In the wave of tech modernization, several industries hopped on the bandwagon to remain competitive and to deliver better services. Among them, the insurance sector was no exception. With a flourish of capital readily available, many insurance companies seized the opportunity to invest heavily in technological updates. However, a few years down the line, some are starting to question the tangible returns from these substantial investments.
A Close Look at the Spending
While capital was seemingly “free”, insurance companies weren’t hesitant to pour significant amounts into their tech modernizations. For example, according to data from McKinsey & Company up until 2022, the global insurance industry was projected to spend more than $200 billion on IT. As these investments begin to amortize, some insurance providers are finding that the business cases for these technological updates are not delivering the promised benefits. What’s worse, that amortizing is putting significant pressure on expense ratios.
The Issue with Legacy Systems
A concerning trend in the sector is the inability to completely transition away from legacy systems. Despite having new, modern solutions in place, many of these older systems have not been retired. In some cases, they are even acting as a dependency for the new capabilities to function correctly. This means, instead of a seamless transition to a new system, insurance companies are juggling both – an old system and its modern counterpart.
In other cases, we see where a modern platform has been implemented, but only in part (see our thought piece on Salesforce implementation in Insurance). These partial implementation leave tremendous value on the table and keep legacy capabilities in the mix.
The Costs and Challenges of Redundancy
Supporting multiple systems doesn’t come without its challenges and costs. From a purely financial standpoint, maintaining two systems is, unsurprisingly, costlier than one. Added to that, redundant systems can lead to:
- Operational inefficiencies: Multiple systems can lead to duplication of processes.
- Training and support: Employees need to be trained and continuously supported for both systems.
- Decreased productivity: Employees might spend more time switching between systems or manually integrating data.
- Increased error rates: Redundancy can lead to inconsistency in data between systems, leading to potential errors and increased risks.
The FiveM Approach: A Way Forward
Addressing these challenges requires a comprehensive, structured approach. The FiveM approach can be a game-changer for insurance companies:
- Inventorying: Begin by creating an inventory of all software solutions in use. This provides a clear picture of redundancies and overlaps.
- Mapping: Map out how each solution interfaces with others. Understand the flow of data and processes.
- Rationalizing: Once you have a complete view, rationalize the need for each software. Can any be retired without losing functionality?
- Renegotiation: In cases where vendor contracts are in place, renegotiate terms based on your updated needs. Vendors are often willing to revisit terms, especially if the alternative is the discontinuation of their service.
- Consolidating: Finally, consolidate your software stack. This might mean merging data, retiring old systems, or transitioning entirely to newer solutions.
As a service offering, the FiveM approach ensures that insurance carriers aren’t just modernizing but are doing so efficiently and cost-effectively. It’s time to ensure that every dollar spent on technology not only promises benefits but delivers them in the most optimized manner possible.
