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Over the years, insurers have grown organically, and through mergers and acquisitions, layering legacy infrastructure and meshing code that is often brittle to link core systems together. While modernizing systems is not an easy challenge to overcome, according to a recently released Forrester Consulting study commissioned by Red Hat, many in the industry understand that now is the time to do so. Insurers need to modernize these core systems to increase flexibility, gain cost savings, and be better able to address the growing digital needs of their policyholders. Let’s look at some of the key findings of this Forrester Consulting research study on modernizing the insurance roadmap.
Core App Modernization is Key to Business Success
You've probably seen some of those insurance commercials showing policyholders calling their insurance company immediately after a minor incident, and the insurance agent addressing and resolving everything, magically, right then and there.
We tend to only need our insurance in times of stress, so it is important to consumers that insurers meet their policyholders’ needs quickly, while being as efficient, productive, and cost-effective as possible. A firm’s ability to meet specific needs quickly is directly correlated to the technology that they are using, and according to Forrester's study, 62% of respondents surveyed "believe their core system modernization initiatives are the most critical component of their digital business strategies."
The majority also recognized that they cannot achieve this objective alone, and need to work with a vendor to succeed in these efforts. Because of this, proper vendor selection is a key criteria when selecting and evaluating vendors.
Challenges to Modernization
Even though insurers recognize the need to modernize, there are challenges that can prevent them from doing so. Data migration, integration with upstream/downstream systems, cloud migration, and data conversion were cited among respondents as the top challenges they are facing.
These challenges highlight both the insurance industry’s hesitation in moving to the cloud and what may happen if they don’t: falling behind the competition, failing to meet stakeholders’ needs, and not having the skills in place to eventually migrate.
It is not enough to simply move core legacy systems to the cloud, it has to be optimized to maximize the most value, especially in light of the effort expended. While a cloud implementation with one or multiple providers is a step in the right direction, an open hybrid cloud infrastructure can aid core modernization and innovation by promoting a wider set of technology across the data center and public clouds. Technology teams would be freed to build new customer experiences, create and market offers, optimize operations, and manage talent across the enterprise using the same tooling for common tasks.
Benefits of modernizing core apps
Modernizing core apps can have many benefits.
According to respondents, top benefits include:
- increased IT speed (66%)
- improved IT agility (61%)
- improved customer experience (59%)
- faster development (54%)
These statistics illustrate that the benefits of making the change from legacy technology to an open hybrid cloud can outweigh the risks. However, it can be a daunting task to make this transition, especially if it is unknown where to prioritize in undertaking this effort.
An open hybrid cloud platform - like Red Hat OpenShift Container Platform - offers a modern, enterprise container platform, allowing insurers to make use of multiple environments, such as on-premise, private and public clouds. This creates a common foundation to gain a balance of what is right presently, and continue to offer adaptability to scale and implement enhancements as requirements evolve. Setting up a flexible, open hybrid cloud platform will also help insurers to address challenges as they arise- avoiding "vendor lock-in" to inflexible legacy systems, which might be in place presently.
It is imperative that insurance agencies have the technology in place to be able to meet the variety of unique needs of policyholders. At Red Hat, our hybrid cloud platform can support insurers in their cloud journey, introducing tooling to support a modern DevOps methodology while providing the flexibility to build and run scalable applications in any environment where OpenShift runs.
Insurance is a uniquely personal business - protecting customers and helping them recover in stressful times of loss. As we experience an unprecedented economic shift as a result of new ways of working, and the move to work transformed in a completely digital environment, insurers need to align their focus on specifics related to policyholder concerns, not burdened by the limitations of running their core apps on legacy technologies.
To explore the key findings of the study in further depth, please see: Core system modernization: Time for a new roadmap.
About the author
Jeff Picozzi is a Principal Product Marketing Manager specializing in the financial services industry for Red Hat. He has more than 20 years of experience in the industry. After working for a global insurer and wealth management institutions and surviving Dodd-Frank, Solvency II, and the Basel Accords he began working for technology partners supporting the industry.