Report: Legacy tech is holding back innovation and change at insurance companies
Fewer than half of industry execs consider their companies ‘advanced’ in the main areas of business evolution.
Legacy technology systems and infrastructure are blocking the adoption of digital tools and new ways of working at insurance companies. That’s the consensus of nearly half of the 200 insurance executives recently surveyed by EPAM Systems, a digital transformation services and product engineering company.
Additionally, more than one-third (39%) or all respondents representing both commercial and consumer lines said legacy technology is slowing innovation and change across the business, while 34% claimed it is preventing them from getting new products and services to market quickly. Fewer than half consider their companies “advanced” in the main areas of business evolution.
“This has been a challenge across the industry — regardless of market, class, and geography — and, despite significant progress on technology adoption, it remains the biggest drag factor for insurers,” according to a new 24-page report produced by EPAM Systems and backed by London Research.
“Like many insurers we have a number of legacy systems including a monolithic policy administration system, that we need to modernize and break down in order to better leverage data and provide the digital journeys that colleagues, customers, and partners are looking for,” Ian Wrigglesworth, chief technology officer at the insurance company Hiscox UK, said in the report, titled “Digital Modernization in the Insurance Industry: How to Drive Progress in Your Organization.” “A well-designed componentized architecture will also enable us to increase throughput and speed of change, as well as being easier to build out an API layer that enables easy partner integration.”
The report covers the emergence of new technologies (including artificial intelligence), the integration of data and analytics into decision-making, and the shift toward more agile business practices, while also offering practical guidance for insurance companies “ready to take the next steps on their digital journey.”
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Amplifying the legacy tech issue, according to the report, is a lack of digital leadership (identified as a significant issue by 38%), misalignment between business and IT (38%), absence of a business case for change (35%), lack of funding (34%), and insufficient executive backing (32%).
“You need to think about the economic value of IT not just in terms of simple cost reduction, but of how it makes your company more competitive, more attractive to customers, how it makes your data more transparent, and how you can use data to create value through the use of technology, etc.,” Natasha Davydova, chief information officer at the Paris-based multinational insurance company AXA, noted in the report. “For example, it is a challenge to find a positive business case for the cloud as a pure technology project. It becomes a positive business case when you look at the impact on the business, at whether it allows you to make things more efficient and effective on the business side, whether it allows the businesses to grow faster or provides products to the customers quicker in response to the changing demand.”