More Than Half of Insurers Plan Core System Replacements: Study

Despite heavy investments in core legacy replacement initiatives throughout the past decade, P&C and Group Life carriers continue to depend on in-house developed systems, according to theUS Insurance Market Core Systems Research. The study concluded that challenges presented by older systems are motivating most companies to augment their core systems within the next 12 to 18 months.

The research was conducted by Insurance Global Operations (IGO), a provider of insurance core systems.

A total of 123 P&C carriers and 77 Group Life carriers participated in phone interviews to answer questions pertaining to the ages of their existing claims and policy administration systems, satisfaction levels, organizational and system challenges, and planned initiatives.

IGO surveyed both groups to confirm its assumption that satisfaction levels, challenges and future plans were similar between the two market segments despite their differences in existing core systems and functionality needs.

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More than three-quarters of Group Life carriers reported their core systems as homegrown, compared with slightly more than half of P&C carriers. More than half of total respondents cited legacy systems as their top core system challenge, followed by integration and scalability/flexibility problems.

On an A to F grading scale, more than 40% of respondents rated their satisfaction with their current system as a “C” or lower. Old technology is likely the culprit behind system problems. 63% of respondents have had the same core system for at least 11 years, with 18% reporting systems older than 25 years.

Given the widespread dissatisfaction, major technological changes are in store for P&C and Group Life carriers. Over the next year, 40 companies will invest in new or replacement policy systems, 35 will obtain new or replacement claims systems, and 11 will implement new end-to-end core processing systems.

These changes indicate the beginning of a major industry shift away from in-house core systems. “As satisfaction levels with legacy systems continue to decline and the industry confidence continues to grow relative to new and modern core processing systems, we expect to see an accelerated shift from the old to the new,” explained Didier Lamour, IGO’s US CEO.

Kelly Sheridan is the Staff Editor at Dark Reading, where she focuses on cybersecurity news and analysis. She is a business technology journalist who previously reported for InformationWeek, where she covered Microsoft, and Insurance & Technology, where she covered financial ... View Full Bio