Prisoners of legacy systems?

Insurers face the old challenge of renewing themselves or dying to meet their clients’ increasingly specific needs and remain competitive. One of the pillars of this update is the architecture of computer systems, a real key issue, which can bring unquestionable competitive advantages … or quite the opposite.

This chapter includes a set of IT structures and components that not only determine the current operation of systems, but also influence the ability to adapt to changes in technology and/or business. They play a crucial role in both service delivery and risk management. Many times in a silent, disguised way, but being the backbone of the operation of the complex gear of an insurance company.

Talking about legacy systems is often associated with technologies that are old, obsolete and expensive to maintain. They present weaknesses in the context of technological transformation.

• Lack of agility – Legacy systems are often inflexible and unprepared for changes and innovations (negative impact on time to market).
• Complexity in integrations – The lack of orientation to API and web services greatly complicates interoperability with internal and third-party systems.
• Maintenance costs – Legacy systems consume time and resources (also scarce) that could be spent on innovation. As to the core, it requires constant adaptation to the new requirements.
• Cyber threats – The vulnerability of older systems, with numerous upgrade layers, is usually higher because their management becomes extremely complicated.
• Delay in the adoption of GenAI – The exploitation in use cases of GenAI will be strongly conditioned by the correct adequacy of an infrastructure of data and systems so that it does not act as a blocking element.

In this context, insurers can adopt the following strategies.

1. “Be so-so”: This phrase is heard too often. The boat continues to navigate and, although there is a leak, we just continue to drain the water.
2. Incremental approach: Modernisation – usually with internal resources – is approached gradually, starting with those systems and applications that present the lowest operational risk and bring greater profit to the business.
3. Strategic partnership: Search for specialised suppliers for the provision of adapted solutions that free internal resources and guarantee continuity and evolution over time.

Opting for a profound renewal gives vertigo, it’s understandable. This means that in many cases this type of decision is postponed.

This is where the organisation needs true “transformational” leaders, who can see beyond the problem of tomorrow or the day after tomorrow, and discern the opportunity (in some cases the possibility of survival) that arises in the medium-long term.