Part II: Insurers Focus on Legacy Modernization

As I wrote last week, insurers are continuing to look at different ways to modernize their existing legacy systems. The first option that most insurance companies are looking at is doing a full system replacement. Yes, there are several benefits to this option, but there are also things you need to keep an eye on…

Prohibitive Cost
Deploying a replacement system is costly and resource-intensive, and many organizations simply underestimate the time and resources required. For example, before implementing a replacement, organizations must have a true understanding of both internal costs and processes – something many insurers are not used to measuring. Additionally, time required to implement a replacement is most often measured in years and not months. More costly in dollars – and likely in time – than any other alternative to managing a legacy system, replacement should only be considered if these resources are not an issue.

User Reluctance
Perhaps more underestimated than any other reason, user reluctance to use a replacement is a bigger issue than most insurers think – particularly IT leaders who are accustomed to technology changes. User reluctance is a factor that is hard to measure or completely predict, but a factor that can still cripple replacement projects.

In fact, insurers have been hesitant to change any systems out of fear of losing both short-term and long-term productivity from their often very experienced workforce – not to mention concerns about their potential inability to train employees in the new systems.

Speed of Delivery
Given the vast amount of data stored in legacy systems, replacements are rarely rolled out quickly. Because the legacy application has been in use for even as little as, say, 20 years (and that may be on the low end for many insurers), extracting that data and finding a way to integrate it into the new replacement may not be such an easy task and often requires extensive custom coding. Purely data-driven, legacy systems are great at outputting numbers and reports, but finding a way to use that data so that it makes good business sense often requires great data analysis to integrate multiple legacy systems.

Again, I know that there are benefits to replacement – especially looking at what you have today; but next week I’ll talk about some of the alternatives outside of a full replacement.

Eric Willis

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