Growth \\ Technology

Growth \\ Technology

Insurance industry legacy systems as the main barrier to growth 


It is said insurers spend up to 80% of their IT budget on maintaining legacy systems. The report by Duck Creek found that 20% of respondents said the cost of performing an enterprise-wide upgrade of one version of a system to another was over €1 million (approximately £880,000).

30 June 2021  \\ Growth                     Author: Patrycja Maksymowicz

Open Solutions Global Linked IN
Open Solutions Global News
Open Solutions Global News Tweet

Although the pandemic has accelerated the fintech revolution, the insurance industry has been slower to adopt digital transformation compared to the other financial services.

It is said insurers spend up to 80% of their IT budget on maintaining legacy systems. The report by Duck Creek found that 20% of respondents said the cost of performing an enterprise-wide upgrade of one version of a system to another was over €1 million (approximately £880,000).
A big investment.

 

Bart Patrick, MD of Duck Creek Technologies explains it quite well by comparing the inside of an insurance company to a jigsaw, where each interconnected piece is looking different to the other and requiring unique connections as well as regular upgrades. 

He points out that such systems make for a poor architecture that is difficult and expensive to keep up to date. 

It goes without saying out of date IT systems create inefficiencies and costs and hardly ever support the growth strategy. 



Are insurers stuck on legacy systems forever? 


Coronavirus has surely highlighted the burden of such systems. So what are the challenges the industry is facing and the ways software can support the industry post-Covid?



What are the problems of legacy systems?


In their recent publication, 'A Perspective on Modernising Insurance Legacy Systems', PWC and Ignatica list the following three main challenges of Insurance Legacy Systems: 


  • Increasing costs of policy maintenance and customer acquisition
  • Time-consuming and costly product development 
  • Limited capability to integrate with digital ecosystems


How to modernise and not lag behind? 


Insurtechs have finally stepped in to take advantage of the new opportunity and remove friction between insurance providers and the end customer through technology. Thanks to becoming fully digital, insurance companies can now lower costs and target their audience in a better and more effective way.




What are the key challenges the insurance industry is facing while reshaping?


With new technologies, data-driven processes and growing customer demands being the key drivers for change the industry has now started reshaping at a pace no insurer can match with dated legacy systems. Any change brings new challenges.


Small business insurance firms are a niche but profitable market within the insurance industry and most of them have so far survived without much digitization. However, larger and more aggressive insurers who understand the market well are also pushing to move into space smaller insurers operate in. This means smaller companies need to get on board with digital technologies to keep up with their competitors.


We live in unpredictable times and anyone can run into situations that endanger their life or well-being. This translates into a huge opportunity for insurance, however, lack of trust and bad previous experience are often the reasons why many individuals don`t bother with insurance.


Seeing this market opportunity, insurers are constantly trying to win over new customers as well as retain the current ones. Some keep their rates low, but rates are not as important to a modern consumer as to how they are treated by their insurers. It is no secret legacy systems increase the risk of mistakes, and this often means a high number of complaints.
New systems allow smoother customer management and much better care.
Some insurers have also been deploying solutions such as AI to ensure a personalized experience. This way they can also create unique products quickly as well as use complex and offer better rates.



Providing a great experience is impossible nowadays without the mobile-first approach to customers’ solutions. Unfortunately, many insurers still underestimate the power of the mobile channel.


To get the most out of the user, operational and marketing data, insurers need to have robust data management plans in place to improve the overall quality of data and gain better insights.

PwC makes the following recommendations to maximize data analytics: 


  • Define customer segments and interactions that are top priorities as well as insights needed to drive the experiences that result in new business and better customer retention.
  • Take a holistic approach to data-driven decision-making. 
  •  Modernize the data analytics foundation to make sure it is agile, flexible and reusable. 


While using data to improve offerings and experience is not a new phenomenon in the insurance industry, doing it well and consistently is still a challenge for many.
To meet this challenge companies must leverage the digital insurance solutions at their disposal. With agile cloud systems or data analytics insurers can meet the demands of today’s consumers with helpful features such as chatbots, AI-generated quotes or using AI for fraud detection.

For individuals and businesses cautious of identity theft or a data breach, insurers can cover the costs associated with cybersecurity issues.



Are insurers stuck on legacy systems forever?


The industry needs digital solutions that would address its challenges, most of all, reduce administration, increase the accuracy of data and enable data-driven decisions.
Only by embracing change and accelerating digital transformation, insurers will remain competitive.

Featured - industry news

RETAIL


6 July 2020

How retailers are overcoming the Post-Pandemic Economic Recession 


Read more

TECHNOLOGY


13 July 2020

People, Process, Technology – the last piece of the puzzle 


Read more 



FINANCE


20 July 2020

Is it finally time for your local bank branch to be virtual? 


Read more

PUBLIC SECTOR


27 July 2020

The Public Sector is slow but does it have to be?


Read more