Insurers Make Progress On Legacy Upgrades

A new report by industry analyst Celent has found that over half of the insurers surveyed have made some progress in upgrading old legacy computer systems, while a quarter have made significant progress.

“The tide of change has arrived,” said Boston-based Celent.

The report, “The Challenge of Legacy Modernisation,” discusses the results of a detailed survey of almost one hundred insurers, said Celent. The report looks at the current state of the information technology environment, future plans, views on data migration, modernization preferences, and vendor roles.

“Modern languages and systems have many benefits to the IT department,” noted Catherine Stagg-Macey, senior analyst in Celent's insurance practice and author of the report.

She added that ripping out every line of COBOL code was not the intention of a legacy modernization program. “Legacy applications should be measured along criteria such as ease of integration, skill sets, vendor support and scalability. If the applications meet [these] criteria, the time for replacement has not yet arrived.”

“It is imperative that insurers address the legacy problem. How this is done is dependent on current IT environment, business pain points and the company's appetite for risk,” said Celent. “With careful design and planning, insures can avoid creating the next generation of legacy.

“With the global crisis well underway, insurers need to reexamine their IT projects against a combination of strategic goals, including getting bigger by growing revenue, getting leaner by reducing expenses and increasing productivity, and getting smarter by making better use of their data,” the analyst firm said.

Celent added that there are several viable approaches to addressing legacy IT within the insurer, but no absolutes. In the survey, respondents showed “an overwhelming preference” for replacing legacy systems with new systems. “Close to two-thirds of both large and midsize insurers had this as one of their preferences,” said Celent.

The second preference among those surveyed is to wrap or extend the existing system, leveraging existing investments where possible, said Celent.

“For large insurers, the third preference would be to outsource part of the application portfolio, while midsize insurers showed a preference for rewriting applications in modern code,” the company found.

The new report provides a summary of the survey results, examining the strengths and weaknesses of different approaches and making the business case. It concludes with lessons learned from early movers.