This content originally appeared on DEV Community and was authored by Maruti Techlabs
Over the past few years, modernizing legacy systems has become a common strategy among organizations. It has become evident that operations, marketing, and distribution processes are already transitioning to digital.
The insurance sector, in particular, has introduced numerous services and platforms to align with its competitors. However, evolving trends and consumer preferences propels insurers to practice a continual innovation curve.
A prime reason to introduce modernization to legacy applications is to compete effectively with startups in the insurance space. New startups don’t possess the limitations posed by legacy systems, providing users with a digital-first - anytime, anywhere convenience.
A World Retail Banking Report by Capgemini revealed that 95% of banking executives said legacy applications and core banking processes hinder their leveraging of data and customer-centric strategies. Additionally, 80% stated that poor data capabilities impact customer life cycle enhancements.
Insurance organizations constantly battle the perception of maintaining and continuing with legacy systems or opting for a complete digital makeover. To ease this confusion, we bring you this blog, which shares insights on the challenges, benefits, and best practices that insurers can employ when planning legacy app modernization.
Understanding Legacy Systems
Legacy systems are outdated hardware or software systems that organizations continue to use due to the substantial investment in developing these technologies or the challenges associated with replacing them.
Insurance companies haven’t historically been at the forefront of embracing emerging technologies. Additionally, their minimal investments in the technological space are fueled by following the ‘one-size fits all’ approach.
Compared to today’s latest technology, these applications are messy code mazes that are difficult to navigate, inherently slow, and costly to maintain. They are also incompatible with modern systems and vulnerable to cyber-attacks.
A significant concern with legacy systems is that they are created using old programming languages, which fewer programmers understand. Due to these reasons, insurance organizations seek efficient and secure means to modernize legacy applications without compromising their business operations and core functionalities.
Let's begin by understanding insurers' most prominent challenges when planning legacy application modernization.
Challenges With Legacy Application Modernization
Many insurance organizations today are at a crossroads. Some try to keep their customers happy by offering a balance between their old systems while introducing new advancements per market demand. Others are considering revamping their legacy applications and processes to reinvent themselves as insurtech organizations. According to a survey by the EIS group, there was a 59% increase in investment in insurance companies' digital infrastructure in 2021. Here are some crucial challenges that insurers face with legacy application modernization.
1. Evolving Regulations
Insurance organizations are experiencing a perpetual tide of transformation, which includes new capital requirements, educating customers about their digital investments, and factoring in the effects of climate change on risk assessments. Additionally, other regulatory priorities can change the fundamentals of insurance processes in the future.
The plethora of diverse regulations makes it challenging to ensure compliance, and there is an apparent lack of coordination between state, federal, and international agencies. Hence, insurers must adopt legacy application modernization to devise flexible systems incorporating immediate changes.
2. Managing Maintenance Costs
In response to the economic downturn post-COVID-19, insurers strategically reallocated resources by cutting costs while investing in areas such as enhancing customer experiences and restructuring business models.
Cost optimization and managing siloed data with legacy systems is arduous. Application modernization can aid this process. Subsequently, modern systems powered by microservices are easier and cheaper to maintain.
To achieve this, insurers can take an iterative rather than a complete rip-and-replace approach. This makes it easier for insurance companies to allocate resources more effectively while employing a budget-friendly approach.
3. Siloed Data
Another looming problem with legacy systems is their incompatibility with modern systems. Sharing crucial information, like policy and claims details, with other devices or programs can become challenging. Modernizing this infrastructure can help foster active communication between different systems, offering seamless integration and accessibility.
4. Compromised Security
Insurance organizations face data vulnerability due to the extensive data they handle. Cyber attackers today use sophisticated methods to weave a trap that one can easily fall prey to. Additionally, old IT systems pose an even greater risk by not shielding customer data with the latest cyber advancements.
Leveraging modernized infrastructure empowered with the latest cybersecurity tech adds layers of security and enables insurers to employ new security practices across the company.
5. Evolving Customer Expectations
Modern consumers are accustomed to the conveniences and enhanced customer experiences of technology, particularly in sectors like banking. This has raised their expectations for insurers to adopt a similarly tech-driven approach.
Catering to a massive user base with lightning-fast services using legacy systems is next to impossible. Insurance organizations need to equip their applications with microservices to stay competitive and fulfill consumer expectations. Microservices offer tiny and independent building blocks that can be rolled out, giving insurers the freedom to develop and deploy at their will.
6. Claims Processing
Sharing quotes on the go with customers is a must for insurers as it accounts for more sales. However, offering quick quotes is difficult without investing in modern-day techs like artificial intelligence. Modernizing these processes with automation adds speed and digitization to claims processing. It directly contributes to customer satisfaction while exponentially boosting engagement.
Read the Full Article: 8 Best Practices for CTOs to Modernize Legacy Systems in Insurance
This content originally appeared on DEV Community and was authored by Maruti Techlabs
Maruti Techlabs | Sciencx (2024-07-24T06:17:11+00:00) 8 Best Practices for CTOs to Modernize Legacy Systems in Insurance. Retrieved from https://www.scien.cx/2024/07/24/8-best-practices-for-ctos-to-modernize-legacy-systems-in-insurance/
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