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InsurTechs - A Danger for Established Insurance Companies?

Getsafe, Simplesurance or Lemonade: A bit cheeky, a bit more sonorous and therefore a bit more memorable are the names of young companies that are about to put the time-honored insurance companies to the test. For just like their brothers in spirit, the FinTechs, who are turning the financial industry upside down, these so-called InsurTechs are revolutionizing the insurance industry. Their capital: new technologies and business models that make processes simpler, more customer-friendly and cheaper. Their motor: digitalisation. They have no local branches, nor do they have any legacy systems environments that have grown over the years. The new generation of insurers is agile and able to bring new products and services to market quickly. This is particularly appealing to younger customers who expect real-time communication and fast, digital processing via apps from their insurer.

Legacy Systems as a Stumbling Block for Established Insurance Companies

Traditional insurance providers are falling behind in the face of this development. And it's not because they don't want to digitize their processes and create a better customer experience; insurers are already on the road to digitization. According to research by the German Insurance Association (GDV), the IT expenditures of insurers have even reached a new record level with a total of 4.7 billion euros. Legacy systems are causing problems, which are slowing them down in the implementation of their digitization efforts. These are IT systems that insurers established decades ago and have grown heterogeneously since then, even during various mergers. It is not uncommon for some companies to still have IBM systems from the 1980s and information that is often distributed across various repositories.

If you want to retrieve data from a long-standing existing customer in a matter of seconds, you face a huge problem. The only viable way is to streamline the IT infrastructure and reduce its complexity. This is precisely the process that is high on the list of priorities for most companies. This is the only way they can become faster and more agile and, in the long term, prevent their customers from migrating to young competitors who initially appear to be better at meeting customer needs. Insurers are increasingly turning to server and cloud solutions so that IT capacities can be flexibly adapted to requirements, according to the GDV's evaluation. According to the survey, operating costs for servers have risen by 20% within five years.

Migration Entails Risks

At first glance, the migration of data from legacy systems to the cloud seems to be the best solution. This step promises considerable cost savings as well as improved security and stability. Up to 30%of infrastructure costs can be saved. With such a migration, the company transfers the information to a new platform. However, the process often takes years, consumes a lot of money and resources and is also prone to errors. Large amounts of structured and unstructured data are stored decentral in the branched IT systems. Dependencies between some IT systems are no longer traceable. If the data is simply copied, process disturbances can occur. This risk is too great for many IT managers at insurance companies.

Alternatives to a Classic Migration

If legacy systems are to be decommissioned, insurers should consider two other options in addition to classic migration: Data integration (1) or sluggish migration (2). Within the framework of an integration (1), the legacy system is connected to the new, modern archive solution by means of an adapter. The old archive is then shut down, which saves licensing and maintenance costs. If the data is to be transferred to the new platform in the long term, a sluggish migration (2) is also an option. In this case, the data remains in the existing old archives for the time being but is gradually transported to the new archive. Until the sluggish migration is completed, employees have central access to all data using the ECM solution and the adapter. This gives the companies time to decide which data they want to keep, and which need to be deleted.

Flexible Content Service Platforms

One way out of the dilemma is to offer flexible content services platforms that are compatible with both legacy systems and the new cloud platforms. They enable companies to take advantage of cloud computing without first having to change their entire IT infrastructure. Solutions such as ASG Mobius for AWS are specifically designed to bridge the gap between mainframe, repositories and the cloud. They have a REST API that gives them access to distributed storage and applications and brings the various content islands together in a central view. The cloud-enabled nature of the ECM solution is critical to enable companies to take advantage of services from appropriate providers such as Amazon Web Services. There, more than one billion pieces of data can be easily analysed, archived and made available in real time. All information can then be accessed via any end device – regardless of whether it is a laptop, smartphone or tablet. Solutions such as Mobius software additionally compress the data to save storage space and reduce cloud service costs.

Summary

While InsurTechs are turning the insurance industry upside down and attracting customers with innovative technologies and business models, established insurance companies often lag behind when it comes to digitalization. The reason is not a lack of willingness to embark on such projects, but the corresponding legacy system, which urgently needs to be modernized. However, this is easier said than done, because a complete adaptation of IT can be a lengthy and risky process. In addition, many companies are afraid of the costs, effort and, above all, technical problems associated with the changeover. But with the right tactics, this does not have to be the case.

How can content from various applications be made centrally available and used to optimize processes and generate value from the information? Flexible content service platforms such as the Smart Content Ecosystem solution ASG Technologies offers will enable traditional insurers to make content from different business areas centrally available without migration in order to optimize processes and generate value from the information, while at the same time reacting flexibly and agilely to changing condition, in a nutshell, it will enable traditional insurers to keep up with the speed of innovation of InsurTechs – without first having to perform a lengthy and error-prone migration to the cloud. Insurers who react quickly now can gain a competitive advantage.

And as my colleague Doug Johnson, Vice President of Product Management for Content Services at ASG  stated a while ago in our Press Release, “ASG Technologies Advances Mobius Content Services Platform”:  IT leaders need to modernize and transform their infrastructure while also improving their organization’s ability to govern and secure information. Investments help them do this by consolidating and merging content stores and governance policies, migrating content to the cloud, and improving interoperability with business systems and applications.

Visit the following link to discover more about ASG’s Smart Content Eco system

Posted: 7/16/2020 8:30:00 AM by Nicole Biel