Old And New Techology: Coexistence Necessary
Legacy systems arent given their moniker because they offer the latest in technology and flexible platforms for quick life and annuity product development and deployment.
While “legacy” may be a nice, palatable word, lets face itisnt legacy just a nice way of saying old and outdated? Well, then again, your Granny may be old and outdated, too, but youre not ready to throw her on the trash heap in exchange for a new model.
Just like your Granny, the legacy system maintains years and years of historical information and know-how. While you have no expectation that Granny is going to become hip to the current trends, you do need to occasionally use her wisdom and wealth of information to conduct daily life and make wise choices.
What does all this talk of Grannies have to do with insurance legacy systems? Well, just like your Granny, you can use the legacy system to tap into a wealth of information that can help you to identify new business opportunities and to administer old books of business.
However, while you cant just add new Grannies to the family tree, you can add new systems to your insurance technology arsenal to handle the emerging and rapidly changing challenges of todays complex business landscape, thus staying hip with the current insurance trends. In insurance technology you can have the best of both worldsa coexistence between the old and the new.
The industry is taking notice and is beginning to look at legacy systems as more than just an army of old war-horses. While you dont look to old technology as the platform for new products, there is a trend underway to look for a peaceful coexistence between the older generation and the technology new kids on the block.
Why the truce and the recent search for coexistence? Quite simply, the battle of old vs. new, legacy vs. current has been raging on for the last decade. Yet, with all the infighting, little has been accomplished other than an increasing backlog for new product development. With the market window for new life and annuity products shrinking and now estimated at less than two years, insurance executives can no longer continue to let the technologies battle it out for supremacy.
Its not a matter of whos right and whos wrong, but more of the right technology for the right application. Sounds like were just getting back to the basics of good technology decisions, but with more technology options to consider than ever before.
When it comes to legacy, or new technology, the most obvious and rarely debated decision is to develop, deliver and administer new life and annuity products on new technologies that naturally take advantage of component development and the Internet.
The short window of market opportunity, complexity of todays new products and the growing need for market-of-one offerings quite simply cant be served well with legacy systems. The older technology does not allow the rapid product development and code reusability that has become an absolute necessity to react quickly and stay in the competitive race. Nor can old technologies provide the flexibility to change product mix and characteristics on an as needed and continual basis. New product, new technologyno argument.
Existing products can be divided into two categoriesold books of business with no new policies being written and active products where new policies are still being put in force.
For the old and inactive business, there is typically little justification for converting to new technologies. If you are able to administer the policies on the existing legacy systems, why spend a lot of precious IT dollars converting old business to new technology?
The only exception to the rule may be if the legacy system has just gotten too expensive to keep current with changing regulatory requirements and the resource experts have long since retired. In the event of cost prohibitive or resource-restricted maintenance, outsourcing the policy processing for the old books of business may very well be the best alternative. After all, there is little business value in converting to new technologies for old books of business. Its just a lot of time and expense with no new business revenue.
For active products where new business is still being written, the technology decision is fairly straightforward in that, if you are able to process new business and administer the policies, why fix something that isnt broken? For the most part, it makes the most sense to leave existing business where it is. Since new business is still being written, it is recommended to leave this processing in-house rather than outsource. The seemingly never-ending exception processing requires that the insurance company maintain close control over the code and process.
Whether you choose to outsource or keep the processing of existing business in-house, the ability to tap into the wealth of historical data and policyholder information is critical to the CRM requirements and data mining capabilities that are quickly becoming the “must have” marketing tools for our industry. For too long weve looked at legacy systems as a burden and a cost of doing business rather than an untapped gold mine of knowledge for the business.
As you develop and deploy new products on new technology platforms, much of the existing business may well remain on legacy systems. But, that doesnt mean that the insurance company needs to be limited by the old technology architecture. Extending the life of the legacy systems, giving them a facelift and bringing them into the 21st century can help ease the pain and improve the process.
From middleware and data repositories for implementation of CRM and data mining, to the use of XML standards to integrate disparate systems, the options are plentiful for breathing new life into the old beasts.
Building Web-enabled front ends is becoming another popular approach, giving much needed access to data and functions, and bringing the process closer to the distribution channel and ultimately the policyholder. Empowering these touch points (agents and consumers) and enabling them to perform the functions that they can do and have authority to do, reduces the burden on the carrier for simple transactions such as address changes.
While current technologies are critical to remain competitive in todays business and should be the choice as new insurance products are developed and administered, there is still a place for the legacy system, at least for the time being. Taking advantage of the myriad of options to extend the legacy life and provide the means for legacy and current technologies to coexistence in the same environment is the ideal solution.
In addition, these life-extending technologies lay the foundation on which an insurance company could develop and deploy a longer-term migration strategy to more current technologies.
After all, Granny would be pleased that you know when to come to her for the old family recipes and genealogical details, but just as pleased that you know to consult the Internet to find the best HDTV or Cable Modem. The right tool for the right application, just like in the insurance business.
is chief marketing officer with Adminserver Inc. in Malvern, Pa. He can be reached at [email protected]
Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.