When it comes to technology, the insurance industry tends to lagbehind. Yet insurance executives overwhelmingly believe adoptingmodern technology will lead to long-term fiscal growth.

What's causing the disconnect between intentions and action? Formany insurers, making an actual transition away from legacy systemsis too daunting.

Insurance carriers are clinging to systems and processes thatare decades old, silos of applications that create ongoing supportand maintenance issues and rudimentary modernization still lockedinto old technology. While insurance companies understand thatimproving technology would be beneficial, change is often toodifficult and daunting to take on while still maintainingfull-business services.

Many companies operate on highly customized core systems thatcontain massive amounts of data and have evolved to meet specificbusiness and regulatory requirements. Completely revamping to anew, more efficient operating environment in these cases is nearlyimpossible.

It is easy to understand why insurers are avoiding modernizationand continue to stick with legacy systems that are working for now.But as insurers continue to fall further behind modern technology,the potential revenue they're missing multiplies.

The good news is that there is a relatively simple pathinsurance executives can take to modernize quickly and smoothly.Two improvements over the past several years have made thetransition to modernized technology much easier for “early adopter”companies that have been willing to make the change.

The first was service oriented architecture (SOA) or morecommonly referred to as web services. SOA is a way to share databetween systems and applications to create operational improvement.SOA systems can move data into and out of legacy systems toaccomplish a required task more quickly and efficiently. Theability to connect legacy systems with new technology allows for asmoother transition into modernized structures without forcinginsurers to completely overhaul everything at once.

Business-intelligence systems have also helped insurancecompanies better transition to modernized structures.Business-intelligence systems are used to collect information andmake it easier to access throughout the organization. For example,insurance companies have extensive management and statisticalreporting requirements that require communication between severaldifferent systems. With business-intelligence systems, data withinsiloed systems—policy administration, accounting or claims—is mucheasier to access. With the ability to aggregate data acrossdifference business departments or siloed systems, insurancecompanies can deliver improved management reporting and insight aswell as simplified statistical reporting.

It's important for insurance companies to analyze currentsystems and truly understand what they can and cannot handle.Companies need to understand that data is what keeps theirbusinesses running, and accessing, reusing and repurposing thatdata is the key to making a significant return on investment intheir technology infrastructure.

It is commonly assumed among insurance executives thatlegacy-system replacement is the only option to improvingtechnological efficiency. But it has become clear that entirelyrevamping systems is simply not possible, and that solutionsto help increase efficiency while still maintaining current systemdata may be the easiest way to improve.

As a result, it is not crucial for insurance companies topartake in complete system overhauls to reap the benefits ofmodernized technology. Many companies have taken amiddle-ground approach by investing in business-intelligencesystems and SOA technologies that have allowed for the integrationof legacy-system data with modernized technology to streamlineworkflow. For many insurance companies this is a suitablesolution. For those that do plan to completely overhaul legacysystems in the long run, these types of services can act asexcellent transitions, as the shift from a core legacy system cansometimes prove to be more daunting than expected.

It is now more important than ever for executives to understandthe most effective ways to streamline their currentsystems. How insurers are able to go about this dependsentirely on what individual systems can handle. Regardless of whichpath is taken, investing in appropriate technology now will giveyour insurance business a significant competitive advantage in thelong run and can act as a stepping stone towards a complete systemoverhaul down the road.