This publish is a part of a collection sponsored by AgentSync.
The price of legacy know-how
In 2023, firms within the monetary providers business spent a mean of 15 % of their income on know-how. Not solely is that up from 10 % in 2022, however it’s close to the highest of the listing whenever you take a look at proportion of income spent on IT by business. Solely firms within the precise tech business, like software program firms and managed providers firms, spent a larger share of their annual income on IT!
You possibly can argue that it is because monetary providers firms, together with these particularly in insurance coverage, have gotten more and more technologically enabled. Alternatively, you can argue the monetary providers firms’ 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 business isn’t the U.S. authorities, dependable knowledge from the federal government gives a clue into how a lot cash different industries is perhaps spending to keep up current methods, together with those who can be thought of “legacy tech.” In response to the Authorities Accountability Workplace (GAO), “every year, 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 current IT, together with legacy methods.”
Even by conservative estimates, if you consider how a lot cash the insurance coverage business’s collectively spending to keep up 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 response to the Insurance coverage Data Institute (III), the complete U.S. insurance coverage business 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 significantly, Google says it’s about $168 billion).
With that mind-boggling quantity, we determined to put out a few of the greatest issues your insurance coverage provider, company, or MGA/MGU may spend that cash on if you happen to weren’t utilizing it to help outdated know-how.
However first…
Why is supporting legacy know-how so costly?
Outdated know-how prices extra to keep up, to maintain safe, and to maintain in good working order than its trendy equal.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, the complete enterprise of software program labored otherwise than it does at the moment. You had a pc, housed in a single location – your front room, maybe. And you bought a bit of software program that got here in a field and that you just “owned” till the top 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 whenever 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 value in your software program and you bought the suitable to make use of it ceaselessly. What you didn’t notice was that “ceaselessly” 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 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 know-how (hiya, web!) – however since you bought a replica of Microsoft Phrase 1995 and it doesn’t work in your new laptop in 2002, you’ve acquired to purchase one other model. Seemingly, the brand new one comes at an excellent larger value than the primary time you got it.
That’s a value you didn’t anticipate. In any case, whenever 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 have to spend extra money each few years to maintain utilizing it.
On prime of simply having to purchase (the identical) new software program time and again, you additionally realized that hackers had been benefiting from 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 dangerous actors have to determine learn how to use it for evil. This implies you then needed to go purchase Norton Antivirus to maintain your laptop secure. Yet 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 degree. This is the reason it prices a lot for companies to easily preserve the tech they bought many years 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 know-how?
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 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 essential.
Nonetheless, the answer isn’t to bury your head within the sand and fake that your decades-old legacy methods 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 accomplished on a whim. It takes a number of time and sources 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 price financial savings, and also you is perhaps 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 notice by shifting away from legacy tech. A few of them are extra pragmatic than others, however we imagine in dreaming large!
- Fashionable insurance coverage infrastructure: OK, so this one is form of apparent. You possibly can be spending cash (albeit a lot much less of it!) on trendy 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 shopper 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 may improve the shopper 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 might enhance worker satisfaction.
- Excessive-tech coaching applications: Staff will actually profit whenever you reallocate your previous tech price range towards coaching them on cutting-edge know-how. Possibly it’s knowledge analytics, cybersecurity, utilizing AI, or blockchain know-how. Both manner, staff will acquire invaluable abilities that’ll assist them of their careers, and so they’ll recognize the chance.
- Residence-office upgrades: With a lot of the insurance coverage business workforce collaborating in a hybrid working association, you may enhance staff’ lives by giving them a price range for issues that’ll make their work-from-home expertise extra comfy and productive. Ergonomic chairs, standing desks, and noise-canceling headphones are just some concepts that you would be able to provide every worker with the cash you’re not spending supporting legacy know-how.
- Wellness retreats and psychological well being advantages: Glad staff are productive staff, so utilizing a few of your financial savings on wellness advantages like fitness center memberships, spa experiences, mindfulness courses, and even days-long wellness retreats can present your staff how a lot you worth their complete well being.
- Charitable giving or matching donation applications: If you happen to’re searching for an effective way to spend a few of your financial savings, contemplate giving again to the neighborhood. Staff love with the ability to direct funds to causes they care about. You may even arrange an employer match in order that staff can double their impression when fundraising for his or her most passionate causes.
- Workplace petting zoo: Neglect “convey 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 staff 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 may very well be an funding that’s well worth the ROI, particularly if you happen to’ve acquired just lately freed up price range after slicing down in your legacy tech spending.
- An excessive team-building expertise: Transcend blissful 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 if you happen to don’t reallocate funds into one in every of our concepts, your organization received’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 training, and managing dually licensed dealer sellers with real-time FINRA knowledge as properly!
Learn the way insurance coverage business companies could make compliance a value saver in our information “Don’t Make Compliance Compete with Price.” If you happen to’re able to discover how AgentSync may also help your enterprise modernize and lower your expenses, attain out to one in every of our insurance coverage compliance tech specialists at the moment.
