Taming existing tech: A strategic approach for insurance modernization

Insurance remains an incredibly data-heavy industry with deep roots. Based on product offerings and strict regulatory data retention rules, a significant number of existing systems, some decades-old, are still in operation. It's not uncommon to find COBOL-coded applications or AS/400s continuing to run mission-critical workloads.

There's a valid reason for this: the insurance sector was an early adopter of these data-heavy environments, and the technology worked well.

However, managing this data over decades created heavy technical debt. For example, liability insurance policies often require data retention periods of up to 20 or 30 years beyond a policy's lifetime. If a policyholder lives to be 100 years old, it is possible that mandates would compel operational teams to secure and correct 100 to 120-year-old data.

We once hoped cloud computing would provide a fix for this specific legacy problem, but no single technology offers a complete answer. Cloud is a significant component, but virtual machines remain a necessity as well. Because of this, IT teams must piece together environments or extract data into separate storage layers to keep operations running.

Today, insurers manage hybrid environments composed of new cloud-driven systems, old legacy applications, and a complicated middle layer where operational teams try to tie everything together. This infrastructure sprawl can make accelerating claims adjudication and other critical business functions incredibly difficult.

Risks of a “rip and replace” strategy

When confronted with this level of complication, a "rip and replace" strategy might feel like a natural response. The instinct is to build something entirely new and transition operations to the newly constructed environment. However, moving away from working infrastructure—even if it's duct-taped together—comes with substantial risk and potentially high expenses.

Massive overhaul projects can take years to complete, and IT teams often don’t have full visibility into existing systems.

• Data may have been placed into storage decades ago for compliance reasons.
• Insurance organizations often don’t have years to modernize and can incur unnecessary risk when choosing a "rip and replace" strategy.

A better strategy is an iterative approach. Developing an incremental plan to outline upgrades, modifications, or an approach to replace systems 1 by 1 creates a more controlled risk environment.

Controlling potential chaos with a unified platform

To reduce operational complexity, organizations require a robust application management platform. Red Hat OpenShift Virtualization provides a central layer to control older systems alongside new, modern applications. Traditional virtual machines and modern containerized applications can operate together in a single unified view.

With a heavy reliance on third-party data, a strategic platform that supports multiple formats, processes information faster, and accelerates routine claims adjudication is critical for future success.

Practical steps for iterative modernization

To effectively mitigate risk and resolve technical debt, insurance leaders should adopt a focused, iterative approach to modernizing their infrastructure. Consider the following:

• Commit to an open source platform: Selecting a unified application management platform built on open source principles provides the operational agility needed to navigate evolving regulatory data requirements without vendor lock-in.
• Enforce central control: Modernization often stalls when disconnected IT initiatives emerge across various business units. Success requires executives to champion and enforce a unified, central strategy across the organization.
• Target a single specific business function: Avoid the pitfalls of a massive overhaul by focusing on a single target area first. Whether it's a vertical line like personal auto insurance in specific regions or a horizontal function like claims fraud, starting with a self-contained environment enables faster validation.

By demonstrating success in 1 concentrated area, teams can build the necessary momentum and confidence to scale the migration to subsequent business functions.

Learn more to take the next steps

Modernizing insurance technology doesn't require risking the entire business on a massive, multi-year overhaul that could become obsolete before completion. By embracing a standardized, open source platform and an incremental approach to manage virtual machines and modern containers, organizations can systematically reduce technical debt and increase their competitive advantage. Start by identifying 1 distinct business function for migration to prove the value of your new architecture. Prove it out and use the lessons learned to expand.