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Making Insurance Legacy Systems More Efficient With Automation

The wave of digital transformation has been sweeping across industries in recent years, from healthcare to retail, aviation, and even non-profits. But the insurance sector has been slow to catch up. 

Today, approximately 80% of global insurers still depend on outdated legacy systems to manage core processes. These systems are severely inefficient, leading to longer claim processing times, poor customer satisfaction, and increased costs. To alleviate these issues, they end up pouring large sums of money to maintain the systems. In fact, research shows that insurers allocate at least 70% of their IT budgets toward infrastructure support, which is a significant waste of resources.

One possible solution would be system modernization through automation. By embracing automation technologies, insurers can reduce expenses, and align more effectively with contemporary customer expectations and regulatory requirements. 

Self-Service Legacy Systems Automation for Business Users

Automating self-service capabilities within legacy IT systems empowers business users to access and manage data without IT support. This process involves automating operations for carriers, making it easier to manage tasks like client and claims management, policy administration, and insurance accounting. Also, it increases processing efficiency and reduces the number of urgent support tickets IT staff need to handle. 

According to the 2024 Global State of IT Automation Report, about 88% of businesses surveyed offer self-service IT automation to end-users. By decreasing reliance on specialized IT staff, this self-service automation allows insurers to focus on strategic initiatives, helping them manage routine inquiries and transactions while freeing up resources for transformative projects.

Schedule Workflows Across Legacy, Modern, and Third-Party Technologies

Insurance companies often work in isolated departments, making it tricky to coordinate tasks that involve different teams and systems. They usually use a mix of legacy and modern technology, along with third-party systems. 

Automating workflows across these technologies ensures seamless integration and data flow. This makes handling compliance reports, underwriting, and reserves easier. Studies suggest that companies using automated workflows are 60% more likely to boost efficiency. Automation ensures updates, data transfers, and system checks happen smoothly, even among disparate systems.

Reduce Manual Tasks for Human Operators

According to credible sources, around 400,000 workers could leave the insurance industry by 2026.

This challenge is not unique to the US – it’s likely happening globally. Many workers are getting ready to retire, technology is changing fast, regulations are shifting, and what customers want is evolving, too. Unfortunately, the next generation of workers might not be familiar with the legacy technology being used in insurance.

To deal with this, insurance carriers need to start automating some tasks now. Studies indicate that automation can cut processing claims costs by up to 30%. Automation not only reduces manual work for human operators, it also improves accuracy. Workers can focus on higher-value tasks such as customer engagement and strategic planning.

Using Automation to Maintain the Competitive Advantage

Embracing digital technologies is critical for keeping ahead of the curve in the increasingly competitive insurance sector. Automation, for example, enables industry players to respond swiftly to changing market conditions and growing expectations from customers. Insurers can provide more innovative services by automating regular operations and accelerating decision-making. This adaptability is critical for being relevant in a digitally driven environment.

Why Do Insurance Companies Still Rely on Legacy Systems?

Despite the many benefits of modern systems, insurance companies still heavily rely on legacy core systems. Several factors contribute to this: concerns about cloud computing, time and cost considerations, and the need for additional training. Let’s explore each of these factors.

Cloud Security Concerns

Providers are often hesitant to move from their core insurance system to the cloud due to significant security concerns. With about 82% of cyber breaches originating from cloud sources, this caution is understandable. The rise in cyberattacks and data breaches makes many insurers wary of placing their sensitive information in the hands of 3rd-party cloud services. To prevent unauthorized access, data encryption issues, and system vulnerabilities, many insurance companies prefer to stick with their internal legacy systems.

Time and Expenses

The time and expense associated with updating legacy systems pose a significant obstacle for insurance companies. The intricate process of integrating older systems with cloud-based structures and applications can be quite daunting. Also, the expenses linked to infrastructure upgrades, data migrations, and resolving compatibility issues can be substantial. These factors force many insurance providers to prioritize maintaining their existing legacy setups rather than venturing into costly and time-consuming transitions.

Skills Gap

Another significant reason for the continued use of insurance legacy systems is the potential skills gap. Employees accustomed to older technologies often find it challenging to switch to new systems. The transition requires extensive training, and many would prefer to stick to the familiar systems.

A survey revealed that 21% of respondents cite resistance to change (which may be due to training and transition difficulties) as a major barrier to legacy modernization. This reluctance to adopt new technologies reinforces insurance companies’ hesitation to move away from legacy systems.

Strategies for Effective Legacy System Transformation

Insurance legacy system transformation is essential for staying competitive and leveraging modern solutions. Here are four strategies to manage this transformation effectively.

Define Your Goals

Set clear goals from the start. Are you looking to cut expenses, expedite claim processing, increase customer satisfaction, or increase efficiency? Whatever the motivation, a clear set of goals will direct the entire procedure. This is the method to follow.

  • Outline what you want to achieve.
  • Identify KPIs to measure success.
  • Make sure transformation goals align with the overall business objectives.
  • Engage stakeholders and carry everyone along.

Explore Open APIs

Application programming interfaces, or open APIs, are freely accessible resources that facilitate communication between various software programs. They enable developers to easily connect and communicate data between systems since they are made to be easily accessible. Open APIs are key to modernizing legacy systems. They enable insurance companies to:

  • Integrate legacy systems with modern applications for a smooth transition.
  • Enhance existing systems’ functionality without a complete overhaul.
  • Enjoy greater flexibility and scalability.

Avoid a Narrow Focus

Addressing specific issues is important, but focusing only on isolated problems can be limiting. Instead, take a holistic approach and consider the entire system. By doing so, you can identify interconnected issues and develop strategies to address them collectively. This approach ensures a more comprehensive and effective transformation. Here’s how:

  • Conduct comprehensive assessments to identify all areas needing improvement.
  • Consider the long-term impact of changes rather than just immediate fixes.
  • Ensure all departments and processes are considered for a cohesive and integrated plan.

Develop Streamlined and Innovative Strategies

Legacy systems often possess inherent complexity, making it difficult to streamline business processes. A good approach is to come up with innovative business models that simplify operations and cut out unnecessary complications. This involves:

  • Automate processes to ensure a smooth transition.
  • Incorporate cutting-edge tech like cloud computing, AI, machine learning, and business intelligence.
  • Encourage continuous improvement.

Case Studies of Insurance Legacy System Transformation with ModLogix

The ModLogix team has handled dozens of successful legacy system transformations for insurance industry clients. Here are some examples.

Migrating WinForms to .NET Core 3.2

At ModLogix, we partnered with a major financial and insurance services provider in the healthcare sector following a merger and acquisition (M&A). This M&A process necessitated the integration of a modern cloud-based SaaS platform with a 20-year-old WinForms desktop application. The outdated system, reliant solely on Windows, faced productivity issues, frequent user complaints, and a maintenance problem due to developer shortage.

We were able to successfully migrate the WinForms application to .NET Core 3, overcoming technological disparities and data integration challenges. The transformation included redesigning the app to align with modern UI/UX standards and optimizing the SQL Server database. This legacy system transformation significantly enhanced system usability, performance, and maintainability, ensuring seamless operations.

Database Upgrade for Healthcare Insurance Service Provider

A global insurance service provider in the healthcare sector approached ModLogix to update its databases. Their software, essential for healthcare facilities’ financial management, was struggling with the growing volume of data. The legacy Microsoft SQL Server 14 database could no longer handle the workload, leading to inefficiencies and rising costs.

The ModLogix team successfully upgraded the database to Microsoft SQL Server 17, ensuring a seamless data migration and standardization. We preserved data security and ensured regulatory compliance. This transformation doubled core system performance, reduced maintenance costs, and improved business continuity, ultimately leading to higher ROI and market expansion.

To see more of our successful projects, click here.

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