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Many insurance companies operate nowadays with legacy software tools. They are typically bulky and non-scalable, and it's challenging to adapt them to the new requirements for operative activities. In this blog post, we will make arguments in favor of the necessity of switching to the new software solutions from the old ones in the insurance companies.
What’s wrong with legacy software tools in the insurance market?
The modern world is changing extremely quickly. What was relevant yesterday may be outdated today. Almost all sectors of the economy are characterized by a high level of competition, the insurance market is no exception.
However, many insurance companies still use legacy software systems, thereby losing their positions to more modern competitors. There is a common situation in companies where a number of departments are partially automated, but use different software and databases are not interconnected. This leads to errors and makes the simplest operations time-consuming.
It is also often the case that the software used is outdated and the employees who participated in its implementation no longer work for the company.
How legacy software keeps down insurance business development?
It's hard to update and maintain the legacy software
Legacy systems tend to be quite large due to the old programming languages and codebase, as well as a huge amount of documentation and many undocumented features. Such systems are monolithic, so it isn’t possible to replace one system module. Also, even with the smallest update, there is a risk of conflicts in the system. In fact, any modification or update takes much time and effort, and, accordingly, money.
It's hard to scale the legacy software
Generally, old software consists of numerous components across many databases and storage points. It's hard to scale and reorganize them in order to enhance storage space and optimize its functioning. Manual collection and legacy data systematization is a time-consuming and costly task.
It's hard to find relevant IT professionals
Languages used in obsolete programming systems are no longer taught or actively used. Thus, there are not so many specialists working with the old technologies and, as a result, it’s more expensive. It takes a long time to find such professionals and bring them up to date on the company specifics.
It's hard to integrate the new third-party systems
Integrating third-party tools (such as geolocation, payment and accounting tools, user authentication, data sharing, etc.) into legacy software often requires considerable amounts of custom code. There is always a risk that the final integration will malfunction or will not work at all.
How to start modernizing your legacy systems step by step?
Step 1. Analyze the current InsurTech market
The global insurance technology market is expected to grow significantly over the next 5 years due to factors such as simplification of the claims process, improved communication with the client, and the possibility of implementing automation.
In order to automate and simplify the ongoing processes, insurers are beginning to actively use innovative technologies. These include chatbots, data processing in the cloud, technologies with elements of artificial intelligence, insurance self-service portals, etc.
According to the Deloitte research, among the top incentives of insurance companies to modernize are the following:
- product strategy and objectives - 86%;
- technological relevance - 66%;
- service enablement - 34% of respondents.
Step 2. Choose the optimal software
You should analyze your current software setup and prioritize the list of systems that need to be modernized. Decide in favor of a modern software solution that will help you take your business to the next level.
There is a wide range of digital innovations different in functionality and costs. The right choice depends on the specifics of your work and your priority needs. When choosing, pay attention to the potential ROI of the modernization process.
We advise you to consult with your internal IT staff or attract professional tech consultants to identify the main software “gaps” to be modernized.
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Step 3. Decide what software to implement: ready-to-use or custom-developed
A company with legacy software can choose 2 options for modernization: implement a ready-to-use solution or develop software customized to the company’s needs and requirements.
The ready-to-use product is standard software that is used to support the business processes of many companies. Such software solutions can be adapted to the company, but there will still be functional limitations.
The main benefit of such a solution is that it already exists on the market and you can compare various proposals. Also, in the short-term perspective, it may seem to be cheaper than custom development.
However, in the long run, it is more expensive and may not always meet the individual needs of operating activities in the company. Therefore, your company will either have to put up with such a software solution and adapt business processes to it or look for alternative software.
Custom software is the development of a unique software solution for the processes of each company. It is completely created for the needs of a particular company, and solves specific problems and pains that employees face on a daily basis.
Due to the customized development, you get a software solution without unnecessary features and the ability to work more efficiently. You can add or remove certain features of the software at any moment. Thus, companies have full control over various changes and data protection from third parties.
Unlike the ready-to-use product, custom software, with well-implemented business analysis and in-depth infrastructure will scale according to the company's demands and growth.
Custom product is more expensive in the short term than the ready-to-use product, but in the long run, the company will benefit from this because it will have only the cost of development and in the future - a small cost of software maintenance.
Custom insurance software solutions are typically represented by:
- Web application: This is a full-fledged program that the user accesses via the Internet, that is, it does not require installation on the device. For example, our most popular stack is built around the React ecosystem. A typical React project contains the following elements: CRA / Next, TypeScript, React Query / SWR, fp-ts, io-ts, and Material UI. It contains many interesting solutions, such as authentication modules, access rights, payment systems, and many others.
- Mobile application: There are two options for mobile app development: native development (2 independent applications for Android and iOS) and cross-platform development (common code base for iOS and Android using Flutter framework).
- Backend infrastructure: The technology stack for each project is selected depending on its size and complexity. For example, at Axon we work with technologies such as Java, Scala, PHP, Node, C #. We use Restful Web services to transfer the API. We use microservice architecture. This approach complicates the project as a whole, as it requires the participation of DevOps engineers. However, this allows us to use a variety of technologies, and implement a process of flexible parallel development and continuous delivery of software products.
Also, we suggest you pay attention to such technologies, as:
- Cloud Computing - in order to ensure that all data is stored in cloud and could be accessed from anywhere;
- Big Data - in order to ensure the proper storage and management of the big amount of data in your software;
- API Integrations - ERP, accounting, etc.
Step 4. Choose a vendor with specialized expertise
The main challenge for insurance companies launching modernization processes is the lack of expertise.
The optimal solution is to find the vendor, a software development company, with competence and experience in the insurance field. The vendor will help you understand the intricacies of your company and select the most necessary functions for your business processes and needs. Therefore, the new software will not only be easy to implement but also easy to use by company employees.
Experienced experts will study the current situation together with a company stakeholder, and develop necessary requirements for a future launch of the modernized software.
Conclusion
Insurance companies have to quickly adjust to new business environments and be open to new products, enhance market share through new channels, meet changing regulatory requirements, and reduce expenses in funding new technologies.
If your existing software is difficult to maintain, support, or integrate with other systems, such legacy software needs to be updated. Be ready to allow your company to reach its best potential!
