Differences among regions and countries notwithstanding, phasing out legacy systems and practices in order to innovate and provide improved service levels for agents and customers are pivotal issues for insurers worldwide.
That is the overriding recommendation of a new report, entitled Legacy Transformation in Insurance: Differences across Continents.” Released recently by Celent, the report is authored by Karen Monks and Nicolas Michellod, both senior analysts with consultancy’s insurance practice.
Legacy and eco-system transformation initiatives, investments and programs are quite different for insurers in different regional markets, but they are all based on the need to eliminate legacies that are constraining their ability to innovate, especially in terms of the services and experience they provide agents and customers. The extent to which they succeed at this within the next five to seven years, the report maintains, will determine whether or not their businesses remain viable.
In some cases, insurers are still using systems that are 40 years old, according to the report. These are expensive to maintain, inflexible, and typically can’t adapt to today’s customer demands. In general, notes Monks, insurers are investing in new systems and practices, but “how they do it differs among regions."
While some insurers opt to surround or contain their legacy systems, others replace them in entirety.
The most common methods include full replacement with a new system developed internally from the ground up or with a commercial, off-the-shelf package; wrapping and extending the current system using rules, BPM, content management and portals, or undertaking a program of continuous improvement that combines elements of both the full replacement and the wrap and extend strategies.
Regional CIO surveys conducted during the last quarter of 2013 in Asia-Pacific; Europe, the Middle East and Africa; Latin America and North America revealed that:
Latin American insurers are investing in core system replacement or modernization, while European and Asian insurers are concentrating on upgrading finance and supporting systems.
North American insurers lean toward making incremental improvements to their legacy systems compared with Asian, European, and Latin American insurers, who are more likely to opt for a complete replacement by purchasing a commercial package.
When thinking about legacy transformation, managing risk is the top concern for most insurers.
Insurers in all regions are hesitant to outsource core systems, especially policy administration.
European and Asian insurers are willing to deploy policy administration in a Software as a Service model, but Latin America and North America are less inclined to adopt this model.
Insurers are still wary of cloud computing, and very few are willing to develop or put critical systems in production in the cloud.
This story originally appeared on Insurance Networking News.
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