These beasts--legacy platforms, antiquated policy administration systems, and even today's newer proprietary Web portals--have been gobbling up huge chunks of industry IT budgets, keeping insurers tied to the old way of doing things and preventing them from using the Internet to their best advantage.
About 70 percent of insurance industry IT budgets are used to feed the beast, just to keep the existing platforms running smoothly, according to Kevin Kelly, executive vice president for Enterprise Markets at XDimensional Technologies and a well-known insurance technology consultant and iconoclast. Another 10 percent to 20 percent of the budget goes to upgrades to the existing systems, leaving only about 10 percent of the budget left for anything else.
The problem goes beyond just dollars and cents, according to Kelly, who spent a decade on insurance at Microsoft. Although the industry is often teased for being somewhat Amish--that is, to mix metaphors, averse to technology--that's not exactly the case.
The industry tends to be risk averse and wary of change, and insurance is a complex transaction. But, in the case of technology, it also prefers its proprietary systems because companies hope those systems can give them an edge. So they often choose to stay tied to their beast of choice.
In doing so, insurers are tied to outdated processes and systems that are inefficient and costly to maintain. The industry continues to pay fees to stay with proprietary networks and slow-moving standards bodies. And it meets year after year to discuss problems that never get solved--fed by vendors and consultants who have an interest in maintaining the status quo. Meanwhile, the Internet and XML standards have been around for years, but are still poorly utilized. So what, then, are the top tech innovations that insurers have overlooked as they appease their monsters? Kelly has pinpointed three areas that have held the industry back:
1. Remaining intentionally hog-tied by decades-old legacy processing applications and development approaches. This results in a continuation of labor-intensive, phone/fax/paper/Post-It-note-based workflows and task management.
2. Failing to capitalize on the "plumbing" and "standardization" via Internet applications that would allow for easy transfer of data between customers, brokers and carriers.
3. Failing to use new technologies to help consumers better understand what insurance is and how take steps to mitigate risk. A collaborative technology platform would enable the industry to enroll customers in more of the risk management and selection processes, making the product stickier and more easily branded. Instead, the industry is too easily painted as an evil institution and this lack of understanding translates into trouble in public policy debates as well.
Making substantial changes isn't easy. The old tech monsters not only eat up budgets, they also can be intimidating. "Yesterday's technology is a terrorist," Kelly says. The prospect of ditching the monsters to make a conversion involves huge risk and could result in the rolling of heads. The key, Kelly says, is that management has to allow IT to be brave.
It takes courage to slay the old technology dragon.
PATRICIA VOWINKEL has worked for national media outlets for more than 20 years.
November 1, 2009
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