Technology Modernization in Insurance: Myths, Benefits, Challenges, and More

Quick Rundown: In a world where technology is reshaping industries, insurance is no exception. Legacy systems, once reliable, are now hindering innovation and customer experience. That’s where leveraging technology modernization in insurance is the only key to staying ahead in the future. But is it worth the effort? Read on as we debunk the myths, explore the benefits, and navigate the challenges of this transformative journey in this blog.

Traditionally insurance companies used to operate using a paper-based system, with policies and claims being processed manually by underwriters and claims adjusters. This process was often slow and prone to errors, as it relied on individuals to manually input and process data.

However, with the advent of technology, the insurance industry has undergone significant legacy modernization. Insurance companies have embraced insurance technology, including artificial intelligence (AI), machine learning (ML), and blockchain, to improve efficiency and customer experience. Hence, the global insurtech market is projected to generate 152.43 billion by 2030.

For example, the case of Progressive, a US-based insurance company that has been around for over 80 years, is inarguably one of the world’s greatest success stories of technology transformation in the insurance industry. It is having insurers rethink the way they operate their business and interact with customers.

Their investment in developing a usage-based insurance software system named Snapshot has paid off pretty well. The program has helped them retain existing customers, attract new customers, and improve profitability, with millions of drivers turning to the product.

As a result, the firm has gained a reputation as an innovative and customer-focused insurance company that successfully stayed ahead of its competitors.

However, as influential as their story is, implementing a tech modernization strategy can be a bit tricky for insurance companies. If you opt for insurance tech without a clear, sustainable approach, you are more likely to fail.

This article will break down a handful of details about technology modernization in the insurance industry, including benefits, best practices, and approaches insurers should pay attention to.

Gain A Competitive Edge in Insurance Industry with Tech Modernization

Get Started Today

The Problem of Legacy Technology in Insurance

The insurance industry has been slow to adopt new technologies, resulting in many companies relying on legacy systems that are outdated and difficult to maintain. According to a survey by Bain & Company, over 60% of life and non-life insurance companies around the world are still using software systems from the 1970s and 1980s.

The problem with legacy technology in any insurance infrastructure is that it can hinder a company's ability to compete in today's fast-paced digital environment. These systems might not be able to handle the increasing amount of data, leading to slow processing times and delays in making decisions.

Legacy systems are also typically more difficult to integrate with newer technologies. For example, if an insurer wants to leverage the power of AI, it may not be possible to do so without significant modifications to the existing system.

In addition, legacy technology systems can pose a security risk. These systems often lack modern security standards, which means that they do not have the needed security features to protect your customer data against modern cyber threats.

Thus, organizations that are still using legacy systems should start investing in tech insurance if they want to survive in the changing industry landscape.

What is Technology Modernization in Insurance?

Simply put, technology modernization in the insurance industry is basically the process of upgrading and optimizing the existing way of working with the latest digital transformation technologies to improve operational efficiency, enhance customer experiences, and enable data-driven decision-making.

For instance, AI-powered chatbots can provide quick and personalized responses to customer queries, reducing response times and improving customer engagement. IoT development solutions such as sensors and devices can collect real-time data on policyholders, allowing insurers to customize their products and services to meet specific needs.

Modernization also calls for the migration to cloud-based platforms from traditional legacy systems. Cloud-based solutions offer flexibility, scalability, and cost efficiency. This, in turn, enables insurers to reduce manual tasks and enable remote work.

The adoption of blockchain technology is also gaining momentum in the insurance industry as it provides a secure and transparent way to manage claims processing and fraud detection.

Develop an Insurance Software System to Improve Your Operations and Serve Customers Better

Discover Your Edge

The Evolution of Insurance Technology

Over the years, the insurance industry has gone through significant changes which are nothing short of revolutionary. From the traditional pen-and-paper methods to deploying insurtech software, insurance has come a long way.

The first wave of insurance technology modernization came in the form of computerization, which involved the use of computers to automate manual processes. This allowed insurers to process claims and underwriting activities more efficiently, reducing the time and effort required to complete these tasks.

As technology continued to evolve, insurance companies began to adopt more advanced technologies such as AI and ML that allowed companies to analyze large amounts of data, identify patterns and trends, and make informed decisions based on this information.

Another significant development in technology insurance modernization is the use of the Internet and mobile devices. Insurers can now provide customers with online portals and mobile apps that allow them to access policy information, file claims, and make payments. This has made the insurance process much more convenient and accessible for customers.

Why Should Insurers Care About Technology Modernization?

Insurance companies have been around for centuries, providing businesses and individuals with financial security against unexpected events. However, as the world becomes increasingly digital, insurance and technology are going hand in hand.

According to Statista, fintech software systems are going to replace more than 45% of existing insurance jobs across the USA by the end of 2030.

Pretty clearly, technology modernization is crucial for insurance companies to stay competitive in today's market as they can streamline their processes, improve their customer service, and increase their efficiency.

Another reason is improved data management. With the right fintech system in place, companies can easily collect and analyze data to make more informed decisions. This can help them better identify potential risks and develop more accurate pricing models.

Above all, with the rise of digital channels, customers expect to be able to interact with their insurance companies online. By adopting an insurance mainframe modernization methodology, you can offer more convenient and personalized experiences for your customers through mobile apps, online portals, and chatbots.

Technology Modernization Challenges for the Insurance Industry

Although modernizing the insurance infrastructure is the need of the hour now, it's not without its challenges. Before jumping into a project, insurers should know about the potential pitfalls.

• Data Quality

Since insurance companies collect a vast amount of siloed data scattered across multiple systems, retaining the data quality becomes a great challenge.

• Cybersecurity

With the increasing use of technology and digital platforms in the insurance industry, cybersecurity has become a top concern for insurers. Cybercriminals and hackers are constantly looking for vulnerabilities to exploit, and insurers must be vigilant in protecting their systems and data from cyber threats.

• Talent Shortage

Insurance technology modernization requires the right talent at the right place to manage and maintain these systems. However, due to the shortage of skilled technology professionals in the insurance industry, firms might struggle to find and retain top talent.

• Customer Expectations

Customers expect seamless and personalized experiences across all touchpoints. Hence, you must make the best use of tech insurance to empower your team to meet these expectations while also ensuring that they are compliant with regulatory requirements.

Upgrade Your Age-Old System to a Next-Gen Digital Platform with Our Legacy Modernization Services

Explore More

Key Benefits of Technology Modernization in Insurance

Exploring the IT skills that support the growing insurtech insurance wave is easy. Therefore, you will find the motivation and desire to come up with a strategic technology mainframe modernization plan once you understand why you must do it.

Let's take a quick look at the main benefits of technology modernization for insurers:

Improved efficiency and lower costs

Technology can automate many of the manual processes involved in insurance, reducing paperwork and the time it takes to complete tasks. This leads to faster response times, reduced costs, and a more streamlined customer experience.

Better customer experience

Vehicle or health insurance software development enables businesses to provide a more personalized and responsive service to customers through the use of chatbots, mobile apps, and other digital tools. This results in higher levels of customer satisfaction and loyalty.

On-spot accuracy

Modernizing your existing tech insurance ecosystem improves the accuracy of risk assessment and underwriting so that you can reduce the likelihood of errors and enhance the quality of insurance services.

Foolproof data analysis

Insurance tech modernization helps insurers collect and analyze vast amounts of data, providing insights into customer behavior, market trends, and risk patterns. This allows them to develop more effective products and pricing strategies.

Increased agility

Last but not least, you can respond more quickly to changing market conditions and customer needs, stay ahead of the competition, and adapt to the latest insurance technology trends in the industry.

Top 5 Myths About Technology Modernization in Insurance

Technology modernization is a complex process that involves various stages and components. Many people may not have a clear understanding of what the process holds, leading to myths and misconceptions about it.

Let's dispel them one by one and help you have a clear idea about what technology transformation for insurance companies is and what it is not:

Myth 1: Only large-scale insurance companies need technology modernization

Sure, large insurance firms have a lot on their plate, and they have no other way than to modernize legacy systems to run their businesses. However, insurtech solutions are necessary for insurers of all sizes.

Smaller companies might have more limited budgets and resources, but failing to modernize can lead to decreased efficiency and competitiveness.

Myth 2: Customers don't care about tech insurance

In today's digital age, customers have technology integrated into all aspects of their lives, including their relationships with insurance companies. So, if you fail to align insurance and technology, it might cost you decreased customer satisfaction and loss of business.

Myth 3: Implementing new technology will solve all problems

Digital transformation technologies indeed have the power to revolutionize every aspect of an enterprise.

While new technology can certainly improve operations and efficiency, it is not a silver bullet. Hence, it is important to have a clear strategy and plan in place for implementation and to continually evaluate and adapt as needed.

Myth 4: Modernizing technology digs a hole in the pocket

While there can be significant upfront costs associated with technology modernization, it will eventually lead to cost savings over time through increased efficiency, decreased errors, and improved customer satisfaction.

Myth 5: Insurance technology will replace people

Although insurtech systems might automate or entirely eliminate some jobs, they can also create new job opportunities. Instead of going through piles of paperwork, technology allows employees to focus on higher-level tasks that require human input and creativity.

Tap into the FinTech World to Drive Customer Excellence at Speed and Scale

Get It Started

Best Practices for Technology Modernization in an Insurance Company

Implementing a tech modernization without fail needs careful consideration and decision-making. It all begins with understanding the best practices and applying your skills to them.

So, here are some tried-and-tested tips on how to successfully modernize your insurance infrastructure using the power of technology:

Develop a comprehensive technology modernization plan

First up, a well-defined technology modernization plan that should perfectly align with your business objectives. You must identify technology gaps and prioritize investments based on value and ROI.

Additionally, you should involve stakeholders from different areas and consider each of their feedback to make sure that the plan meets the requirements of all the business units.

Leverage the power of cloud computing

Cloud computing for businesses can provide insurers with scalability, flexibility, and cost savings. By moving to the cloud, insurers can simplify operations, reduce infrastructure costs, and utilize modern reporting and analytics tools to gain deeper insights into their business and make better business decisions.

Focus on efficient data management

You must remember that data is at the core of insurance operations. Hence, data quality, accuracy, and accessibility should be the priority of your insurance technology transformation plan.

In this regard, a centralized data management system can help you access and evaluate data more effectively and serve your customers better.

Invest in automation capabilities

As we mentioned before, automation technologies, including robotic process automation (RPA) and AI, can improve the efficiency and accuracy of insurance processes, enabling insurance companies to reduce manual labor and improve customer satisfaction.

Build a culture of innovation

Another key factor is a culture of innovation. Upgrading the entire organizational infrastructure should be a gradual process and you must encourage experimentation, collaboration, and continuous learning throughout the process. Keep in mind that it’s your team that is going to make it happen and creating a culture of innovation is going to boost their confidence.

Adopt a customer-centric approach

Embracing a customer-oriented mindset holds great importance here. More than anything, insurance customers expect personalized, convenient, and fast services and insurers can leverage technology to meet these expectations.

For example, implementing self-service portals and providing customers with real-time access to information are some ways you can address your clients’ needs and establish a credible brand identity.

Examples of Successful Insurance Technology Modernization

The big players in the insurance industry have delivered ample hints at why insurance tech upgradation is a surefire way of boosting a company’s growth and staying relevant in the market. Such striking examples are worth discussing to understand the core benefits of technological disruption.

• Allstate

Being one of the largest insurance companies in the United States, Allstate has invested heavily in tech modernization in recent years. The company has embraced artificial intelligence (AI) and machine learning to enhance its capabilities and make the process faster and more efficient.

• AXA

AXA, a multinational insurance company, is another company that has also undergone significant tech transformation. Leveraging blockchain technology and AI-powered chatbot, they have streamlined their operations and improved customer service.

• Lemonade

Lemonade is a relatively new insurance company that has disrupted the industry with its innovative use of technology. With AI to automate much of its claim processing and a user-friendly mobile app, it allows customers to manage their policies and file claims easily.

• Ping An

This list is not complete without Ping An, a Chinese insurance company that has transformed itself into a leading player in the global insurance industry. By investing in AI, blockchain, and other cutting-edge technologies, Ping An has managed to enhance its underwriting, data analysis, and customer service capabilities.

Recreate Your Legacy Application from Scratch with State-of-the-Art Technologies

Tell Me More

Modernize Your Insurance System with RadixwebInsurance may have joined the fintech revolution a little later than expected, but the industry is quickly catching up. C-suite executives now understand the significance of strategic investments in both cutting-edge tools like blockchain and AI and underlying technology like the cloud.It is high time for insurers to switch to this new way of doing business in order to strengthen their operations and gain the favor of both their clients and the business itself.Are you planning to do the same? Whether you need to implement new software systems or improve existing ones, we can help you modernize your tech landscape.We have a wealth of experience in offering industry-leading application modernization services for a variety of industries, including insurance. You can leverage this experience to develop customized solutions that meet the specific needs of an insurance company. We also bring a fresh perspective to the table to help our clients pinpoint areas where they can leverage technology and then develop insurtech solutions to address those issues.Reach out to us to create a foolproof tech modernization strategy and get your insurance business to new heights!