Insurance Technology Featured Article

The Gains Are Worth the Headaches When Refreshing Legacy IT Systems

December 27, 2012

Replacing legacy IT systems is essential for business agility, and most businesses know it. But the cost and hassle of implementing infrastructure upgrades keeps many firms tottering on without the IT necessary to meet their business goals, according to a new study by research firm, Celent.

Roughly 58 percent of respondents cited business agility as the main benefit of core systems replacement, according to the study, which surveyed 141 insurers, more than a third of which have more than $1 billion in annual premium.

The benefits of increased underwriting efficiency through workflow, rapid product design and improved customer service are clear, according to Celent, but it says that many firms fail to act on this knowledge because it is a big job and the quantifiable monetary benefits are hard to accurately forecast.

“Why does Celent dedicate so much time to researching these engines? It is the misalignment of the abilities and the business aspirations that attracts our attention,” the report noted.

“Should the business need to drive on the autobahn at 200 mph, the engine should be ready to go that fast,” the report noted. “This flexibility is what is missing from most great engines in the insurer. As such, restrictions are placed on what the business is able to execute. Current engines may allow the insurer to speed up, but not too fast, and certainly not to execute any emergency braking.”

The biggest challenges of legacy systems, according to respondents, were inflexibility of applications, inflexibility of data models and difficulty of integrating with other systems.

But replacing legacy systems are not easy, and the report found that companies that undertake legacy upgrades struggle the most with having the right staff in the right areas to take on the challenge, deciding on the best approach for the legacy modernization program, and managing the impact on the organization.

IT departments need to improve the accuracy of their requirements definition, system configuration, data conversion and system integrator costs, noted the report, and the needs, costs and goals of system replacement must be more clearly communicated to senior management. Yet, many IT departments fail to treat this business case for upgrade as a living document, which hinders acceptance and adoption.

Managing the complexity of an IT change also hinders adoption, according to the report. The IT landscape has grown and so have many interfaces, interdependencies on systems and the technology stack, and using an outsourcing partner is often viewed as adding complexity. Yet, insurers are ready to leverage the strategic skills and expertise of third parties, noted the report.

Some suggestions that insurers might want to take to heart when upgrading legacy systems include making sure that legacy modernization is undertaken with backing by senior management, as any upgrade will have a significant impact on several areas of the business; breaking upgrades into manageable projects that last no longer than six to nine months, and having associated benefits with each project; and avoiding the creation of new systems that will quickly turn into the legacy systems of the future by leveraging a service-oriented architecture that allows for business logic to be developed once and used whenever required, with incremental replacement over time.

Celent also noted that outdated business rules and processes are often embedded in legacy systems, and partnering with a handful of system integrators with deep expertise and knowledge is an important factor for minimizing risk during an upgrade. 

Want to learn more about the latest in communications and technology? Then be sure to attend
ITEXPO Miami 2013, Jan 29- Feb. 1 in Miami, Florida. Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.





Edited by Peter Bernstein

Article comments powered by Disqus

Related Insurance Technology Articles

Miniter Group Upgrades Insurance Tracking Software with OCR

Miniter Group, a provider of software for business in the insurance industry, recently announced the latest upgrade to its Borrower-Centric Insurance Tracking software, which includes the major addition of optical character recognition technology. [ Read More ]
03/02/2015

SS&C Launches Services to Manage Insurers' Non-traditional Investments

SS&C Technologies Holdings, Inc., a provider of financial services software and software-enabled services, recently launched a new accounting and reporting service for insurance and reinsurance companies looking to better manage non-traditional, high-risk assets such as Schedule BA and syndicated bank loans. [ Read More ]
03/02/2015

Independence Holding Company Platform Administers Health Products on Private and Public Exchanges

As those who live in the U.S. have become more than aware in the past few years the administration of health care exchanges, be they public or private, is an extremely difficult to do not just correctly but cost-effectively as well. News from Independence Holding Company is that IHC Health Solutions, Inc., which administers multiple health insurance lines of business for IHC's carriers and other insurance companies, has launched EbixEnterprise, a state-of-the-art system in conjunction with Ebix,… [ Read More ]
02/26/2015

PROS Cameleon CPQ Provides Insurer AG2R LA MONDIALE Greater Agility and Flexibility

PROS Cameleon CPQ enables French insurance group AG2R LA MONDIALE to expand its multi-channel sales capabilities. [ Read More ]
02/25/2015

Events

Weekly Live Demo
Contact Center Solutions

Register Today!