This submit is a part of a sequence sponsored by AgentSync.
The price of legacy expertise
In 2023, corporations within the monetary providers business spent an average of 15 percent of their revenue on expertise. Not solely is that up from 10 % in 2022, nevertheless it’s close to the highest of the record if you have a look at proportion of income spent on IT by business. Solely corporations within the precise tech business, like software program corporations and managed providers corporations, spent a better share of their annual income on IT!
You can argue that it is because monetary providers corporations, together with these particularly in insurance coverage, have gotten more and more technologically enabled. Then again, you would argue the monetary providers 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 gives a clue into how a lot cash different industries is perhaps spending to keep up present methods, together with those who can be thought of “legacy tech.” Based on 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 sometimes reported spending about 80 % on operations and upkeep of present IT, together with legacy methods.”
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 % of income it’s spending on IT as an entire.
And what’s that 15 % of? Based on the Insurance coverage Info Institute (III), the whole U.S. insurance coverage business 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 mathematics! (However critically, Google says it’s about $168 billion).
With that mind-boggling quantity, we determined to put out among the finest issues your insurance coverage service, company, or MGA/MGU may spend that cash on if you happen to weren’t utilizing it to assist outdated expertise.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Outdated expertise prices extra to keep up, to maintain safe, and to maintain in good working order than its fashionable equal.
A very long time in the past, the whole enterprise of software program labored in another way than it does as we speak. 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 top of time. Let’s use Microsoft Phrase as a well-known instance that everybody can recall.
Sidenote: In case you don’t recall a time if 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 value in your software program and you bought the suitable to make use of it eternally. What you didn’t understand was that “eternally” got here with a pricetag that you just 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. Ultimately, 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. Doubtless, the brand new one comes at an excellent greater value than the primary time you purchased it.
That’s a price you didn’t anticipate. In any case, if 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 high of simply having to purchase (the identical) new software program many times, you additionally realized that hackers had been benefiting from your product’s previous age to interrupt in and steal your information. The longer a software program’s been round with out modifications and updates, the extra time dangerous actors have to determine easy methods to use it for evil. This implies you then needed to go purchase Norton Antivirus to maintain your laptop secure. Yet 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 seems to be like at an enterprise stage. For this 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 actually 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 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 stay.
Such modernizations can contain main information cleanup and migration tasks, could cause enterprise interruption and down-time, and may 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 process 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 following few years, and even longer. Right, Southwest Airlines?
Making the selection to modernize your insurance coverage tech stack isn’t one which ought to be achieved on a whim. It takes lots of time and sources to do it proper: from evaluating different solutions to making the case in your chosen accomplice. Nevertheless, when you’ve made the leap to modernization, you’ll realize cost savings, and also you is perhaps questioning what else what you are promoting may do with that cash.
10 issues an insurance coverage enterprise may spend cash on as an alternative 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 huge!
- Trendy insurance coverage infrastructure: OK, so this one is form of apparent. You can be spending cash (albeit a lot much less of it!) on fashionable insurance coverage expertise as an alternative of legacy insurance coverage expertise. You want technological infrastructure to energy what you are promoting it doesn’t matter what: You simply don’t should 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 occasions, or by investing in a smartphone app that lets purchasers 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. 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: Workers will actually profit if you reallocate your previous tech finances towards coaching them on cutting-edge expertise. Possibly it’s information analytics, cybersecurity, utilizing AI, or blockchain expertise. Both means, 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 taking part in a hybrid working arrangement, you may enhance staff’ 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 that you would be able to provide every worker with the cash you’re not spending supporting legacy expertise.
- Wellness retreats and psychological well being advantages: Blissful staff are productive staff, so utilizing a few of your financial savings on wellness advantages like gymnasium 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: In case you’re on the lookout for a good way to spend a few of your financial savings, take into account giving again to the group. Workers 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 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 expensive, offering childcare for workers is without doubt one of the biggest advantages for these with minor dependents. It could possibly be an funding that’s definitely worth the ROI, particularly if you happen to’ve bought lately freed up finances after reducing 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 weird settings.
Prepared to save cash by modernizing your insurance coverage licensing compliance processes?
Even if you happen to 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 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 information as nicely!
Find out how insurance coverage business companies could make compliance a price saver in our information “Don’t Make Compliance Compete with Value.” In case you’re able to discover how AgentSync may also help what you are promoting modernize and lower your expenses, reach out to one of our insurance compliance tech experts today.
