Pedaling through the headwinds: What’s holding insurers back from digital transformation? - TmaxSoft
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Pedaling through the headwinds: What’s holding insurers back from digital transformation?

Market forces and technology-savvy consumers have created significant headwinds in the insurance industry. There is pressure to grow market share while reducing the costs of underwriting and claims handling. Innovative solutions from nimble insurance technology (“InsurTech”) competitors are stealing away customers and policyholders. Demands for more customer friendly products and applications are at odds with industry regulations and the mainframes that are running core business systems.

Digital transformation offers a way to pedal through. If you’re like many insurers, however, you might be having trouble moving full speed ahead. In 2018, the independent industry analyst firm Gartner said, “The majority of the insurance industry is either early-stage digital or digital fast-followers that take a more moderate approach to digital transformation.” Let’s explore what’s holding your company—and other insurers—back and how you can pedal all the way through the headwinds.

The barriers to digital transformation in insurance

How long has your insurance company been in business? If it’s decades or generations, then you likely have legacy systems that run your core business processes. In fact, the average age of billing, policy administration, claims, underwriting, and broker and agent management systems is 13 years old. These systems are characterized by complexity, multiple duplications, and inefficient processes that affect response times.

As a result, many insurance carriers cannot move beyond digital optimization in their digital transformation strategy. The focus of digital efforts instead is on moving manual internal processes online and digitizing some policyholder interactions. Because core insurance business systems are not easily digitized, it’s difficult to move all the way forward. If this sounds familiar, then you probably also know that stagnant digital optimization jeopardizes your place in the industry as policyholders choose to do business with more engaging non-traditional vendors to attain an end-to-end flawless user experience.

The strongest gust in the insurance headwind is the mainframe—the home of your core legacy systems. According to the results of a Gartner 2017 survey of insurance CIOs, 66 percent of their IT budgets are spent on maintenance. Most of that spend is related to the mainframe. In other words, fixing, updating, and patching it can quickly drain your resources, not to mention slow the performance of underwriting, claims processing, customer-facing applications and more.

Shift to a more effective gear with mainframe rehosting

Pedaling through a headwind to get to the other side usually means finding a better gear that can do the job. In your digital transformation process, rehosting is that gear. Mainframe rehosting moves your legacy insurance business systems to a more modern, open platform. Your mainframe assets move to the cloud or an open on-premises system quickly and with minimal risk. Your applications work as-is with no changes to the underlying business logic or user interface.

Because the operating systems in rehosting are open, they integrate with the new technology required to achieve a competitive edge in the insurance marketplace. Not only are there cost savings, but you gain greater flexibility, which can drive and deliver instantaneous, highly personalized experiences similar to those on mobile devices to consumers, policyholders, brokers, and agents. There is no negative impact on the enterprise or on the measures you have in place to address regulatory compliance and data security, and it requires minimal training.

For example, consider this case of a global insurer that rehosted its mainframe with TmaxSoft OpenFrame. In five years, the insurer reduced costs by $17.5 million USD, enhanced their CPU capability to 10,000 MIPS, and recorded response times of 200 milliseconds and a 4x improvement in transactions per second. Another insurer completed their rehosting project in less than 12 months, reduced run costs by more than $30 million USD over a four-year period and reported a significant increase in performance and reliability.

Want to learn more about the benefits of rehosting?

Rehosting your mainframe will remove a number of obstacles in your insurance company’s path to digital transformation. To learn more, check out the 5 Reasons to Rehost your Mainframe.

Paul Bengtson is the Vice President of Sales for TmaxSoft. He has spent more than 20 years selling technology in segments as diverse as big data, analytics, ERP, cloud and SaaS. Paul joined TmaxSoft in 2016 from EFI where he was Sales Director for its ERP solutions. He also has held senior leadership positions with Radius Solutions, where he was VP of North American Sales, and with Misomex, Artwork Systems (now Esko) and Ace Hardware. Paul has a BS in MIS from the University of Iowa and an MBA in MIS from Benedictine University.