As we embark on a new year, I’m reflecting on conversations I’ve had in the past year with many industry thought leaders and insurance executives who have opined about the future of insurance. I’m also pondering how much was written about the innovations and market disruption from technology advances (e.g., digitalization, the Internet of Things, big data, mobility etc.) and the shift in consumer experience from companies such as Amazon.com, Apple, and Google. The great news for 2015 is that opportunities exist to innovate like never before, in both the product space and the consumer experience. I’m not going to rehash all of those opportunities, though, since I’d rather talk about the number one barrier to achieving them—the hindrance of legacy systems and the aversion to the risk of replacing them.
Accenture published a great study titled “Accenture Digital Innovation Survey 2014,” which surveyed 141 insurers about seizing the opportunities of digital transformation. One of their findings is that the biggest obstacle to executing on a digital strategy is overcoming legacy systems. These systems were built for a different time period, when insurance was all about the policy and interaction through an intermediary. These systems weren’t built to store nonpolicy data about an individual, nor were they built to share their data or processes with other internal systems, let alone external systems. Quite simply, the world was different when these systems were created.
What the Accenture study and the many “80/20” studies show is the amount of IT resources spent on the non-value-add activities of simply keeping the lights on. In general, CIOs are spending 80 percent of their resources on maintaining the status quo while they spend only 20 percent to address new and emerging opportunities. If the company is in good shape, the ratio is more like 70/30; it’s closer to 90/10 if they’re in bad shape.
I talk to a lot of carriers, so I have the opportunity to look through a wide market lens. What I see, over and over again, is a problem that has become too big to tackle, or at least it’s perceived to be too big. What I see taking place instead are incremental improvement initiatives. Worse than that, they are typically disconnected incremental improvement initiatives that—while addressing an immediate need—are further cluttering the legacy infrastructure. I see marketing departments implementing CRM systems that are separate from their legacy policy systems. They’re struggling to utilize customer data, policy data and communication history in an attempt to market to individuals in a consumer-centric and relevant way. I see digital technology organizations creating infrastructure that is layered on top of the layers that are on top of the legacy systems so they can get piecemeal digital functionality out to their field and policyholders. I see data efforts trying to work around the limitations of disparate legacy data to add unstructured, non-insurance data in an attempt to understand the consumer. But these data efforts are disconnected from the CRM efforts, which are disconnected from the digital efforts, which are disconnected from the legacy systems that maintain their customers’ policies, which are, actually, what the carrier is in business to provide and service.
As we think about the new year and consider our resolutions, perhaps it’s time to resolve to tackle the root of the problem—the one thing we all know to be true but feel might be too big to fix. Let’s resolve to fix the legacy systems and create a foundation that will open your organizations up to all of the innovations that we are seeing and hearing about. Let’s set up a world where our IT organizations can focus 80 percent of their effort on enabling business innovation and only 20 percent of their time on keeping the lights on. Doesn’t that sound like a worthwhile resolution?
At EIS Group we focus on this problem that’s often considered too big to solve. We help our customers approach PAS projects in a way that de-risks the project and takes it on in manageable chunks. Our resolution is to do it even better in 2015.