Legacy Insurance Systems vs Modern Systems – Making the Right Choice


For insurers, deciding between legacy and modern systems involves careful consideration of the impact on business and the advantages of embracing contemporary technology. Before delving into this decision, it’s crucial to grasp the concept of technical debt and its financial ramifications.

Technical Debt (TD) refers to the long-term consequences of opting for short-term solutions, leading to increased costs or limitations down the line. With customers increasingly demanding immediate access to services and exceptional experiences, legacy systems are struggling to meet these expectations. These outdated systems often compartmentalize data, hampering seamless service delivery and falling short of evolving customer needs.

Understanding the Financial Implications of Legacy Systems Maintenance

Maintaining legacy systems comes with significant operational and financial burdens, impacting adaptability and growth. In the United States government alone, technical debt amounted to $7 billion by 2018, with 75% of the budget allocated to legacy system maintenance. Similarly, banks and insurance companies globally allocate a substantial portion of their IT budgets to legacy maintenance, hindering innovation and responsiveness.

Acknowledging the Challenges and Risks of Migration

Migration or modernization efforts pose challenges such as outdated hardware, costly maintenance, integration difficulties, and limitations in functionality evolution. Additionally, maintaining unsupported software exposes organizations to security risks and escalates operational costs. It’s crucial to address these challenges when planning migration strategies.

The Importance of Outsourcing Data Migration

In the insurance sector, outsourcing data migration is crucial due to its complexity. Despite possessing adequate infrastructure, large insurance firms often lack the specialized skills and hands-on experience required for seamless migration. Finding professionals with expertise in this field proves challenging due to the infrequent nature of such tasks within the industry.

Enterprises like Decerto, with a proven track record in successful migrations, offer a unique blend of technical expertise, industry-specific knowledge, and practical migration experience. This combination is difficult to cultivate internally. Data migration in insurance presents challenges like dealing with incomplete or inconsistent data sets.

Each policy, representing individual client details, requires meticulous transfer to the new system, regardless of complexity. Without a refined methodology and specialized tools, the migration process risks delays and incomplete success. Entrusting experienced firms with this operation ensures efficient execution, accuracy, and compliance.

Choosing the Right Modernization Approach

Alternative approaches to entire system migration include incremental modernization, service-oriented architecture (SOA), rehosting, replatforming, refactoring, data modernization, and the use of APIs. Each approach presents unique benefits and challenges, requiring careful consideration based on organizational needs and goals.

Strategizing for Legacy System Modernization

A strategic approach is necessary when embarking on a legacy system modernization journey. Prioritizing core business logic, assessing technical debt, and devising a modernization roadmap are essential steps. A successful digital transformation requires comprehensive planning, considering factors like data migration, regulatory compliance, and business continuity.

In conclusion, while legacy systems have served their purpose, the time for modernization is now. By evaluating costs, understanding technical debt, and strategizing for modernization, organizations can pave the way for a successful digital transformation, supporting growth and competitiveness in the evolving digital landscape.