The insurance industry has a reputation for being slow on the uptake when it comes to modernisation and innovation…
However, as business practices were turned on their head at the onset of the pandemic, we saw an increase in reliance on digital systems and technological advances. This enforced shift allowed the opportunity for insurance brokers to build on the momentum of the rapid changes and acted as a sink-or-swim moment; but many brokers still felt that legacy systems were holding them back from modernising: an Insurance Times survey carried out during the Covid-19 pandemic asked participants what their main barrier to increasing digital touchpoints was; over half of the respondents stated that legacy systems were their biggest stumbling block (55%). However, findings from their Digital Adoption Report in October 2022 then revealed that 41% of the 175 brokers surveyed have fully implemented a cloud-based infrastructure (up from 22% in 2021). This indicates that the industry as a whole is making steps in the right direction, but many businesses still have a long way to go.
In order to get a clearer picture of the issues Insurance brokers are facing when it comes to phasing out their legacy systems, our Digital and Tech consultant Marcus Knapp has shared his insights.
“As a Digital & Tech consultant, I have worked alongside many Insurance brokers who have been considering taking the plunge to modernise their systems, but equally there are still many who are hesitant to make the commitment to upgrading…
A lot of my clients have expressed their concerns about how big a task moving from their existing legacy system to a brand new one will be, and what this will actually entail. Some clients have an ‘if it isn’t broken, don’t fix it’ approach to upgrading tech, but this mentality can become a massive barrier for those businesses who are refusing to embrace modernity. The argument that many businesses have against migrating to a new system is that the process of doing so is often costly and time-consuming and can lead to massive decreases in productivity and some business downtime. All of this may be true, but the simple fact is that the impact of not migrating to modern tech will become significantly more detrimental for brokers in the long run.
In the long term, both customer and client experience will undoubtedly begin to suffer, and businesses will struggle to keep up with competition from those who are staying ahead of the curve. Legacy systems will inevitably be phased out eventually, and these systems will not benefit from the updates and newer iterations and features of their rival systems. This is why start-ups are generally at an advantage in terms of their technical operations because they will be utilising modern systems from the very outset. Equally, there is a security element to be considered: the older the system, the greater the risk of a data breach or of systems faltering. Upgrading systems is often the best way to safeguard your business against these risks.
From a talent attraction perspective, working with a legacy system will make your business unattractive to prospective candidates; from my perspective, I always find that firms who are using a legacy system are putting themselves at a disadvantage, namely because a lot of the individuals I work with don’t want to work with legacy systems. But equally, it is likely that there are many insurers who won’t want to utilise outdated systems either. Cloud-based systems are truly the future: they allow agility and adaptability and, in a post-covid world, ensure seamless business continuity as well as remote-working advantages.
“Once you know you’re ready to upgrade your systems, figuring out where to begin can be overwhelming…
It’s important to take into consideration all of the factors. What do you need from your new system? What are your current pain points? What do your customers need? Do you need something bespoke, or off-the-shelf? I would always advise my clients of the former, as usually their requirements cannot be fully met with an off-the-shelf system, and opting for this route will involve significant compromise.
Once you know the route you’ll be going down, it’s crucial to find the talent and developers that can understand both your existing legacy systems as well as the new software you have chosen, in order to ensure the migration process is as smooth as possible. Finding the right specialist is important in ensuring you can maintain an accurate timeline and forestall any potential stumbling blocks as you move over your systems. This will ensure the least disruption to general operations and minimise business downtime. Generally speaking, I tend to place developers into legacy projects on a permanent basis, as there will always be plenty of projects to keep them busy; there will always be new features being added to streamline and enhance processes, as well as incorporating new features for customers too. But, with that being said, it is also possible to hire a developer on a contract basis to complete the migration work. This can take anywhere from 3, 6, or 12 months, depending on the system chosen and the scale of the project.
However, for those who may not be fully ready to overhaul and upgrade their entire system, The Insurance Times Insurtech50 Report has made the assertion that it’s better to at least incorporate some new innovations and advances even if you aren’t able to entirely get rid of the legacy system: Neil Bayles of Oxbow Partners states that he has observed an “attitude shift” within the industry, where brokers are starting to make ‘small transformations to improve different elements of existing processes – changes that sit on top of a legacy system.’ Any change is better than no change at all, but these adjustments will ultimately only serve to buy brokers more time: the need to update legacy systems and ultimately inevitable. The longer businesses wait to update their systems, the bigger the task becomes. Brokers must therefore ensure they are embracing advances rather than burying their hands in the sand; or, they will run the risk of being left behind.