.

5. Scalability. As your business grows, you need a layered and modular architecture to orchestrate a scalable one-stop shop for customers, service agents, underwriters, claims handlers, actuaries, and intermediaries (each with their single view of truth).

Modernization paths

Given these essentials, insurers looking to modernize their core system typically consider four approaches, each with its own pros and cons.

Option 1: A purpose-built insurance platform. Because they come with product engines, a digital layer with AI and insurance-specific features, these typically enable faster product launches and a more comprehensive shift to omnichannel direct insurance. Some even offer additional insurance-specific APIs and web services as plug-and-play value-adds. The trade-off is that implementation requires time, organizational adaptations and change management.

Option 2: Upgrade your bespoke system. If you've got a robust custom-built system, you could consider modernizing it. The advantage is not having to worry about migration while easily retaining your institutional IP. The flip side? You might be polishing a fundamentally limited system. What initially appears low risk might come at the cost of limiting longer-term agility and resilience.

Option 3: Go with Insurance-focussed ERP packages. The advantages of Ins ERP solutions (SAP, Oracle) lie in their stability, predictable governance and high degree of integration with enterprise IT systems. They make sense for large global organizations with significant existing ERP investments and a standardization focus. The challenge? Because they weren't built specifically for insurance, they offer limited functionality and can be costly and slow to implement.

Option 4: Go for a new build. The advantages of building a custom-fit system are that they are perfectly tuned to your specific business nuances (e.g. speciality Insurers, marine coverages) and cater to your target market requirements with predictable governance. The challenge? The sheer scope of the system - getting requirements nailed in, orchestrating agile workstreams and testing every single requirement means that these turn into multi-year programs. And if the scope is not handled correctly, the ‘new and latest’ systems risk obsolescence the day they are pressed into production.