Other parts of this series:
Addressing legacy technology debt allows insurers to thrive
Armed with an innovation mindset and a focus on the future, insurance carriers are preparing to take on the post-digital age—a time when technology is becoming ubiquitous. A considerable aspect of this realignment lies in the investment in new technologies. Artificial Intelligence (AI) and automation present exciting new opportunities for efficiency, deeper intelligence and rapid business growth.
Out with the old and in with the new?
Not so fast. Before insurance executives can glean any genuine value from new technologies, they can look to reducing their technical debt—the cost of maintaining and updating their legacy technology. This step is essential to leveling the playing field between established insurers and new disruptors in the industry. Technology improvements currently take traditional insurance leaders much longer than their agile digital competitors to implement, and are more expensive to scale, due to the dead weight of their legacy technologies and their siloed business and operating models. If incumbents succeed in minimizing technical debt, they will be significantly more agile and able to apply the latest technologies to their advantage to hold onto—or gain—market share.
How insurers can recover from technical debt
Traditional insurers can take the following steps to recover from technical debt, moving toward a more agile business that is poised to compete in the post-digital age.
- Avoid incremental debt by minimizing new investment in obsolete systems and embracing SaaS and cloud.For non-SaaS applications,investments should be made with the anticipation of product-like service management to ensure that the technology is kept current, capable and flexible.
- Develop short, medium and long-term strategies to eliminate existing technical debt. Each strategy should be underpinned by a focus on market-critical capabilities in the short term, with less burdensome debt elements addressed in the longer term. Consider the financial impact of the required changes and allocate the necessary time and resources to sustainably address the debt challenge over time.
Minimizing technical debt and financially intensive technologies is the closest an established insurer can get to a clean slate. Once a clear debt-reduction strategy is in place, insurance leaders can collaborate with their ecosystem partners and make the most of the current technology at their disposal. I will discuss this in more detail in my next post.