Humans are sentimental creatures. We love progress, but often dread change. We want what’s new, but not if it means getting rid of the old—even if the old isn’t working anymore. This sentimentality plays out in virtually every industry, time and time again, and the insurance industry is no exception.
It’s why so many insurers are still clinging to their outdated legacy systems instead of adopting innovative digital technology.
But what’s wrong with the status quo? Can’t insurers still perform the same duties with their current system? And do the benefits of transitioning to new technology really outweigh the financial costs?
Imagine you’re about to ship a load of cargo across the ocean in an old wooden ship, when you learn that a motorized and much faster boat is available. At first, you’re skeptical. The old ship is loaded, the crew is trained, and of course, you already own the wooden ship. It’s taken dozens of journeys across the sea and hasn’t failed you yet.
But then you realize the old ship takes twice as long to cross the ocean as the motorized boat, if not longer. As you drown in overhead expenses and waste time dealing with outdated technology, you begin to wonder if the comfort of the old ship is really worth the inconvenience.
Legacy systems are plagued by the same kind of limitations. They remain frozen in time while being outpaced by newer technology that’s designed to move forward–not stay put.
Perhaps the biggest drawback is the lack of data availability. Trying to extract valuable insights from old systems is like trying to dig hard soil with a plastic spoon. And without access to real-time data about purchasing habits and product performance, insurers can’t conduct thorough market research or make informed decisions.
Personalization also becomes nearly impossible, despite its growing popularity among consumers. A 2017 study from Epsilon Marketing revealed that people are 80% more likely to choose a company that offers personalized services–but without sufficient data, directing customers to the right product becomes a guessing game instead of a targeted marketing strategy (The Future of Commerce 2022).
Legacy systems also suffer from something called a monolithic application: a single computing network that houses all operations under one roof. While this simpler application is ideal for new organizations, it struggles to keep up as companies expand. The interconnected structure prevents insurers from scaling individual components, and even the smallest change will send ripple effects throughout the entire platform. The result is a time-consuming experience for your employees, whose productivity is limited by a slow and costly application (Geeks for Geeks 2022).
All of these limitations trickle down to your company’s bottom line. But how different might that bottom line look if you abandoned your legacy system for a digital experience?
Insurance legacy migration presents an opportunity to modernize and streamline the company’s systems. By adopting digital technology, insurance companies can take advantage of the latest tools and technologies, which can improve efficiency, reduce costs, and increase competitiveness. Between lower costs of maintenance and more efficient workflows, insurers can save up to 50% when they adopt newer systems.
Data extraction also becomes much easier after the migration process. If legacy systems are hard soil, then digital technology is the soft soil that allows insurers to tap into a reserve of valuable insights about their business. Artificial intelligence, for example, helps companies detect patterns in customer behavior, develop detailed risk profiles, and evaluate the performance of their products in real time–which leads to more informed business decisions (Mapfre 2020).
New technology also removes the barrier of interconnectivity. Unlike legacy systems, modern systems allow each business service to exist in its own self-contained unit. So, if an agent wanted to address the billing service, they could make changes within that specific unit without having to redeploy (or reinstall/reconfigure) the entire platform (Geeks for Geeks 2022). The agility of a multiservice platform also aids its scalability, as companies are able to develop individual services and even expand to other countries.
These capabilities on the back-end translate to an improved user experience on the front-end. Insurance companies that are able to effectively migrate to new systems may be able to offer customers new features and services, such as online policy management and self-service options. Not only can customers interact with real-time data and complete the claims process right from their smartphone, the automated process reduces errors and expedites turn-around times (Aberdeen 2018).
A 2019 report from Salesforce stated that “84% of customers say the experience a company provides is as important as its products or services.” The expectation for seamless digital experiences has no doubt increased since the pandemic, and it’s an expectation that only modern digital technology can meet.
The thought of leaving behind a familiar system for modern technology can feel daunting, but this transition doesn’t happen overnight. Instead, as each policy ends, you can simply renew it in the new system. Sunsetting your old system over the course of a few years will prevent many of the complications associated with the migration process. In our next blog post, we will dive deeper into insurance legacy migration and how your company can make the transition as seamless as possible.
Progress without change is impossible–but thanks to insurtech, change doesn’t have to mean massive expenses or stressed teams. Instead, it means more productive employees, happier customers, and healthier companies. As the insurance industry shifts further away from legacy systems and toward innovative technology, your business can choose either to stay behind–or to forge ahead.