Legacy Systems Cause Delays and Errors for Insurers, But Solutions Are Available Without Costly System Replacement
By Kari Schori, Chief Information Officer, 10/16/2020

When it comes to IT systems, insurers often see wisdom in sticking with what they know. This means they have been using the same systems for many years to support policy administration, claims, underwriting and other core functions. These “legacy” IT systems have proven reliable, but cannot keep pace with the rapid pace of technological change.

Widespread use of legacy systems not only holds back the insurance industry from moving into the digital age, but also introduces project delays and system errors for carriers and MGAs trying to meet market needs and regulatory requirements. Manual rekeying of data can introduce inaccuracies and bottlenecks in data sharing, and also create additional paperwork. Even simple system updates such as policy or rate changes can take months to finish.

For example, MGAs with legacy systems often have to add software to introduce a new line of business with a carrier, and may end up with four or five new pieces of software to meet various carrier requirements. Each of these systems needs to work with each other, which means a central management system is needed to support everything. Data is keyed into each system manually and then copied between systems, with risk for errors at each step of the process.

The new regulatory requirements that were issued to address fraud in the assignment of benefits (AOB) in the Florida insurance marketplace offers another good example. Carriers in Florida that rely on legacy systems cannot easily adapt to these new requirements. That means they run the risk of not being in compliance. In addition, when struggling to meet system update deadlines like these, they may let other system issues fall by the wayside, thereby creating additional errors and delays.

Solutions

While large carriers can more easily replace legacy systems, smaller carriers and MGAs are more hesitant and may have fewer solutions available. There are a couple reasons for this. One is the cost of system replacement, which can easily be half a million dollars; the other is the comfort level IT staff have with the way old systems work. Replacing it with a new system means staff will need additional training to learn an entirely new way of doing business.

We are also seeing these problems exacerbated by a talent shortage in the IT software development area. As the generation of IT professionals who know legacy systems age into retirement, younger staff coming into the industry are not familiar with older technologies.

However, MGAs and carriers looking to avoid a costly system replacement have several solutions available to them:

  • Testing support can make sure upgrades and other system changes do not introduce errors [link to previous blog by Mark].
  • Automating business processes can reduce the need for manual data entry and other repetitive tasks.
  • User interfaces and plug-ins can also help systems talk to each other.

Insurers that choose to invest in a new, more modern system should be cautious. Seek out and work with professionals who can smooth the transition and ensure the underlying system processes are correct. Otherwise, process errors will be introduced into the new system.

If you have questions about testing and automation solutions for legacy systems developed and deployed by my colleagues and me, or would like to schedule a demo of our testing services, call 727-489-9190, visit www.westpointuw.com or email sales@wpisfl.net.

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