LEGACY MODERNIZATION IN INSURANCE INDUSTRY, Part 1
This post series examines the current status and future directions of legacy modernization in Japan’s insurance industry.
It is based on a legacy modernization survey Celent conducted in 2015. The survey targeted insurers, financial institutions, and brokers. It was supplemented with additional information gathered in follow-up interviews.
The new two-part report is an extension of this work that narrows the focus to the insurance sector.
- Part 1 offers an overview of the state of modernization in the industry.
- Part 2 builds on this to offer policy prescriptions and suggestions for industry players.
I hope that this post series will act as a catalyst for legacy modernization initiatives at financial institutions and aid in the pursuit of innovation.
- Legacy modernization: Updating an existing system.
- Legacy system: Systems that have been developed and in place for many years and possess many features but are difficult to upgrade.
- Modern system: A system built with high-performance, cutting-edge features that enable easy upgrades and are able to separate code and business rules.
Key Research Questions:
- KRQ 1. Where are Japan’s insurers in terms of legacy system modernization?
- KRQ 2. What does legacy system modernization mean to insurers and why do they do it?
- KRQ 3. What does an insurer roadmap to modernization look like?
Part 1 of this post series answered the first key research question. From part 2, builds on this by seeking to answer questions two and three.
As the answers to the KRQ 1, we have been reviewing the following five things throughthe report Part 1.
- More insurers are seriously considering legacy modernization and moving to the implementation stage: The norm for replacement strategies is increasingly the deployment of a new system rather than a version upgrade or wrapping, with the decision driven by cost, fit with existing IT skill and aptitude levels, and risk tolerance.
- As organizations progress to the implementation stage of replacement projects: they do not always sufficiently consider potential new solutions such as software as a service (SaaS) or business process outsourcing (BPO).
- The greatest challenge for companies is selecting the optimal program.
- Business cases could be used better: They are generally only used as tools to monitor progress rather than functioning as live documents.
- Changes in the roles of business and IT units accompanying modernization: have yet to translate into changes in the responsibilities of these units.
My past report, Legacy Modernization in Japan’s Financial Industry, Part 2: argued that financial institutions looking to modernize should cease targeting a specific customer demographic and shift to a new strategy that incorporates the below points:
- Create a community with customers using advanced digital technologies.
- Build an ecosystem across the entire value chain.
- Adopt technologies that can be reused and improved.
- Transition to technology as a service, white-label products, and to revenue generating models.
In other words, Celent sees legacy modernization as nothing short of a wholesale upgrade of how companies do business and a strategic move in terms of both digitization and innovation.
Now we will focus on an in-depth look at legacy system modernization for the insurance industry and suggestions for insurers in Japan.
FIG1: Legacy modernization is at its heart the modernization of business
To be continued – Click to read more