5 Myths of Insurance Technology Modernization That Insurance Carriers in the US Should Take Notice

‘Technology modernization’ is a phrase that has been coveted and dreaded in equal parts by insurance companies in the United States. On the face of it, insurance digital transformation implies moving away from outdated legacy software to agile cloud-based systems. That is never an easy decision to make despite the obvious benefits. Insurance carriers can be apprehensive of embarking on a modernization journey because of certain preconceptions. In this blog, we break down how many of these notions are rooted in digital transformation myths and how carriers can resolve potential challenges on the road to technology transformation.

Myth 1: Technology modernization is time-consuming

Migrating to new insurance technology can often be perceived as a complicated, time-consuming process. The common belief is that to successfully achieve technology modernization, companies need to invest at least a few years, over a million dollars and substantial human resources. This can prove to be too daunting for insurers, who as a result, can delay the migration even further.

The reality, however, is that modernization doesn’t have to be an all-or-nothing approach. Companies should plan out their modernization path in phases. The most critical processes should be prioritized and those that are not as significant to business success can be pushed to later on in the digitization journey.

The bite-sized approach works for two main reasons. First, it allows insurers to take advantage of the most recent versions of technology available in the market. Technology evolves at a rapid pace and if insurers waited for years for the full implementation to be completed before going live, there’s a possibility that the technology could have become outdated in that time. Second, it delivers greater speed and agility than an ‘all-or-nothing’ approach.

Insurers can modernize certain aspects of their technological infrastructure quickly to deliver smoother customer experiences or to facilitate remote work. This can be done through the use of APIs to improve data sharing between tools or operating systems (however, part of the problem is that some of the older systems cannot integrate with APIs and will need to be modernized). Insurers can then take a more measured and phased approach to modernize other critical aspects of their business after evaluating what worked and what didn’t.

Myth 2: Technology modernization doesn’t offer substantial returns on investment

Technology transformation can undoubtedly be a complex undertaking. This is particularly true if an insurance company is shifting from a long-standing legacy system that is deeply embedded into day-to-day processes. In some cases, companies might believe that the costs of switching to a new cloud-based system outweigh the potential benefits.

There are largely two situations where technology modernization might not offer significant results to an insurance company. In the first case, companies might implement only a partial modernization and retain older legacy systems with no plans of replacing them in the long term. The problem with this is that insurance digital transformation needs to be done on a large scale to reach its full potential. Even if companies take a phased approach to do this, the end goal needs to be organization-wide modernization. Additionally, companies with multiple operating systems can rack up higher additional costs, further eating into their revenue.

The second scenario where companies might not be seeing returns on their investment is often due to the way in which ROI is calculated. Rather than comparing just the cost of changing from the legacy system versus retaining it, companies should also take into account the productivity gains and lower cost of maintenance from using digital transformation technologies. This can provide a more accurate picture of the benefits of technology modernization.

Rather than comparing just the cost of changing from the legacy system versus retaining it, companies should also take into account the productivity gains and lower cost of maintenance from using digital transformation technologies.

Myth 3 and more can be read in the original article:

Originally published at https://www.simplesolve.com on November 9, 2021.