This submit 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 p.c of their income on expertise. Not solely is that up from 10 p.c in 2022, nevertheless it’s close to the highest of the checklist once you take a look at proportion 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 would argue that it is because monetary companies corporations, together with these particularly in insurance coverage, have gotten more and more technologically enabled. Then again, you could possibly 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 information from the federal government supplies a clue into how a lot cash different industries could be spending to keep up current programs, together with those who can be thought of “legacy tech.” In response to 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 p.c on operations and upkeep of current 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 keep up legacy expertise, it could possibly be a big portion of the 15 p.c of income it’s spending on IT as an entire.
And what’s that 15 p.c of? In response to the Insurance coverage Info Institute (III), all the U.S. insurance coverage business introduced in $1.4 trillion in premium {dollars} in 2021. So, let’s see… 80 p.c of 15 p.c of practically a trillion-and-a-half {dollars}? You do the mathematics! (However significantly, Google says it’s about $168 billion).
With that mind-boggling quantity, we determined to put out a few of the finest issues your insurance coverage service, company, or MGA/MGU might spend that cash on in case you weren’t utilizing it to help outdated expertise.
However first…
Why is supporting legacy expertise so costly?
Outdated expertise prices extra to keep up, to maintain safe, and to maintain in good working order than its trendy equal.
A very long time in the past, all the enterprise of software program labored otherwise than it does at present. You had a pc, housed in a single location – your lounge, maybe. And you bought a bit of software program that got here in a field and that you simply “owned” till the top of time. Let’s use Microsoft Phrase as a well-known instance that everybody can recall.
Sidenote: When you don’t recall a time once you bought Microsoft Phrase in a field from an workplace provide retailer, you’re a member of the newer technology of insurance coverage professionals – welcome!
So, traditionally, you paid a one-time buy value in your software program and you bought the appropriate to make use of it without end. What you didn’t notice was that “without end” 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 best way it as soon as did. It definitely didn’t include new options to enhance performance over time. Finally, you’d want a brand new pc to maintain up with the quickly evolving expertise (hey, web!) – however since you bought a duplicate of Microsoft Phrase 1995 and it doesn’t work in your new pc in 2002, you’ve bought to purchase one other model. Probably, the brand new one comes at an excellent increased value than the primary time you obtain it.
That’s a price you didn’t anticipate. In spite of everything, once 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 have to spend extra money each few years to maintain utilizing it.
On high 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 outdated age to interrupt in and steal your information. The longer a software program’s been round with out adjustments and updates, the extra time unhealthy actors have to determine how you can use it for evil. This implies you then needed to go purchase Norton Antivirus to maintain your pc protected. One more value.
The analogy might proceed for fairly a while, and also you’d nonetheless be nowhere close to the complexity or expense of what legacy software program seems to be like at an enterprise degree. Because of this it prices a lot for companies to easily keep 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 expertise?
The fast reply is as a result of it’s not simple or cheap to do! Modernizing a big and complicated 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 information cleanup and migration tasks, could cause enterprise interruption and down-time, and might be expensive, 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 meant 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 ought to be finished on a whim. It takes quite a lot of time and assets to do it proper: from evaluating totally different options to making the case in your chosen accomplice. Nevertheless, when you’ve made the leap to modernization, you’ll notice value financial savings, and also you could be questioning what else your small business might do with that cash.
10 issues an insurance coverage enterprise might spend cash on as a substitute of legacy expertise
To assist make the case for modernizing, listed here are 10 issues your group might completely be placing cash towards with the financial savings you’d notice by transferring away from legacy tech. A few of them are extra pragmatic than others, however we consider in dreaming huge!
- Trendy insurance coverage infrastructure: OK, so this one is type of apparent. You would be spending cash (albeit a lot much less of it!) on trendy insurance coverage expertise as a substitute of legacy insurance coverage expertise. You want technological infrastructure to energy your small business 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 shoppers 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 may enhance worker satisfaction.
- Excessive-tech coaching applications: Staff will actually profit once you reallocate your outdated tech price range towards coaching them on cutting-edge expertise. Possibly it’s information analytics, cybersecurity, utilizing AI, or blockchain expertise. Both approach, workers will acquire precious expertise that’ll assist them of their careers, and so they’ll respect the chance.
- House-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 which you can supply every worker with the cash you’re not spending supporting legacy expertise.
- Wellness retreats and psychological well being advantages: Blissful 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 workforce how a lot you worth their entire well being.
- Charitable giving or matching donation applications: When you’re on the lookout for an effective 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’ll be able to 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 among the biggest advantages for these with minor dependents. It could possibly be an funding that’s definitely worth the ROI, particularly in case you’ve bought not too long ago freed up price range after slicing down in your legacy tech spending.
- An excessive team-building expertise: Transcend completely happy hours and bowling to design an final team-building expertise, like a company-wide escape room problem or a survival expertise weekend, to foster unity and develop problem-solving expertise in enjoyable and strange settings.
Prepared to economize by modernizing your insurance coverage licensing compliance processes?
Even in case you don’t reallocate funds into one in all our concepts, your organization gained’t object to slashing its legacy tech spend by switching to a contemporary insurance coverage compliance answer that handles all the things from producer and adjuster licensing, to renewals, state appointments, persevering with schooling, and managing dually licensed dealer sellers with real-time FINRA information 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.” When you’re able to discover how AgentSync may help your small business modernize and get monetary savings, attain out to one in all our insurance coverage compliance tech consultants at present.