This publish is a part of a sequence sponsored by AgentSync.
The price of legacy expertise
In 2023, corporations within the monetary companies business spent a median of 15 % of their income on expertise. Not solely is that up from 10 % in 2022, nevertheless it’s close to the highest of the listing while you have a look at share of income spent on IT by business. Solely corporations within the precise tech business, like software program corporations and managed companies corporations, spent a higher share of their annual income on IT!
You could possibly argue that it is because monetary companies corporations, together with these particularly in insurance coverage, have gotten more and more technologically enabled. However, you would argue the monetary companies corporations’ outsized tech spend is because of them spending an excessive amount of cash on legacy expertise that’s not cost-effective.
Whereas the private-sector insurance coverage business isn’t the U.S. authorities, dependable knowledge from the federal government supplies a clue into how a lot cash different industries is likely to be spending to take care of present programs, together with those who could be thought of “legacy tech.” In line with the Authorities Accountability Workplace (GAO), “annually, the federal authorities spends greater than $100 billion on IT and cyber-related investments. Of this quantity, companies have sometimes reported spending about 80 % on operations and upkeep of present IT, together with legacy programs.”
Even by conservative estimates, if you concentrate on how a lot cash the insurance coverage business’s collectively spending to take care of legacy expertise, it could possibly be a big portion of the 15 % of income it’s spending on IT as a complete.
And what’s that 15 % of? In line with the Insurance coverage Data Institute (III), the whole U.S. insurance coverage business introduced in $1.4 trillion in premium {dollars} in 2021. So, let’s see… 80 % of 15 % of almost a trillion-and-a-half {dollars}? You do the mathematics! (However critically, Google says it’s about $168 billion).
With that mind-boggling quantity, we determined to put out among the finest issues your insurance coverage service, company, or MGA/MGU may spend that cash on when you weren’t utilizing it to assist outdated expertise.
However first…
Why is supporting legacy expertise so costly?
Outdated expertise prices extra to take care of, to maintain safe, and to maintain in good working order than its trendy equal.
A very long time in the past, the whole enterprise of software program labored in a different way than it does at this time. You had a pc, housed in a single location – your front room, maybe. And you bought a chunk of software program that got here in a field and that you simply “owned” till the tip of time. Let’s use Microsoft Phrase as a well-recognized instance that everybody can recall.
Sidenote: Should you don’t recall a time while you bought Microsoft Phrase in a field from an workplace provide retailer, you’re a member of the newer era of insurance coverage professionals – welcome!
So, traditionally, you paid a one-time buy worth in your software program and you bought the correct to make use of it ceaselessly. What you didn’t understand was that “ceaselessly” got here with a pricetag that you simply couldn’t have predicted on the time.
As expertise superior, your model of Microsoft Phrase slowly stopped working the way in which it as soon as did. It definitely didn’t include new options to enhance performance over time. Ultimately, you’d want a brand new laptop to maintain up with the quickly evolving expertise (howdy, web!) – however since you bought a duplicate of Microsoft Phrase 1995 and it doesn’t work in your new laptop in 2002, you’ve received to purchase one other model. Seemingly, the brand new one comes at an excellent greater worth than the primary time to procure it.
That’s a price you didn’t anticipate. In spite of everything, while you purchased the software program for the primary time, it got here with the promise that it was yours for all times, not with a disclaimer that you simply’d must spend more cash each few years to maintain utilizing it.
On high of simply having to purchase (the identical) new software program repeatedly, you additionally realized that hackers have been profiting from your product’s previous age to interrupt in and steal your knowledge. The longer a software program’s been round with out modifications and updates, the extra time dangerous actors have to determine methods to use it for evil. This implies you then needed to go purchase Norton Antivirus to maintain your laptop secure. One more price.
The analogy may proceed for fairly a while, and also you’d nonetheless be nowhere close to the complexity or expense of what legacy software program appears to be like like at an enterprise stage. This is the reason it prices a lot for companies to easily preserve the tech they bought a long time in the past, even when they’re not actually getting something in return for his or her continued funding.
Why don’t insurance coverage companies modernize their expertise?
The fast reply is as a result of it’s not simple or cheap to do! Modernizing a big and sophisticated enterprise system, like these used to handle insurance coverage carriers, companies, and MGAs/MGUs, can take months or years to get reside.
Such modernizations can contain main knowledge cleanup and migration tasks, could cause enterprise interruption and down-time, and will be expensive, intimidating, and time-consuming. And there’s no assure the venture will even succeed on the finish of the day, whether or not from a technological perspective or only a lack of buy-in and adoption from supposed customers.
Sidenote: That’s why our world-class implementation course of is so vital.
Nonetheless, the answer isn’t to bury your head within the sand and faux that your decades-old legacy programs are going to do their job for the following few years, and even longer. Proper, Southwest Airways?
Making the selection to modernize your insurance coverage tech stack isn’t one which must be executed on a whim. It takes loads of time and sources to do it proper: from evaluating completely different options to making the case in your chosen associate. Nonetheless, when you’ve made the leap to modernization, you’ll understand price financial savings, and also you is likely to be questioning what else what you are promoting may do with that cash.
10 issues an insurance coverage enterprise may spend cash on as an alternative of legacy expertise
To assist make the case for modernizing, listed here are 10 issues your group may completely be placing cash towards with the financial savings you’d understand by transferring away from legacy tech. A few of them are extra pragmatic than others, however we imagine in dreaming massive!
- Trendy insurance coverage infrastructure: OK, so this one is type of apparent. You could possibly be spending cash (albeit a lot much less of it!) on trendy insurance coverage expertise as an alternative of legacy insurance coverage expertise. You want technological infrastructure to energy what you are promoting it doesn’t matter what: You simply don’t need to spend a lot on it when it delivers so little worth.
- Higher shopper expertise: Whether or not you do that by hiring extra customer support reps to chop down on response occasions, or by investing in a smartphone app that lets purchasers contact you immediately with questions, you’ll be able to improve the shopper expertise by investing in it with cash you’re not spending on legacy tech.
- Eco-friendly workplace upgrades: Go inexperienced by investing in eco-friendly workplace upgrades. Assume photo voltaic panels, a inexperienced roof, and even beginning an organization backyard. It’s good for the planet and might enhance worker satisfaction.
- Excessive-tech coaching packages: Staff will actually profit while you reallocate your previous tech price range towards coaching them on cutting-edge expertise. Possibly it’s knowledge analytics, cybersecurity, utilizing AI, or blockchain expertise. Both means, workers will acquire useful abilities that’ll assist them of their careers, and so they’ll recognize the chance.
- Dwelling-office upgrades: With a lot of the insurance coverage business workforce collaborating in a hybrid working association, you’ll be able to enhance workers’ lives by giving them a price range for issues that’ll make their work-from-home expertise extra snug and productive. Ergonomic chairs, standing desks, and noise-canceling headphones are just some concepts you could supply every worker with the cash you’re not spending supporting legacy expertise.
- Wellness retreats and psychological well being advantages: Comfortable workers are productive workers, so utilizing a few of your financial savings on wellness advantages like gymnasium memberships, spa experiences, mindfulness lessons, and even days-long wellness retreats can present your staff how a lot you worth their entire well being.
- Charitable giving or matching donation packages: Should you’re in search of a good way to spend a few of your financial savings, take into account giving again to the group. Staff love with the ability to direct funds to causes they care about. You may even arrange an employer match in order that workers can double their affect when fundraising for his or her most passionate causes.
- Workplace petting zoo: Neglect “deliver your canine to work day” – this concept’s all about going wild within the workplace. Nothing breaks the monotony of labor like an alpaca within the elevator or a bunny at your desk. Even with out lions, tigers, and bears, you can provide workers an expertise they’ll always remember with small livestock like goats, miniature horses, and different office-sized animals.
- On-site childcare: Though it’s expensive, offering childcare for workers is likely one of the best advantages for these with minor dependents. It could possibly be an funding that’s well worth the ROI, particularly when you’ve received not too long ago freed up price range after chopping down in your legacy tech spending.
- An excessive team-building expertise: Transcend joyful hours and bowling to design an final team-building expertise, like a company-wide escape room problem or a survival abilities weekend, to foster unity and develop problem-solving abilities in enjoyable and weird settings.
Prepared to economize by modernizing your insurance coverage licensing compliance processes?
Even when you don’t reallocate funds into certainly one of our concepts, your organization received’t object to slashing its legacy tech spend by switching to a contemporary insurance coverage compliance resolution that handles every little thing from producer and adjuster licensing, to renewals, state appointments, persevering with schooling, and managing dually licensed dealer sellers with real-time FINRA knowledge as effectively!
Learn the way insurance coverage business companies could make compliance a price saver in our information “Don’t Make Compliance Compete with Price.” Should you’re able to discover how AgentSync might help what you are promoting modernize and lower your expenses, attain out to certainly one of our insurance coverage compliance tech consultants at this time.