It’s no secret that there is still a great deal of legacy technology running the insurance business typically mainframes. Not that there is anything wrong with that many of these systems have been perfected, tweaked and honed over the years, to the point that they continue to support operations in a robust and secure way.
However, a recent study suggests that many of these systems may be starting to get in the way of progress. Numerous executives now view their legacy systems as detriments to competing in an increasingly digitized marketplace. A new report from State Street, based on a recent survey of 321 insurance industry executives conducted by the Economist Intelligence Unit, finds overwhelming demand for new technology platforms to face a fast-changing market.
Is it a case of blaming technology for management shortsightedness, or is the technology itself now a roadblock? Throughout the course of the information technology revolution in recent decades, there has been a presumption that dropping the latest and greatest technology on top of organizations often at huge cost will suddenly start to deliver profits and attract new customers. It’s important to be technology savvy, but it’s even more important to have good, entrepreneurial management that is open to innovation.
Much of the pressure for innovation in the insurance industry may be coming from customers themselves. Namely, the survey finds the market for insurance products is undergoing disruptive change with 78 percent of respondents facing growing demand from their customers to invest in new technology. To meet that demand, insurers are investing in customer relationship management systems (58 percent), social media tools (57 percent) and technology to capture new customer insights (50 percent).
The challenge for many insurers isn’t the performance of their legacy systems per se; it’s that competitive upstarts are launching with the latest generation of cloud, mobile and analytic—friendly platforms. Close to half of the executives surveyed, 48 percent, say they spend a considerable amount of time struggling with legacy IT issues.
Even the asset management side of the business which typically get first pick at more modern systems encounters this challenge. The survey finds fewer than two thirds (58 percent) are very confident their current technology and operating platforms can support changes to investment strategy and only nine percent rank as “excellent” their ability to integrate investment data from multiple sources to achieve a comprehensive portfolio view.
Organizing and managing technology resources is also a challenge. The survey finds a significant cultural divide between the IT and business sides of insurance companies. Only 28 percent of insurance executives feel their technology operations are aligned with their businesses. In addition, only 39 percent can say that their organizations have mastered the art and science of collecting and aggregating data that can be turned into actionable insights.
Of course, it’s never advisable to rip and replace legacy systems with something entirely new. Much better, instead, to choose from a range of less radical solutions and approaches, such as service-orienting key aspects of legacy applications so they are available as standardized interfaces across enterprises, or developing a private cloud and data virtualization layer that makes back-end systems and data available to all decision makers and new applications. Even today’s modern mainframes IBM’s System z are highly configurable to support cloud, mobile and big data analytics, as well as even run Linux and Windows applications. All it takes is enlightened management, working with business-minded IT leaders, to determine where these new investments should be made.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at firstname.lastname@example.org.
This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.
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