There’s a lot of hype along the lines of “adapt or die” when it comes to legacy systems replacement for insurers. Unfortunately, the urgency in this statement is misleading. Legacy systems are not a Y2K problem – there’s no ticking time bomb. And legacy systems or not, it takes an insurance company a long time to die. Policies are sticky. Renewal rates are high as long as you don’t raise premiums or stop paying claims.

A more accurate, but maybe less catchy, slogan might be “Adapt or Decline.” Without digital channels, effective data analytics, and agile core systems, insurers will face declines. Their agents and customers will first tolerate and then resent their poor communications capabilities. Their actuaries, underwriters, and claims adjusters will start to under-perform the market for lack of data and analytical capabilities. Their product freshness will grow stale compared to more agile peers as core systems inhibit speed-to-market.

Legacy replacement is not about avoiding death – it’s about making the hard decision to arrest the decline sooner rather than later.

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