Many Insurance companies still use Legacy Systems despite their limitations. Insurers have different reasons why using new technology is not their priority. Among the various reasons, many believe that new technology will not increase their ROI, the implementation might not work, or using new tech tools will be difficult.

The industry thinks that its Legacy systems can still get the job done, which is a conservative approach that worked for them in the past and will continue to work for them today. They have a wait-and-see attitude toward new technologies, and a large portion of the industry is still reluctant to replace their legacy systems.

Rising above the perceived issues

Another notion regarding the insurance industry’s slow adoption of technology is integration. In the past, lack of technical support was a problem, and many industries, including insurance, had a bad experience deploying, integrating, and managing new systems.

Legacy systems usually operate in an environment controlled by one department, which limits growth and innovation. Moreover, the skills gap is widening because the expert users of legacy systems are about to retire, and the new staff are adept at using new tech tools. Another driver of change is the changing regulatory and compliance requirements. The industry also has to contend with operational efficiency, faster time to market, and cost reduction.

Exploring agile methodology and embracing digital disruption can overcome the legacy systems’ limitations for a smoother, all-channel customer experience suitable for the new generation. The younger insurance customers expect better service, such as easy access to their policy details and insurance claim information. In addition, they expect seamless transactions using different devices and customized policies. Banks and insurance companies can eliminate the problems of legacy systems with Earnix, for example, by providing enterprise-wide, composable, and agile solutions to streamline insurance and banking operations with real-time AI-driven enterprise rating engine. They can help provide instant personalized customer engagement, dynamic pricing and tailored offerings, and respond to opportunities in real-time.  

Other approaches for digital transformation

Shifting to new technology opens doors for improving and enhancing their business processes and operations. Further, it improves the company’s services, benefitting customers and employees because they can serve customers more easily and faster.

• Full replacement

Insurers can replace legacy systems with a new core system built from scratch. It is a more economical approach instead of overhauling the existing system. This approach also involves overhauling the company’s culture and business processes. Total transformation gives a high ROI, increased competitive edge, improved business efficiency, service and product flexibility and effectiveness, and the capacity to provide tailored products and services according to customer preferences.

• Modular replacement

Modular replacement applies to companies whose legacy systems, which include old hardware and software, still function well for back-end processing but cannot compete with new technology, such as the more dynamic, digital, cloud-based, and self-service landscape. The replacement approach involves separating the existing operational sub-components and rebuilding selected sub-systems. This type of replacement costs less and does not disrupt business operations and processes too much. 

Whatever approach the insurer adopts to modernize its legacy systems, it should ensure they maintain quality assurance and continuous testing to reduce risk, find where to implement cost savings, and ensure a smooth shift to the modern system.

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