Winning the Insurance Legacy Modernization Battle with the Best Approaches

To succeed in the long term, insurance firms of all sizes are seeking to deliver more customer-centric services. However, to meet this objective, adopting a key digital transformation lever ‘analytics’ is important. By embracing analytics, insurers can effectively analyze each customer’s financial needs and preferences and provide personalized policy coverage services with ease.

However, despite the increasing relevance, many insurers fail to leverage analytics and deliver personalized customer services. This is mainly because of the utilization of legacy systems in their infrastructure. In the context of insurance, legacy systems include outdated underwriting tools, customer relationship management (CRM), and claims administration portals. Modernizing these systems is essential for insurers to harness the power of analytics and other technological improvements.

Challenges in Using Insurance Legacy Systems - How Modernization Resolves Them?

Insurance legacy modernization refers to the process of restructuring obsolete systems that insurers rely on for managing several business processes.? They continue to work with these systems, as these tools are well aligned with the company’s workflows and business rules. Besides, these systems consistently store large volumes of data and transactions on outdated databases. Such databases are vulnerable to cyber threats, making sensitive policyholder data prone to breaches and losses. To overcome this vulnerability, legacy systems are patched with security layers like real-time threat detection and multi-factor authentication tools, thus guaranteeing greater data security.?

Apart from data security, modernization resolves other key legacy system challenges faced by insurers, such as:

• Rigid Architecture – Most legacy systems possess a monolithic (inflexible) architecture that doesn’t support feature improvements or configurations. Hence, it is difficult for insurers to scale the storage capacity and processing power of legacy systems in line with expanding customer base and varying operational needs. Through modernization, the legacy system’s rigid architecture is converted into modular architecture to accommodate dynamic customization/configurations based on business needs.

• High Maintenance Costs- Legacy insurance systems hosted on a third-party server or database often incur higher operational and maintenance costs for insurers. Through cloud-based modernization, legacy insurance systems are migrated and hosted on a pay-as-per-resource consumption infrastructure. This approach offloads the maintenance burden for insurance companies and saves operational costs at large.

• Inadequate Customer Insights – The lack of real-time analytics functionality in legacy insurance systems makes it difficult for insurers to gather and analyze customer data effectively, resulting in inadequate customer insights generation. Modernizing legacy systems allows insurers to leverage analytics tools and integrate data from disparate sources. This integration simplifies data analysis and insights generation, enabling insurance firms to run targeted marketing campaigns and improve customer satisfaction and retention rates.

3 Reliable Legacy Insurance System Modernization Approaches

The modernization approaches may vary depending on the type and complexity of legacy systems used by insurers. For instance, insurance CRM systems might require an API integration to incorporate advanced functionalities, whereas claims administration portals require extensive re-architecting to enable platform integrations and boost personalization. Let’s discuss them in detail:

1. API-Based Insurance CRM Modernization??

One of the key concerns that insurers using legacy CRM systems largely encounter is the lack of analytics functionality. The CRM systems help insurers collect and store customer details, documents, communication records, and others. However, when this data is not analyzed or processed effectively, insurance firms might lose a huge market potential. That’s why integrating the API of an analytics platform with CRM systems is essential. This integration enables the analytics platform to consistently capture and assess extensive datasets in the insurance CRM and generate valuable insights. With these insights, insurance agents are able to deliver personalized insurance product recommendations or coverage options that align with the customers’ preferences, thereby improving user satisfaction.

In addition to analytics, there are other APIs that can be incorporated in CRM systems like payment gateway API and communication API. The payment gateway API equips CRM to automate payment processing, invoicing, and transaction management. Similarly, communication API enables CRM to interact with digital touchpoints like email, social media, and chatbots, providing an omnichannel experience for end-users. To enable these API integrations, collaborating with an experienced insurance legacy system transformation services provider is advisable.

2. Cloud-Powered Underwriting System Modernization?

Typically, insurers use legacy underwriting systems to store financial information, historical claims data, and risk profiles of customers. This data is crucial for actuaries to determine policy prices and coverage rates. However, the legacy underwriting systems store this data across several platforms, like mainframes and third-party databases. This fragmentation makes it difficult for actuaries to aggregate and analyze data and determine prices accurately. To overcome this, underwriting system’s databases and mainframes are lifted and shifted to a cloud ecosystem. This approach enables insurers to maintain a single source of truth for underwriting data.

Moreover, by embracing migration, pre-built machine learning (ML)-based pricing models offered by cloud ecosystems can be easily leveraged. These models are programmed to evaluate consolidated underwriting data rapidly and generate tailored policy prices for policyholders with greater precision. This helps insurers speed up the underwriting process cycle and drive personalization.

3. Microservices-Based Claims Administration System Modernization?

As stated before, legacy claims administration portals usually possess a monolithic architecture. The monolithic claims administration portals are designed as a single and cohesive unit. In other words, all modules like claims intake, processing, adjudication, and payment are tightly integrated within a single codebase. This makes it difficult to scale a particular module without impacting the entire portal. For example, when there is a need to scale the claims processing module to manage higher transaction volumes, the whole portal must be scaled. This results in redundant resource consumption and massive operational costs.

To facilitate easy scaling of the claims administration portal and regulate operational costs, collaborating with a trustworthy insurance legacy systems modernization services provider is the right choice. The dedicated experts transform the monolithic architecture of the claims administration portal into a microservices architecture. This re-architecting approach turns the cohesive claims portal into an independently scalable (modular) system. The microservices architecture supports dynamic scaling and performance optimization of the claims portal without major disruptions.

Wrapping Up

On the whole, implementing legacy system modernization is an effective way for insurance enterprises to accelerate digitization. However, to ensure a strategic legacy system transformation, insurers must team up with an experienced modernization services provider. The dedicated experts perform a comprehensive analysis to understand the complexity of legacy systems and determine the right approach and best practices. This strategic evaluation is essential for achieving a faster and more profitable legacy insurance system modernization.?