Managing debt in the insurance industry

Tackling technical debt

Technology is the backbone of the modern insurance industry, yet many companies still grapple with how to replace, integrate or phase out their older technologies.

Approximately 70% of IT budgets are consumed by legacy system maintenance according to Forrester. Meanwhile, insurers struggle with complex integrations that are costly and hard to implement. As a result, they are constrained by outdated, siloed legacy ways of operating.

For example, an outdated policy management system used by a life insurance company can result in long claim settlement times and difficulty complying with new privacy regulations.

The good news is cloud, AI and other solutions can help insurers modernize their technology infrastructure and work more efficiently. For example, AI tools are available to help with migrating, consolidating and even converting a company’s multiple legacy policy administration systems into a more modern, future-proof solution.

Overcoming the weight of process debt

Insurers are under pressure to accelerate growth and innovation, streamline operations and provide faster, more reliable services to policyholders. However, they are often constrained by complex and highly manual, outdated processes and workflows. This leads to wasted time, money and productivity.

HFS Research estimates the insurance industry is burdened by $66 billion in process debt, which is the buildup of outdated, overly complex, or inefficient workflows and practices that made sense at one point but no longer align with current goals or realities.

The key to overcoming process debt is to identify and address its root causes. This requires a thorough assessment of current workflows and practices, followed by targeted interventions to streamline and simplify processes. Then, businesses can recapture lost productivity, reduce waste, and ultimately achieve their goals more effectively.

For example, new technologies like smart workflow systems and persona-based portals help connect different front, middle and backend tasks (like customer service, policy administration and billing/collections) so that they can be completed automatically. This allows a company’s external users (e.g., customers and producers) to do front-office work on a self-service basis, freeing up internal staff to focus on more complex middle and back-office tasks. As a result, insurance companies can offer more modern, efficient and personalized experiences for their customers.   

Unburdening organizational debt

When insurance companies tackle technical and process debt, they often overlook the accumulation of inefficiencies, outdated practices, and structural impediments that hinder their ability to adapt and evolve with the times. In addition, organizational debt accumulates when the knowledge of these products, processes and procedures is not documented effectively and is only available from an aging workforce.

Think of organizational debt as the "interest" an organization pays for not addressing these problems. And overcoming it requires a fundamental shift in how teams collaborate, how culture manifests and influences decisions and overall team dynamics, and how customer needs are met at every turn.

For insurance companies, this means understanding the individual experiences customers crave—from preferred channels to accurate recommendations. It means using data intelligence to identify specific touchpoints that meet customer needs. And it means making sure that all the different departments in the organization (claims, finance, legal, underwriting, etc.) are aligned to the same goals.

Go deeper

• Learn more about DXC’s insurance services
• Learn more about DXC's insurance offerings
• DXC ranked top individual life insurance technology provider by Everest Group [DXC Newsroom]