OPINION: Is modernising legacy insurance systems worth the hassle?

Digital transformation is on the agenda of many insurance companies, and a number have successfully and effectively deployed digital customer facing solutions, offering their customers unique and improved customer experiences. 

Alongside this customer-facing transformation, insurers have also begun implementing systems that support a world of mobility and data-driven insights. However, most insurers are still heavily reliant on old, legacy systems for long terms policies, which hinders this process.

Most of their legacy software and customers are housed on traditional - though no less stable and robust for it – mainframe systems. This poses a challenge as insurers struggle to migrate their legacy systems and data over to new systems.

The challenge

Mainframe systems are proven to be stable and reliable, and many insurers have invested significantly in them. New systems typically leverage cloud platforms which offer a far more streamlined user experience as well as easy, central access which enables mobility and real-time customer interaction.

Today’s markets demand this level of service, driving insurers to adopt modern systems. However, emerging data protection legislation demands that insurers retain single copies of customer data that are managed under specific controls and security parameters. Insurers need to decide whether to undergo the expensive and arduous task of modernising or find a way to manage both their legacy and new systems.

Most older systems are written around a policy centric algorithm, while newer systems are customer centric. Insurers that have elected to migrate their data and systems have often met with failure due to the incompatibility created by these different algorithms, leaving them straddling both their old and their new technology – a resource and cost expensive exercise.

Merging the two worlds

There is an easier, more efficient and vastly more cost-effective alternative to replacing old systems with new in such a way that they do not need to invest in resources to manage both systems. Insurers can create a ‘wrapper’ around their old mainframe systems which delivers an integration layer. This effectively allows insurers to retain their old systems and data on their legacy mainframe while accessing and using it as if it were part of their new system.

Insurers can slowly phase out and delete old data as and when it becomes unnecessary to retain, while still managing live policies housed on their mainframe via the integration layer to their new system.

Where to start

Insurers shouldn’t wait to modernise their legacy systems before implementing new systems. The simplest first step is to implement new technology and begin using it for any new customers that come aboard. By creating a wrapper around legacy systems, insurers can still service existing customers and access old data.

From there, insurers need to assess what products, services and data they have on legacy systems and build a strategy around what, if anything, to migrate and what to leave.

Insurers need to decide which new systems are needed for specific lines of business, determining whether old products will continue to sell and which new ones shall be created, either to replace old policy products or as entirely new lines of business.

Data for any policies or products that are retained can be migrated to new systems, typically after a level of modernisation. However, “end of life” policies that are still live can remain on the old system, allowing access via the integration layer between old and new.

A slow migration process can be followed by offering these customers the opportunity to switch to a new, alternative product, enabling them to be loaded onto the new systems as if they were a new customer. In this way, insurers can slowly migrate existing customers to the new system whiles simultaneously still being able to access their old data.

Old data on “dead” policies can be slowly eradicated as it becomes no longer necessary to retain that information.

‘Roboticise’; don’t modernise 

Old systems can be given a quick, relatively inexpensive “upgrade” by including robotics. Robotics will equip legacy systems with the modernisation and automation it needs to offer the user and customer experience associated with new systems without actually using the new systems.

Robotics eliminates the need for retaining resources to manage legacy systems, effectively allowing insurers to automate traditionally lengthy processes and procedures on old systems. Insurers can process claims, invoices, policies and more on their old systems within seconds or minutes, mimicking the performance of their new systems, thanks to robotics.

Insurers don’t need to crumble under the weight and expense of modernising legacy systems. Rather, they should hold on to their existing investment while adding creative ways to phase in modernisation, managing it like their new system until the legacy system is no longer required.

Kumar Utpal, Regional Sales Manager for Banking and Insurance at In2IT

PERSONAL FINANCE 

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