5 Major Problems with Legacy Technology for Insurance Agents

By Allison Babberl on July 18, 2017 in Technology

5 Major Problems with Legacy Technology for Insurance Agents

The Problems with Legacy Systems

“In a 2013 EY global insurance digital survey, 80% of respondents listed “legacy technology constraints” as a top inhibitor to digital growth. Yet, many insurers still operate core systems on multiple platforms that are frequently incompatible, inflexible, antiquated and expensive to maintain . . . The inefficiencies of legacy systems severely affect multiple operating areas and inhibit company growth.”
EY 2015 Global Insurance Outlook 

For the context of this blog, when discussing a legacy system, we’re referring to “outdated computer systems, programming languages, or application software.” Basically, any system that has been used for an extensive period of time and has since become outdated, or a system you choose “instead of available upgraded versions.” 

“Based on aging development standards with limited functionality and usability, most insurers’ legacy systems have been in place for decades with many in use since as early as the 1960s.”
OnBase

For insurance agencies, these systems can include homegrown solutions, outdated CRM software, Excel Spreadsheets, and paper files. But, like anything outdated, using a legacy system can create some difficulties for your insurance agency. Here are 5 key problems you could run into when running on a legacy software:

  1. Lack of Flexibility
  2. Lack of Security
  3. Creates Dependency
  4. High Complexity
  5. Costly

Flexibility

With legacy systems, flexibility is a big issue. In the world of technology, flexibility refers to: 

“The ability for the solution to adapt to possible or future changes in its requirements.”

But flexibility doesn’t just mean longevity. A flexible system also incorporates the ability to operate in the exact manner you need; so one that is tailored (or can be tailored) to your business model. However, this can become a problem in legacy systems. Even if it allows you to customize the interface to suit your needs, it may lead to one (or both) of these problems:

  • The costs for customization (i.e. building a commissions processing platform or creating a individual-based tracking system) become unmanageable
  • The customization is never quite right

Usually, this comes about because the structure of the original system wasn’t built to sustain the new changes you want or it doesn’t have the capacity to add them on. (Mainly this is because the system isn’t built for your business or industry) Therefore, the changes you want are often “modified” to fit how the system can understand them and aren’t exactly what you were looking for. 

Often, life and health insurance agencies will run into this problem when they try to customize a generic CRM solution or outdated homegrown solution to fit their specific business needs. If you try to customize a generic software or an outdated solution too much you could run the risk of the software failing more. 

More times than not, your staff is forced to adapt to how your legacy system operates and work it into your business process. Normally this means that your process is less efficient and less effective.

Security

Legacy systems rarely possess a back-up plan to ensure the safety of your files in case of an emergency. A recent study found that over 96% of workstations are not backed up at all. Failing to back-up your system means that your data is more vulnerable to theft, disaster, and loss; which means you’re putting your clients and their sensitive data at risk as well as yourself. This can lead to an E&O nightmare.

On top of that, legacy systems are usually not built with encryption or security of modern day technology. While many things can age well (for example, fine wine), the same is often not true for security measures. 

Think of all the recent security breaches you’ve been hearing about; these attacks are much more prevalent and common when you’re using a legacy software than an encrypted, up-to-date AMS. Many times these hackers will overtake your hard drive via malware you accidentally download, like through your email or visiting suspicious websites. Once they’re in, and since your legacy software likely won’t have updated security levels, they’ll have an easier time cracking into your information and obtaining your files. After they’ve done that, there is very little you can do except play into their demands and hope for the best. 

Take, for example, if your office manages your book-of-business by storing all of your data on one base computer in the office. If a virus or malware infects that computer, then you could lose everything. By storing all of your information on an actual computer, you are more susceptible to these types of attacks because it’s unguarded and easily accessed. 

WARNING

Some Agency Management Softwares (AMS) and CRMs that are on-premise solutions store you data in one central hub (one main computer). For added protection from malware and viruses, you should heavily consider buying into a management software that is cloud-based and encrypted.

To learn more about security in software, check out these additional resources: 

Dependency

When it comes to dependency, there are two factors you must consider with legacy technology:

  1. Dependency on a designated IT professional
  2. Lack of dependency on the software (downtime)

Likely, you won’t know software and computer programming enough to be able to maintain, update, and fix your system—so you’ll need someone you can rely on to be the go-to service person. But this won’t come cheap. On average, an IT professional can cost your company $75,000 a year, or you can opt for an hourly IT person who could cost hundreds of dollars per hour. Since they would be the only one with the knowledge of the inner workings of your system, your team would become highly dependent on them for upkeep, repairs, and modifications. 

An IT professional is needed for customizations and general upkeep. As the industry changes and your book-of-business grows you’ll need to be able to create more within your system to sustain you daily processes. One example of this for life and health insurance agencies would be handling commission payments. As you grow, you may need to bring that portion of your business in-house which would be impossible without a dedicated, fully-functioning commissions module. To fill this need, you would need to hire an IT professional to build that into your system. 

But dependency is two-fold. The other half is the lack of dependency you may find from an outdated software. This is often caused because the computer is bogged down from too many additions added onto the outdated framework of the original system. Another reason could be that the newer pieces added onto the original framework are incompatible with the original system (because they’re newer and incomprehensible by the old system) and it can no longer efficiently read the information and slows down the processor. 

Pro Tip

To calculate the cost of downtime, use this simple equation:
Cost= P (number of people affected) x A (average percentage they are affected) x C (average employee cost; sales or wages +benefits)

A recent study from Dunn & Bradstreet reported that 49% of Fortune 500 companies experience at least 1.6 hours of downtime per week, which equates to roughly 80 hours annually. To put it into perspective, these companies have at least multiple (if not teams) of IT professionals dedicated to the maintenance and upkeep of their systems. So if their software is down that often, it should make you think about the amount of time and money you’re losing from your slow operating system. 

Complexity

Just think of how much the life and health insurance industry has changed in recent years. Most legacy systems were built many years ago when the industry didn’t even resemble its current state. As the industry has changed, the legacy system might have been expanded without reworking the original functionality, which only makes the system more complicated, thus creating a “Frankenstein Software.” Worse, the system likely won’t meet the current industry needs or comply with the current regulation.

On top of that, using a convoluted system is no way to do business. Not only could it drive your employees to work manually—which is grossly inefficient and ineffective—it could burn them out and push them to leave. On top of that, onboarding new agents or office personnel can be a daunting task. Plus, it dampens the office camaraderie because no one understands how another uses the system. So if you do have someone leave or is gone for an extended absence, finding someone that is willing and able to cover their tasks is difficult at best. 

“With their hard-to-learn interfaces and lack of functionality, legacy systems hardly facilitate productivity. The outcome is that business users often spend more time trying to decipher the system or actually avoid using the system at all, opting instead to complete tasks manually.”
OnBase

The complex nature of the system can also inhibit scalability since new agents/office personnel may shy away from growing and expanding within a system they already find grueling. This could push away new talent as well since younger generations are more apt to join technologically advanced companies.

Costs

“Despite the challenges, legacy modernization is crucial for organizations spending too much to maintain the business value of their outdated information systems.”
Dr. Federico Zoufaly

Arguably the largest problem, the costs of maintaining a legacy system can be staggering. As we discussed earlier, continuously customizing a system not truly built for you can become costly and frustrating. You’ll have to call on your IT person and hope for the best. Plus, if the system goes down, then you’re paying for your employees whom can’t work AND the IT professional(s) who is trying to fix it.

Then, with security, more costs could arise. You’re housing the sensitive data of hundreds (if not thousands) of clients; you must keep it safe. But, if you’re using a legacy system with outdated security measures, this could be a potential HIPAA risk. Orion noted that HIPAA fines can reach upwards of $1.5 million per year per incident for failure to comply with regulations.

Plus, it’ll cost you to just run the stuff. It actually costs more (sometimes a lot more) to run an old system than a new. The added costs are attributed to things like virus attacks, incompatibilities with newer software technology, and multiple hardware issues. Check out these numbers:

Also keep in mind, additional research found that PCs 4 years or older average 21 hours of downtime a year (which is a loss in productivity) and costs nearly twice as much to repair than a newer one.

Although buying into a new system can seem like a lot of money, when you leverage it against the stacking costs of employing or outsourcing IT, downtime, loss of productivity to slow machines or choosing to manually operate, repairs, and customization costs you already have, it will likely come out to be a lot less. 

Upgrading your process

If you are experiencing one or more of these problems, then you may want to consider upgrading your technology to an industry-specific Agency Management System (AMS). AMS’s are built specifically for the insurance world and are often tailored to specific niches (Life & Health or P&C). 

You’d hate to make a decision and move all of your data only to find out the system you chose won’t fit your needs. Here are some resources you can use to help make sure the system you choose is the right fit for your insurance agency: 

AgencyBloc is an agency management system that helps life and health insurance agencies grow their business with an industry-specific CRM, commissions processing, and integrated business and marketing automation.

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Allison Babberl
Allison Babberl

Allison is the Marketing Content Specialist at AgencyBloc. She creates educational content and designs videos to promote AgencyBloc's resources to help you organize, automate, and grow your insurance agency. Favorite quote: “Conversation is the bedrock of relationships. Without it, our relationships are devoid of substance.” -Maribeth Kuzmeski More articles

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