The Strategic Advantages of Modern Claims Solutions Over Legacy Technology
4 MIN. READ
In the evolving insurance landscape, technology is driving significant changes. The digital revolution aims at efficiency, customer-centricity, and data-driven decisions. The impact has already been sweeping, and insurance companies that plan to continue using outdated legacy systems stand to be left behind.
This article delves into technology’s profound impact on insurance and why shifting to modern claims solutions is critical.
Let’s look at technology’s transformative role and strategic benefits to the insurance sector.
Understanding Legacy Technology in Insurance
Legacy systems refer to technology, applications, and architecture at the end of their lifecycle. Such systems are defined by a lack of scalability, slow processes, inadequate support, and compatibility issues.
Some legacy systems in the insurance sector date back to the 1970s, with companies working hard to play catch-up in 2024.
The BCG Digital Acceleration Index, which assesses an industry’s digital capabilities, gave the insurance sector a score of 48 in 2019 and 55 in 2022. The slight improvement signals a willingness on the part of insurance companies to embrace new technologies. Unfortunately, this transformation in the insurance sector hasn’t happened at the same pace as healthcare or finance.
Insurance companies without access to modern claims solutions suffer from:
Standalone systems offer siloed data that is not easily accessible by every department in an organization. Companies also need more integrated systems to deal with the complexity of insurance regulations. Without interoperability, compliance presents a challenge.
Legacy systems cannot be integrated with modern technologies. This rigidity also results in bottlenecks that inhibit data flow and often require manual intervention.
Modern claims solutions may come at a cost, but so does maintaining legacy systems since a significant chunk of IT budgets go into addressing security vulnerabilities and keeping up with evolving compliance requirements.
Outdated licenses and hardware only compound costs. Indirect costs add up, as well.
The Emergence of Modern Technological Solutions in Insurance
By embracing cloud-based solutions, data modeling, and more flexible APIs, insurance companies can counter challenges presented by outdated systems. Modern insurance technology is driven by automation, intelligent data processing, and predictive analytics. Modern claims solutions help streamline operations and improve customer service. AI-enabled technologies offer smart recommendations, data modeling provides macro insights, and automated workflows improve accuracy and efficiency.
Key advantages include:
Automation simplifies tasks related to adjudication, fraud detection, and denial management. Modern claims solutions allow insurance companies to define the level of automation, from simple and repetitive tasks to straight-through processing.
Insurance Thought Leadership research indicates that automated claims triage and cost-calculation processes are 30 percent more accurate than manual processes and increase productivity by 80 percent.
Data Analytics Capabilities
The adoption of big data has enabled insurers to react swiftly to changing scenarios and improve claims handling. Data analysis helps employees benefit from faster underwriting while companies improve lead generation and customer satisfaction.
In 2021, the insurance industry invested $3.6 billion in big data. In return, companies saw a 30 percent jump in efficiency and 40-70 percent cost savings.
Focus on Customer-Centric Approaches
When insurance companies enable omnichannel communication, the customer experience is seamless across all touchpoints in their life cycle. Such a system reduces time and costs, benefiting both the customer and the insurer.
AI-enabled data analysis, meanwhile, allows companies to offer highly personalized services and recommendations while identifying cross-selling opportunities.
Strategic Benefits of Embracing Modern Solutions in Insurance
Modern claims solutions offer significant benefits to companies looking to stay ahead of the curve:
Gaining a Competitive Advantage in the Market
Insurance companies have slowly adopted modern technology, and many continue to rely on legacy systems. There have been some early adopters, however. These front runners of modern claims solutions are better equipped to respond to changing market conditions, customer demands, and emerging business opportunities.
Realizing Cost Efficiencies through Modern Technologies
Legacy systems are expensive to maintain and less efficient. Modern technologies allow companies to deliver better services faster, resulting in significant cost benefits. Mckinsey’s research estimates that automation reduces the cost of claims by up to 30 percent.
Elevating Customer Experiences with Advanced Solutions
Customer-centric solutions deliver better experiences. Insurers can leverage AI, big data, and machine learning technologies to offer their customers reliable, speedy, and efficient service.
Ensuring Compliance with Evolving Regulatory Standards
Insurers are expected to comply with ever-changing regulations and submit periodic compliance reports. Gathering data manually is time-consuming and labor-intensive. AI-driven document data processing expedites the process, delivering error-free compliance reports. The increased flexibility offered by modern claims solutions also helps companies adapt to sudden regulation changes.
Navigating the Shift: From Legacy Systems to Modern Technology
Embracing modern technology can be game-changing, but it does come with challenges. Companies looking to modernize their systems must consider the following:
Implementing Best Practices for a Smooth Transition
- Identify objectives: Evaluate existing legacy systems to identify flaws and assess the features best suit their requirements.
- Adopt an incremental strategy: Agile methodologies can help organizations break down the transformation process and focus on incremental improvements.
- Prioritize User Experience: Placing customers at the center of the digital transformation roadmap helps create more intuitive interfaces.
- Build collaborations: Partnerships with InsurTech startups bring fresh ideas and cutting-edge solutions.
Tackling the Hurdles in Moving Away from Legacy Systems
- Resistance to change: Resistance is often the first reaction to new technology. Companies that upskill employees and raise awareness about the benefits of modern claims solutions are better placed to see success.
- Time and cost considerations: Insurance companies may be wary of the time and resources that go into embracing modern technology. As mentioned earlier, however, very few compare this to legacy system maintenance costs.
- Cybersecurity risks: Companies must implement strong cybersecurity measures, which can be a challenge with legacy systems. Implementing employee awareness programs can smooth the transition and protect company data and assets.
A Modern Claims Solution at Your Fingertips
Insurance companies that modernize systems must remember to stay agile and adaptable. Adopting cloud computing, AI, and other technologies is not an overnight process, but it presents the most straightforward path to increased efficiency and customer satisfaction.
Companies that implement modern claims solutions gain a competitive advantage, reduce costs, and ensure compliance with regulatory standards.
Request a demo with Five Sigma to learn more about a SaaS solution that is quick to learn, easy to implement, and solves critical challenges faced by claims organizations.