Over half of insurers surveyed have made some progress inupgrading their old legacy computer systems, while a quarter havemade significant progress, according to a recent report by industryanalyst Celent.

“The tide of change has arrived,” said the Boston-basedCelent.

The report–”The Challenge of Legacy Modernization”–discusses theresults of a detailed survey of almost 100 insurers. The reportlooks at the state of the information technology environment,future plans, views on data migration, modernization preferencesand vendor roles.

“Modern languages and systems have many benefits to the ITdepartment,” said Catherine Stagg-Macey, senior analyst in Celent'sinsurance practice and author of the report. She added that rippingout every line of COBOL code was not the intention of a legacymodernization program.

“Legacy applications should be measured along criteria such asease of integration, skill sets, vendor support and scalability. Ifthe applications meet [these] criteria, the time for replacementhas not yet arrived,” she said.

“It is imperative insurers address the legacy problem. How thisis done is dependent on the current IT environment, business painpoints and the company's risk appetite,” said Celent. “With carefuldesign and planning, insurers can avoid creating the nextgeneration of legacy systems.”

The firm, in its report, added that “with the global [financial]crisis well underway, insurers need to reexamine their IT projectsagainst a combination of strategic goals, including getting biggerby growing revenue, getting leaner by reducing expenses andincreasing productivity, and getting smarter by making better useof their data.”

Celent cited several viable approaches to addressing legacy ITwithin an insurer but no absolutes. Survey respondents showed “anoverwhelming preference” for replacing legacy with new systems.“Close to two-thirds of both large and midsize insurers had this asone of their preferences,” said Celent.

The second preference among respondents is to wrap or extend theexisting system, leveraging existing investments where possible,said Celent.

“For large insurers, the third preference would be to outsourcepart of the application portfolio, while midsize insurers showed apreference for rewriting applications in modern code,” the surveyfound.