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

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

The report suggests redefining “legacy” as determining whether a system is “fit for purpose,” rather than if it is old. Xuber says, “Fundamentally, there are two questions that you need to ask yourself 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 you fit enough?”

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

Xuber says the case for change includes shining a light on the hidden costs of not modernizing. For example, the report points to speed-to-market abilities. “It is said that older software, running on code such as COBOL, still operates more effectively than newer systems in environments with intensive business processes and high volumes of transactions, even though the cost of maintenances is high,” the report says. “However, such complex systems often prevent businesses from moving quickly enough to deploy new services or distribution channels ahead of their competition due to the age of the architecture.”

Customer expectations come into play as well, and insurers need to be able to respond to increasing demands for a consistent experience. “A prime example is where disparate data models don't enable claims and policy to share information in a single view—insurers that maintain this siloed approach are restricting their ability to drive customer satisfaction and lower costs.”

Insurers could also be missing out on top talent by not upgrading systems. Xuber says the “best of the best will seek out organizations that champion progressive initiatives such as mobile Internet, the Internet of Things and socially integrated applications—and that could be your competitors if your own house isn't in order.”

Beyond showing the penalties a company may suffer by standing still, those making the case for change must also quantify the benefits the company will realize if it does commit to upgrading systems.

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

Underwriting—“How many policies do you write now and how many would a new system or process enable you to write?”
Customer—“How much does it cost you to retain a customer versus winning a new customer? If you knew your customer better through enhanced analytics, for example…what does that do to your costs of customer acquisition and retention?”
Analytics—“What would you stand to gain by giving the power of information to more people within your organization?
Claims—“What do claims cost you to manage in your current scenario, and what does that look like with a new system that enables data sharing with policy?”
Messaging—“What cost savings can be achieved by reducing the manual re-keying of data and moving toward e-trading and the electronic import of data?”
Acquisitions—“What is the cost of integrating new businesses into your own, and are these costs reduced with a new landscape?”
People—“Survey your people. Ask them if they believe their systems could be improved. Does anything frustrate them? How could they service their customers better?”

Special Reports /

The Case for Change Goes Beyond Using the Term 'Legacy'

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