Tackling leakages and inefficiencies of the legacy systems
Back in the early 90s, when computers became usable by the common man, and when the internet started spreading its wings, insurers realised that they were at the cusp of an incredible technological shift which would put an end to Paper Mountains and strong rooms. They called in the pros; the IBMs of the world, to drive their body of work forward, with meaningful technology.
Hundreds of programs were written, for the people and tin-can systems, with an aim to chip away at the mountains, one deployment at a time. Everything was hunky-dory and the transformation was steady, but rate of progression in the external technological sphere, i.e. fresh data discovery with potential to strengthen their business models, across actuarial sciences, underwriting, collection, claims and other departments has outpaced the practice.
This gap leads to “leaks” in the process. Take for example, a scenario which many of today’s insurers are experiencing, called “premium leakage.” Inefficiencies, inaccuracies and risky processes due to the use of legacy systems causing carriers to unknowingly “leak” premium they should be collecting. While the solution to this could be as simple as taking a look under the sink and fixing it, the bigger challenge is to learn that there’s a leak in the first place. This is where many companies find it challenging to look beyond their ever-trusted legacy systems, and notice
But once we look beneath the surface, we can see that legacy systems are causing some of the major pain points insurance carriers face; Multi-entry, siloed workflows, inaccurate data laced with manual errors, slow turnaround times coupled with redundant processes. Why so many pain-points you may ask. Well, legacy systems are notoriously incapable of handling data sharing across organisations, unless you build layers upon layers of ‘middle-wares’ which in turn adds more bulk, which further slows the systems down.
Legacy systems aren’t just painful, they’re costly. A recent study by FINEOS explains how around 5% to 10% of insurance premiums are lost in these leakages due to the inefficient legacy systems. There are a myriad of reasons for premium leakage, however, case onboarding and eligibility estimation related inefficiencies take the top positions.
The solution to eliminating premium leakage is the same as the solution to better mobility and flexibility: strengthening your core. legacy systems and custom solutions are inherently prone to premium leakage, therefore carriers must rethink their core system solutions to combat it.
So, what do these stronger core systems look like? They’re modular and integrated and allow data to flow freely between workflows. They’re also decoupled with purpose-built smaller systems, enabling the core to be a reliable source of truth, without the mess of handling transformational logic and running batch jobs.
We helped develop a renewals management pipeline, leveraging a server-less architecture, while decoupling it from the insurance core system at one of the largest general insurers in the country. As a result, the decreased load on the core system has spurred a chain of similar projects to handle claims process, product configurations and sales reconciliation outside the core system.
Bottom-line being, premium leakages can be eliminated when insurers decide to look under the sink, identify the source of the leak and call in the plumber to fix the issue. In this case, the plumber is a modern, SaaS-based solutions delivery vendor who allows insurers to address the costly inefficiencies caused by legacy systems, and keep the full measure of their projected premiums in their pocket, while providing a superior customer experience.