Small and Medium-Sized Businesses (SMBs) in the insurance sector face more challenging competitive conditions than their established counterparts. For starters, they lack the deep pockets and access to domain expertise. At the same time, they have to continuously pivot and scale operations with the passage of time. Since not all business models of insurance SMBs are fully digital system-based, they often modernize their systems to achieve a digital status aligned with technology trends and customer requirements. Such IT modernization in insurance is followed by the system and data consolidation to ensure that everything functions as a cohesive framework. For businesses that have not taken on such an enterprise, now is a good time as any for IT system modernization and consolidation in the insurance industry. Here’s a detailed look at the “why.”
Challenges Associated With Legacy Systems in Insurance
Legacy systems come with the following problems:
Complex IT infrastructure
Insurance businesses that are not digitally native lack a solid foundational IT backbone upon which the rest of the elements get built. It is more like a hive of disparate and distributed insurance systems plugged together. Such an architecture makes the entire setup unnecessarily complex and tougher to navigate. It also gives rise to drop-off points, dead-ends, and friction during hand-offs.
Outdated systems, even when upgraded, lack the rich features and functionalities of their modern counterparts. Such limitations on capabilities restrict the insurer’s ability to cater to the evolving needs of the industry and its customers.
Lack of Integration
Legacy systems may not integrate seamlessly with other insurance modules. Such a lack of integration results in siloed data and systems that hinder information sharing, data flow, and communication across different departments. This injects inefficiencies and information discrepancies that hamper growth and soil customer experiences.
High Maintenance Costs
Maintaining legacy systems becomes increasingly expensive with the passage of time. Apart from being costly, it is also resource-intensive. Such a drain on resources deprives other segments of the insurance business, which would otherwise benefit from the dedicated resources for complex case handling.
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Why Insurers Should Simplify and Consolidate IT Systems to Unlock Growth
Disparate and distributed IT infrastructure stunts growth. On the other hand, simplification and consolidation in the insurance industry attracts the following benefits:
1. Enhanced Operational Efficiency
Patching together the various IT elements of the InsurTech stack ensures that nothing slips through the cracks. Insurance data consolidation creates a uniform and connected ecosystem wherein information flow is seamless and even the integrated modules act cohesively as a part of a larger unit. Such a framework of integrated systems allows insurers to streamline operations, eliminate redundancies, address bottlenecks, and minimize complexities. It also allows for the optimum utilization of resources. The resulting enhanced operational efficiency improves all aspects of insurance, for employees and policyholders.
2. Improved Agility and Flexibility
IT modernization in insurance imparts greater agility and flexibility to the business. Such qualities allow the organization to swiftly adapt to changing market conditions or customer experiences and capitalize on various opportunities. Agile systems aid the quick implementation of new technologies, strategies, and processes, which supports organizational resilience and elasticity to harness emerging opportunities. At the same time, it maintains a high degree of scalability to scale up or down operations as per demand. As a result, it is easier for insurance companies to respond to market fluctuations, changes in legal and regulatory framework, and shifts in customer demands.
3. Richer Customer Service With Lower Cost-To-Serve
Technology modernization in the insurance industry lays the foundation for rich and meaningful customer experiences. With a consolidated system, insurers can gain a unified and 360-degree view of the customer and their data across various departments, teams, information networks, and touchpoints. The resulting monolithic entity of customer data establishes a single source of truth wherein the data is not only consistent but updated periodically by pulling details from different sources. Equipped with such detailed customer data, insurers can then deliver efficient and personalized service delivery that enhances the customer experience. Insurers gain a comprehensive understanding of the customers’ needs, aspirations, and preferences, which can be used to tailor the products and services, address concerns, and offer proactive support for greater loyalty.
4. Accelerated New Product Development
Consolidation in the insurance industry eliminates complexities and inefficiencies that plague the product development processes and cycles. This optimization empowers insurers to fast-track product creation and deployment in almost no time. The new products and services are not only far more superior but they are also more tightly coupled with customer requirements. The personalized offerings come packed with innovation and technological advancements that offer it a competitive edge over other options available in the market. As a result, insurers can stay a step ahead and capture a significant chunk of the market share.
5. Better Informed Decision-Making
With insurers sitting on a wealth of rich and unambiguous data, it becomes easier for them to make smarter and well-informed decisions. Such capabilities are bolstered by meaningful data available in real time. These data sets are a source of comprehensive insights, whether it is about the business and its operations or the customers and their demands. Using this cross-functional array of data, insurers can reach strategic, data-driven decisions. Insurance data consolidation allows them to anticipate trends, identify demand-supply markers, and respond proactively to any changes.
Insurance core systems modernization promises a bouquet of benefits – from operational efficiency to improved customer service delivery. As such, insurance platform modernization and consolidation services address various internal and external challenges by making businesses more adaptable, agile, and scalable. Such advantages place SMBs in a favorable position to capitalize on market opportunities and gain traction while acquiring a solid customer base. As SMBs become empowered to adapt, innovate, and thrive against the dynamic market landscape, it won’t take them long to become thriving enterprises!
Case in Focus
A multi-line, US-based insurer was struggling to manage data and processes from its home-grown legacy system. The insurer sought to modernize the insurance systems to overcome language incompatibilities, remove data disparities, and improve service quality. We modernized and migrated the insurance management system to the Azure cloud, enhancing scalability, security, and process efficiency while reducing operational costs by 15-20%. For more details, refer to the case study.