Core system modernization: insurance technology experts have been discussing it for the past decade, and Celent says it will continue to be on insurers’ priority lists for the next decade.

The difference? It’s finally more than just talk as progress is being made, according to Celent’s new report, “Reviving the Insurance Core Systems Business Case.” Improved capabilities and evolving competitive pressures suggest that an updated look at the business case may point toward action.

The action, Celent says, is a result of more than just lack of functionality in legacy systems or the inability to quickly bring about organic growth by developing new products and markets. Difficulties in hiring qualified IT staff with the necessary skills to support legacy platforms are real, and most insurers expect this issue to get worse. Ultimately, Celent says, the business case for legacy modernization should support incremental improvements, which are realized as hard benefits, but also enable the strategic flexibility that will allow insurers to compete more effectively.

Some insurers know this and are moving forward, converting to modern approaches and languages, bringing new functionality online and enabling quick product introductions and organic growth. But this isn’t done without challenges. In May and June 2011, Celent surveyed a wide range of insurers and vendors about their views on the business case for insurance systems modernization. Eighty-six insurers and vendors responded to the survey and said creating the culture change necessary to maximize benefits of the modernization and creating consensus within the IT and business organizations about the best path forward are major challenges in a legacy modernization project. Celent says it is up to both vendors and insurers to identify the areas that will impede a project's success before the project starts. This may require bringing the right resources to the project that will manage the culture change associated with the new system.

Another suggestion to consider before setting out on a modernization project? Explicitly address culture, core systems platforms, and vendor relationships by creating a modernization plan that articulates what needs to be changed, how those changes will be measured, and the concrete steps that will be taken to give the evolution momentum beyond what the passive players in the market are experiencing, Celent says.

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