Just because legacy core processing systems may not be as modern and elegant as some would like, doesn't mean they aren't still getting the job done for many insurers. There may still be a lot of life and value in existing back office systems, and insurers should carefully consider their options. While many insurers may consider implementing new core systems, modernization can come in many flavors and may be a multi-step process. Insurers may want to buy time before replacing, continue using the legacy as they implement the new, or maybe just modernize the legacy environment with a new user experience or complementary capabilities. The ideal technology objective may not be to just modernize, but to future proof.
There are many differing opinions about how to handle the legacy environment, yet the one that seems to be talked about about most is legacy replacement. That being the case, the question that needs to be asked is: What's wrong with sticking with what works? Legacy replacement projects are difficult, long, expensive, and come with considerable risk. It is not uncommon to hear stories of insurers having spent millions on legacy replacement projects while going over on both budget and time, yet are still not close to production. Was replacement really the way to go, or has it just become the common and easy decision with little consideration given to the business drivers and potential alternatives?
Many insurers may find leveraging their legacy a viable approach, and not just for the short term. Whether using a mainframe COBOL system, client/server, rules-engines, web-based, cloud-delivered or any combination of old and new, most insurers have a mix of disparate systems that make up the heart and soul of the operation. But, if it works, why mess with success? Why not just complement what's already in place?
When I speak with insurers, they aren't focused on the latest technology, but rather on business issues such as accessing and using data, reaching new distribution channels, providing a quality user experience including self-service, and delivering new and more complex products to market.
For the most part, the nuts and bolts transaction processing is being handled well with what they already have in place. Rather than rip and replace, my suggestion is to find a way to extend and complement the capabilities of the existing systems. Let's stop thinking in terms of legacy or modern and instead think about delivering a highly functional environment, putting data to work, enabling speed to market, and making both data and functionality easily accessible.
Technologists have become very adept at connecting older and disparate systems to retrieve and to share data. Web Services have ushered in the concept of "open systems" to take advantage of existing systems' rich functionality and dependable transaction processing, while any system introduced in the past decade is most likely already designed to be open. This combination of technologist skill and system openness offers a lot of opportunity for extending system reach and life, and modernizing the existing environment.
Data warehouses and exchanges combined with business intelligence and predictive analytics tools have provided an opportunity for drastically improved and informed decision making. Document solutions, underwriting front-ends, and an endless array of add-on capabilities offer an arsenal of options for insurers – especially as cloud-delivery becomes more commonplace.
New user experience platforms enable the development, delivery, and maintenance of a common and highly quality user experience and support for new devices; exposing both old and new back-office systems, ancillary systems, and their respective functionality to more users and new distribution channels. Also, providing a common front-end, regardless of "what's behind the curtain," gives insurers a low-risk approach when it comes time to introduce new core processing systems. The user experience front-end remains consistent, while change goes on behind the scenes, making user interaction with multiple systems, or migration from the old to the new, transparent.
As insurers continue to consider the best approach to dealing with legacy systems they should be taking into consideration all of their options. These days, a system makes the transition from new to legacy in the blink of an eye given the rate of technology advancement and introduction. Once the industry comes to terms with the fact that insurers are destined to live in a world of old and new technology, the best long term approach can then be determined. Rather than focusing on trying to modernize, my suggestion would be for insurers to focus on future proofing their technology environment.