10 Things You Could Be Spending Money On Instead of Maintaining Legacy Insurance Technology


This post is part of a series sponsored by AgentSync.

The cost of legacy technology

In 2023, companies in the financial services industry spent an average of 15 percent of their revenue on technology. Not only is that up from 10 percent in 2022, but it’s near the top of the list when you look at percentage of revenue spent on IT by industry. Only companies in the actual tech industry, like software companies and managed services companies, spent a greater share of their annual revenue on IT!

You could argue that this is because financial services companies, including those specifically in insurance, are becoming increasingly technologically enabled. On the other hand, you could argue the financial services companies’ oversized tech spend is due to them spending too much money on legacy technology that’s not cost-effective.

While the private-sector insurance industry isn’t the U.S. government, reliable data from the government provides a clue into how much money other industries might be spending to maintain existing systems, including those that would be considered “legacy tech.” According to the Government Accountability Office (GAO), “each year, the federal government spends more than $100 billion on IT and cyber-related investments. Of this amount, agencies have typically reported spending about 80 percent on operations and maintenance of existing IT, including legacy systems.”

Even by conservative estimates, if you think about how much money the insurance industry’s collectively spending to maintain legacy technology, it could be a large portion of the 15 percent of revenue it’s spending on IT as a whole.

And what’s that 15 percent of? According to the Insurance Information Institute (III), the entire U.S. insurance industry brought in $1.4 trillion in premium dollars in 2021. So, let’s see… 80 percent of 15 percent of nearly a trillion-and-a-half dollars? You do the math! (But seriously, Google says it’s about $168 billion).

With that mind-boggling number, we decided to lay out some of the best things your insurance carrier, agency, or MGA/MGU could spend that money on if you weren’t using it to support outdated technology.

But first…

Why is supporting legacy technology so expensive?

Outdated technology costs more to maintain, to keep secure, and to keep in good working order than its modern equivalent.

A long time ago, the entire business of software worked differently than it does today. You had a computer, housed in a single location – your living room, perhaps. And you purchased a piece of software that came in a box and that you “owned” until the end of time. Let’s use Microsoft Word as a familiar example that everyone can recall.

Sidenote: If you don’t recall a time when you purchased Microsoft Word in a box from an office supply store, you’re a member of the newer generation of insurance professionals – welcome!

So, historically, you paid a one-time purchase price for your software and you got the right to use it forever. What you didn’t realize was that “forever” came with a pricetag that you couldn’t have predicted at the time.

As technology advanced, your version of Microsoft Word slowly stopped working the way it once did. It certainly didn’t come with new features to improve functionality over time. Eventually, you’d need a new computer to keep up with the rapidly evolving technology (hello, internet!) – but since you purchased a copy of Microsoft Word 1995 and it doesn’t work on your new computer in 2002, you’ve got to buy another version. Likely, the new one comes at an even higher price than the first time you bought it.

That’s a cost you didn’t expect. After all, when you bought the software for the first time, it came with the promise that it was yours for life, not with a disclaimer that you’d need to spend more money every few years to keep using it.

On top of just having to buy (the same) new software again and again, you also realized that hackers were taking advantage of your product’s old age to break in and steal your data. The longer a software’s been around without changes and updates, the more time bad actors have to figure out how to use it for evil. This means you then had to go buy Norton Antivirus to keep your computer safe. Yet another cost.

The analogy could continue for quite some time, and you’d still be nowhere near the complexity or expense of what legacy software looks like at an enterprise level. This is why it costs so much for businesses to simply maintain the tech they purchased decades ago, even if they’re not truly getting anything in return for their continued investment.

Why don’t insurance businesses modernize their technology?

The quick answer is because it’s not easy or inexpensive to do! Modernizing a large and complex business system, like those used to manage insurance carriers, agencies, and MGAs/MGUs, can take months or years to get live.

Such modernizations can involve major data cleanup and migration projects, can cause business interruption and down-time, and can be costly, intimidating, and time-consuming. And there’s no guarantee the project will even succeed at the end of the day, whether from a technological perspective or just a lack of buy-in and adoption from intended users.

Sidenote: That’s why our world-class implementation process is so important.

Still, the solution isn’t to bury your head in the sand and pretend that your decades-old legacy systems are going to do their job for the next few years, or even longer. Right, Southwest Airlines?

Making the choice to modernize your insurance tech stack isn’t one that should be done on a whim. It takes a lot of time and resources to do it right: from evaluating different solutions to making the case for your chosen partner. However, once you’ve made the leap to modernization, you’ll realize cost savings, and you might be wondering what else your business could do with that money.

10 things an insurance business could spend money on instead of legacy technology

To help make the case for modernizing, here are 10 things your organization could absolutely be putting money toward with the savings you’d realize by moving away from legacy tech. Some of them are more pragmatic than others, but we believe in dreaming big!

  1. Modern insurance infrastructure: OK, so this one is kind of obvious. You could be spending money (albeit much less of it!) on modern insurance technology instead of legacy insurance technology. You need technological infrastructure to power your business no matter what: You just don’t have to spend so much on it when it delivers so little value.
  2. Better client experience: Whether you do this by hiring more customer service reps to cut down on response times, or by investing in a smartphone app that lets clients contact you instantly with questions, you can enhance the customer experience by investing in it with money you’re no longer spending on legacy tech.
  3. Eco-friendly office upgrades: Go green by investing in eco-friendly office upgrades. Think solar panels, a green roof, or even starting a company garden. It’s good for the planet and can improve employee satisfaction.
  4. High-tech training programs: Employees will really benefit when you reallocate your old tech budget toward training them on cutting-edge technology. Maybe it’s data analytics, cybersecurity, using AI, or blockchain technology. Either way, employees will gain valuable skills that’ll help them in their careers, and they’ll appreciate the opportunity.
  5. Home-office upgrades: With much of the insurance industry workforce participating in a hybrid working arrangement, you can improve employees’ lives by giving them a budget for things that’ll make their work-from-home experience more comfortable and productive. Ergonomic chairs, standing desks, and noise-canceling headphones are just a few ideas that you can offer each employee with the money you’re not spending supporting legacy technology.
  6. Wellness retreats and mental health benefits: Happy employees are productive employees, so using some of your savings on wellness benefits like gym memberships, spa experiences, mindfulness classes, or even days-long wellness retreats can show your team how much you value their whole health.
  7. Charitable giving or matching donation programs: If you’re looking for a great way to spend some of your savings, consider giving back to the community. Employees love being able to direct funds to causes they care about. You can even set up an employer match so that employees can double their impact when fundraising for their most passionate causes.
  8. Office petting zoo: Forget “bring your dog to work day” – this idea’s all about going wild in the office. Nothing breaks the monotony of work like an alpaca in the elevator or a bunny at your desk. Even without lions, tigers, and bears, you can give employees an experience they’ll never forget with small farm animals like goats, miniature horses, and other office-sized animals.
  9. On-site childcare: Although it’s costly, providing childcare for employees is one of the greatest benefits for those with minor dependents. It could be an investment that’s worth the ROI, especially if you’ve got recently freed up budget after cutting down on your legacy tech spending.
  10. An extreme team-building experience: Go beyond happy hours and bowling to design an ultimate team-building experience, like a company-wide escape room challenge or a survival skills weekend, to foster unity and develop problem-solving skills in fun and unusual settings.

Ready to save money by modernizing your insurance licensing compliance processes?

Even if you don’t reallocate funds into one of our ideas, your company won’t object to slashing its legacy tech spend by switching to a modern insurance compliance solution that handles everything from producer and adjuster licensing, to renewals, state appointments, continuing education, and managing dually licensed broker dealers with real-time FINRA data as well!

Learn how insurance industry businesses can make compliance a cost saver in our guide “Don’t Make Compliance Compete with Cost.” If you’re ready to explore how AgentSync can help your business modernize and save money, reach out to one of our insurance compliance tech experts today.

Topics
InsurTech
Tech



Source link

Latest articles

Related articles

spot_img