The main business benefit of a core systems replacement is increasing business agility, according to 58 percent of respondents to Celent’s “Tracking Progress In Core Systems Replacement, Global P&C Edition.” Just 12 percent of respondents pursue such projects to reduce business costs, 11 percent to reduce IT costs, 9 percent had other reasons, 4 percent had no business case and 3 percent were pursuing such projects in efforts to increase revenue.
Celent said that while the benefits of increased underwriting efficiency through workflow, rapid product design, or improved customer service may be instinctively clear, attaching quantifiable monetary benefits to such projects can be difficult. However, addressing the legacy IT environment will become the cost of staying in business.
“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 authors said. “Should the business need to drive on the autobahn at 200 mph, the engine should be ready to go that fast. If an emergency stop is required, followed by a 180-degree turn, the engine should enable that too. 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.”
Asked to rate issues related to their legacy systems on a scale of “not important” to “very important,” the top issues were: inflexibility of applications, inflexibility of data models, difficulty of integrating with other systems. “This raft of issues stands in the way of the IT department delivering on business requirements and supporting business strategy,” Celent said.
Findings from the research include:
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The greatest challenges to core systems replacement projects are largely the same as they were two years ago, the last time Celent conducted this study. The biggest challenge continues to be having the right staff in the right areas to take on the challenge. Next was deciding on the best approach to the legacy modernization program, followed by managing the impact on the organization. Two years ago, those challenges were ranked in reverse order.
Early adopters of legacy modernization programs offered the following lessons:
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The online survey asked questions about current state of the IT environment, future plans, views on data migration and modernization preferences, and vendor roles; 141 P&C/general insurers responded to the survey. More than 40 percent of respondents had more than $1 billion in annual premium; most respondents were on the IT side (46 percent), followed by a mix of IT and business (32 percent), and 22 percent on the business side.