This submit is a part of a collection sponsored by AgentSync.
The price of legacy expertise
In 2023, corporations within the monetary companies trade spent an average of 15 percent of their revenue on expertise. Not solely is that up from 10 % in 2022, however it’s close to the highest of the record while you take a look at share of income spent on IT by trade. Solely corporations within the precise tech trade, like software program corporations and managed companies corporations, spent a higher share of their annual income on IT!
You may argue that it is because monetary companies corporations, together with these particularly in insurance coverage, have gotten more and more technologically enabled. However, 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 trade isn’t the U.S. authorities, dependable information from the federal government supplies a clue into how a lot cash different industries is likely to be spending to keep up present methods, together with people who can be thought-about “legacy tech.” In keeping with the Government Accountability Office (GAO), “annually, the federal authorities spends greater than $100 billion on IT and cyber-related investments. Of this quantity, companies have usually reported spending about 80 % on operations and upkeep of present IT, together with legacy methods.”
Even by conservative estimates, if you consider how a lot cash the insurance coverage trade’s collectively spending to keep up legacy expertise, 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 keeping with the Insurance coverage Info Institute (III), your complete U.S. insurance coverage trade brought 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 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your insurance coverage service, company, or MGA/MGU may spend that cash on when you weren’t utilizing it to help outdated expertise.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Outdated expertise prices extra to keep up, to maintain safe, and to maintain in good working order than its trendy equal.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, your complete 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 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-known 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 generation of insurance professionals – welcome!
So, traditionally, you paid a one-time buy worth to your software program and you bought the fitting to make use of it eternally. What you didn’t understand was that “eternally” 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. Finally, 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 bought to purchase one other model. Possible, the brand new one comes at an excellent increased worth than the primary time you got it.
That’s a value you didn’t anticipate. In any case, 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 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 making the most of your product’s previous 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 tips on how to use it for evil. This implies you then needed to go purchase Norton Antivirus to maintain your laptop protected. 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 like at an enterprise stage. 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 actually getting something in return for his or her continued funding.
Why don’t insurance coverage companies modernize their expertise?
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 information cleanup and migration initiatives, may cause enterprise interruption and down-time, and will be pricey, intimidating, and time-consuming. And there’s no assure the undertaking 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 process is so vital.
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 following few years, and even longer. Right, Southwest Airlines?
Making the selection to modernize your insurance coverage tech stack isn’t one which needs to be achieved on a whim. It takes quite a lot of time and sources to do it proper: from evaluating different solutions to making the case to your chosen companion. Nonetheless, when you’ve made the leap to modernization, you’ll realize cost 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 a substitute 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 shifting away from legacy tech. A few of them are extra pragmatic than others, however we imagine in dreaming large!
- Trendy insurance coverage infrastructure: OK, so this one is form of apparent. You may 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 enterprise 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 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 applications: Staff will actually profit while you reallocate your previous tech funds towards coaching them on cutting-edge expertise. Perhaps it’s information analytics, cybersecurity, utilizing AI, or blockchain expertise. Both means, staff will acquire worthwhile abilities that’ll assist them of their careers, they usually’ll admire the chance.
- House-office upgrades: With a lot of the insurance coverage trade workforce taking part in a hybrid working arrangement, you’ll be able to enhance staff’ lives by giving them a funds for issues that’ll make their work-from-home expertise extra comfy and productive. Ergonomic chairs, standing desks, and noise-canceling headphones are only a few concepts which you can supply every worker with the cash you’re not spending supporting legacy expertise.
- 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 group how a lot you worth their complete well being.
- Charitable giving or matching donation applications: Should you’re searching for a good way to spend a few of your financial savings, think about giving again to the neighborhood. 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 staff can double their influence 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 may give staff an expertise they’ll always remember with small cattle like goats, miniature horses, and different office-sized animals.
- On-site childcare: Though it’s pricey, offering childcare for workers is among the best advantages for these with minor dependents. It may very well be an funding that’s well worth the ROI, particularly when you’ve bought just lately freed up funds after chopping down in your legacy tech spending.
- An excessive team-building expertise: Transcend pleased 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 economize by modernizing your insurance coverage licensing compliance processes?
Even when you don’t reallocate funds into one in every of 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 pieces from producer and adjuster licensing, to renewals, state appointments, persevering with training, and managing dually licensed dealer sellers with real-time FINRA information as nicely!
Find out how insurance coverage trade companies could make compliance a value saver in our information “Don’t Make Compliance Compete with Price.” Should you’re able to discover how AgentSync might help your enterprise modernize and get monetary savings, reach out to one of our insurance compliance tech experts today.
