While the term “legacy” is frequently thrown around as anattempt to motivate insurers to update aging platforms,decision-makers would be better served to make the case for changebased on whether their systems are able to keep pace with theirgoals, rather than how old those systems may be, a new reportsays.

It its report, “When is Legacy Not Legacy at All?”insurance-software provider Xuber says, “Doom and gloom is an easypicture to paint in an effort to elicit change, but therein liesthe rub. If legacy systems are such a threat to operations,why do commercial insurers continue to rely on such systems to runtheir businesses? Because they tend to work, that's why.”

The report suggests redefining “legacy” as determining whether asystem is “fit for purpose,” rather than if it is old. Xuber says,“Fundamentally, there are two questions that you need to askyourself to help you create your burning platform for change.Firstly, where do you want to be, i.e., your purpose? And secondly,will your current resources enable you to get there, i.e., are youfit enough?”

Xuber contends that oftentimes this case is not made to theappropriate executives. And it is not as if the executives cannotsee that there is a case for technology change, they may just notsee what that case is. Xuber notes that at the 2013 ITC conference,“100 percent of attendees agreed there was a case for technologychange in the insurance market, yet only 53 percent believed thatthe case had been made.”

Xuber says the case for change includes shining a light on thehidden costs of not modernizing. For example, the report points tospeed-to-market abilities. “It is said that older software, runningon code such as COBOL, still operates more effectively than newersystems in environments with intensive business processes and highvolumes of transactions, even though the cost of maintenances ishigh,” the report says. “However, such complex systems oftenprevent businesses from moving quickly enough to deploy newservices or distribution channels ahead of their competition due tothe age of the architecture.”

Customer expectations come into play as well, and insurers needto be able to respond to increasing demands for a consistentexperience. “A prime example is where disparate data models don'tenable claims and policy to share information in a singleview—insurers that maintain this siloed approach are restrictingtheir ability to drive customer satisfaction and lower costs.”

Insurers could also be missing out on top talent by notupgrading systems. Xuber says the “best of the best will seek outorganizations that champion progressive initiatives such as mobileInternet, the Internet of Things and socially integratedapplications—and that could be your competitors if your own houseisn't in order.”

Beyond showing the penalties a company may suffer by standingstill, those making the case for change must also quantify thebenefits the company will realize if it does commit to upgradingsystems.

Xuber identifies seven areas where insurers could questioncurrent processes to see if they would benefit from change:

• Underwriting—“How many policies do you writenow and how many would a new system or process enable you towrite?”
• Customer—“How much does it cost you to retaina customer versus winning a new customer? If you knew your customerbetter through enhanced analytics, for example…what does that do toyour costs of customer acquisition and retention?”
• Analytics—“What would you stand to gain bygiving the power of information to more people within yourorganization?
• Claims—“What do claims cost you to manage inyour current scenario, and what does that look like with a newsystem that enables data sharing with policy?”
• Messaging—“What cost savings can be achievedby reducing the manual re-keying of data and moving towarde-trading and the electronic import of data?”
• Acquisitions—“What is the cost of integratingnew businesses into your own, and are these costs reduced with anew landscape?”
• People—“Survey your people. Ask them if theybelieve their systems could be improved. Does anything frustratethem? How could they service their customers better?”