For 50-odd years, the way insurance has worked has remained the same. But in the last few years, catalysed by the pandemic, the rise of digital solutions and insurtech looks to break down historical insurance preconceptions have emerged.
Innovative solutions continue to change how insurance companies interact with customers, how they underwrite and price policies, and how they manage risk. But how long will it truly take for legacy systems to go extinct, if ever?
We hear from a number of industry experts, who share their opinions on if it is possible to fully modernise systems, and how long this could take.
‘Some providers will wait too long’
The length of time it will take to move away from legacy systems is dependent on the technology providers, says Paul Yates, product strategy director at cloud-based insurance software provider iPipeline.
“The length of time that providers cling to their legacy systems depends on how easy technology providers make it for them to integrate their existing book of business into a new fully digital ecosystem that they can control.
“For example, we specifically designed our SSG back office system to administer legacy books and new business within one simple ecosystem.
“The concern is some providers will wait too long to move away from legacy and eventually the brand damage and customer flight won’t be containable. Poor online service and inefficiency isn’t something consumers and advisers are willing to tolerate any more.”
‘Legacy systems are an integral part of the insurance IT landscape’
Paul Rusu, director of consulting and insurance solutions at digital authority SoftServe, explains that while insurers recognise the importance of transitioning away from legacy systems, many changes have not yet begun.
“Legacy systems are an integral part of the insurance IT landscape. Companies have developed their legacy systems for decades and they are not going to disappear soon. But although businesses are dependent on them, they recognise the importance of transitioning away from those cumbersome structures if they are to improve competitiveness and efficiency.
“Radical change is rarely embraced as both internal user acceptance and skills are usually still available. Consequently, many jobs depend on existing systems. Most insurers have therefore tried to optimise their system landscape over time due to fears of business and IT disruption.
“Therefore, they are replacing older systems in measured steps. System landscapes are slowly in upheaval, allowing future-oriented architectures and uniform SaaS or IaaS cloud-based solutions to be explored to enable the integration of new technologies and modules.
“This means interfaces between legacy systems and state-of-the-art technologies can be deployed in order to increasingly support digital capabilities.
“Most insurers realise that their main source of differentiation and competitiveness will lie in the ability to better serve customers.”
There is ‘a long runway before extinction’
The extinction of legacy systems is still far off, explains Bruce Lucas, founder and CEO at Slide Insurance. Lucas details the current challenges facing the removal of legacy systems.
“Insurers need to modernise their systems to compete and meet evolving customer needs. However, due to the time, cost, and complexity of moving off legacy solutions, there will be a long runway before extinction.
“Many insurers have begun this process by standing up new systems and converting the less complex business.”
‘Talent pool is diminishing year-on-year’
Graham Gordon is a strategy and product marketing director at insurance software provider Sapiens. Gordon explains how market conditions mean that legacy systems are already quickly becoming outdated.
“It won’t take long for legacy systems to become outdated. The talent pool is diminishing year-on-year. As new young developers, network administrators, or technical architects step in, they are unlikely to select old technologies or outdated coding languages and technology stacks.
“For insurers to remain relevant, insurance software must connect ecosystems, data enrichment and micro-services to allow for mass products to address increasingly smaller niches.
“Organisations relying on legacy systems will miss business opportunities delivered by insurance 2.0, namely cost reduction, insights and analytics, and new customer-centric services. They should therefore reconsider embracing the insurtech revolution.”