This publish is a part of a sequence sponsored by AgentSync.
The price of legacy know-how
In 2023, corporations within the monetary companies trade spent a median of 15 % of their income on know-how. Not solely is that up from 10 % in 2022, but it surely’s close to the highest of the record while you take a look at proportion of income spent on IT by trade. Solely corporations within the precise tech trade, like software program corporations and managed companies corporations, spent a larger share of their annual income on IT!
You would argue that it’s because monetary companies corporations, together with these particularly in insurance coverage, have gotten more and more technologically enabled. Then again, you might argue the monetary companies corporations’ outsized tech spend is because of them spending an excessive amount of cash on legacy know-how that’s not cost-effective.
Whereas the private-sector insurance coverage trade 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-about “legacy tech.” In accordance 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 trade’s collectively spending to take care of legacy know-how, it may very well be a big portion of the 15 % of income it’s spending on IT as an entire.
And what’s that 15 % of? In accordance with the Insurance coverage Info Institute (III), all the U.S. insurance coverage trade introduced in $1.4 trillion in premium {dollars} in 2021. So, let’s see… 80 % of 15 % of practically a trillion-and-a-half {dollars}? You do the maths! (However critically, Google says it’s about $168 billion).
With that mind-boggling quantity, we determined to put out a number of the greatest issues your insurance coverage service, company, or MGA/MGU may spend that cash on when you weren’t utilizing it to assist outdated know-how.
However first…
Why is supporting legacy know-how so costly?
Outdated know-how prices extra to take care of, to maintain safe, and to maintain in good working order than its fashionable equal.
A very long time in the past, all the enterprise of software program labored in another way than it does right this moment. 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 just “owned” till the tip of time. Let’s use Microsoft Phrase as a well-known instance that everybody can recall.
Sidenote: If you happen to 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 to your software program and you bought the appropriate to make use of it perpetually. What you didn’t understand was that “perpetually” got here with a pricetag that you just couldn’t have predicted on the time.
As know-how superior, your model of Microsoft Phrase slowly stopped working the way in which it as soon as did. It actually didn’t include new options to enhance performance over time. Ultimately, you’d want a brand new pc to maintain up with the quickly evolving know-how (hi there, web!) – however since you bought a replica of Microsoft Phrase 1995 and it doesn’t work in your new pc in 2002, you’ve received to purchase one other model. Possible, the brand new one comes at an excellent greater worth than the primary time you got it.
That’s a price you didn’t count on. 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 just’d must spend extra money each few years to maintain utilizing it.
On prime of simply having to purchase (the identical) new software program many times, you additionally realized that hackers have been making the most of your product’s previous age to interrupt in and steal your knowledge. The longer a software program’s been round with out adjustments and updates, the extra time unhealthy actors have to determine methods to use it for evil. This implies you then needed to go purchase Norton Antivirus to maintain your pc protected. One more value.
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 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 really getting something in return for his or her continued funding.
Why don’t insurance coverage companies modernize their know-how?
The short reply is as a result of it’s not straightforward 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 dwell.
Such modernizations can contain main knowledge cleanup and migration tasks, could cause enterprise interruption and down-time, and will be pricey, intimidating, and time-consuming. And there’s no assure the challenge 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 necessary.
Nonetheless, the answer isn’t to bury your head within the sand and fake that your decades-old legacy programs are going to do their job for the subsequent few years, and even longer. Proper, Southwest Airways?
Making the selection to modernize your insurance coverage tech stack isn’t one which needs to be achieved on a whim. It takes a number of time and assets to do it proper: from evaluating totally different options to making the case to your chosen companion. Nevertheless, when you’ve made the leap to modernization, you’ll understand value financial savings, and also you is likely to be questioning what else your enterprise may do with that cash.
10 issues an insurance coverage enterprise may spend cash on as an alternative of legacy know-how
To assist make the case for modernizing, listed below 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 consider in dreaming massive!
- Fashionable insurance coverage infrastructure: OK, so this one is form of apparent. You would be spending cash (albeit a lot much less of it!) on fashionable insurance coverage know-how as an alternative of legacy insurance coverage know-how. You want technological infrastructure to energy your enterprise it doesn’t matter what: You simply don’t must spend a lot on it when it delivers so little worth.
- Higher consumer expertise: Whether or not you do that by hiring extra customer support reps to chop down on response instances, or by investing in a smartphone app that lets shoppers contact you immediately with questions, you’ll be able to improve the client expertise by investing in it with cash you’re now not spending on legacy tech.
- Eco-friendly workplace upgrades: Go inexperienced by investing in eco-friendly workplace upgrades. Suppose photo voltaic panels, a inexperienced roof, and even beginning an organization backyard. It’s good for the planet and may enhance worker satisfaction.
- Excessive-tech coaching packages: Workers will actually profit while you reallocate your previous tech finances towards coaching them on cutting-edge know-how. Possibly it’s knowledge analytics, cybersecurity, utilizing AI, or blockchain know-how. Both method, workers will acquire useful abilities that’ll assist them of their careers, they usually’ll respect the chance.
- Residence-office upgrades: With a lot of the insurance coverage trade workforce collaborating in a hybrid working association, you’ll be able to enhance workers’ lives by giving them a finances for issues that’ll make their work-from-home expertise extra snug and productive. Ergonomic chairs, standing desks, and noise-canceling headphones are only a few concepts which you could supply every worker with the cash you’re not spending supporting legacy know-how.
- Wellness retreats and psychological well being advantages: Comfortable workers are productive workers, so utilizing a few of your financial savings on wellness advantages like fitness center memberships, spa experiences, mindfulness lessons, and even days-long wellness retreats can present your crew how a lot you worth their entire well being.
- Charitable giving or matching donation packages: If you happen to’re on the lookout for a good way to spend a few of your financial savings, take into account giving again to the neighborhood. Workers love having the ability to direct funds to causes they care about. You possibly can even arrange an employer match in order that workers can double their influence when fundraising for his or her most passionate causes.
- Workplace petting zoo: Overlook “carry 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 pricey, offering childcare for workers is likely one of the biggest advantages for these with minor dependents. It may very well be an funding that’s well worth the ROI, particularly when you’ve received not too long ago freed up finances after reducing down in your legacy tech spending.
- An excessive team-building expertise: Transcend glad 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 strange settings.
Prepared to save cash by modernizing your insurance coverage licensing compliance processes?
Even when you don’t reallocate funds into considered 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 part from producer and adjuster licensing, to renewals, state appointments, persevering with training, and managing dually licensed dealer sellers with real-time FINRA knowledge as properly!
Find out how insurance coverage trade companies could make compliance a price saver in our information “Don’t Make Compliance Compete with Value.” If you happen to’re able to discover how AgentSync can assist your enterprise modernize and get monetary savings, attain out to considered one of our insurance coverage compliance tech specialists right this moment.
