More Tools, More Work: The Dangers of Environment Complexity for Insurers

Over 75% of insurers use multiple core systems, with significant variation in vendors and operating environments between organizations. And although the vast majority of insurance companies view their legacy IT systems as core to their business models, they’re also aware that industry disruptions from hyper-modern players like insurtechs mean they have to evolve to stay competitive.

So, although they’re unwilling or unable to move away from legacy systems entirely, insurers are also bucking global trends by ramping up enterprise IT investments. As a result, many are dealing with a tangled web of tools and systems that ultimately creates more work for IT staff, drags down operational efficiency, and produces lackluster ROI.

Why are insurance operating environments so complex?

The push for modernization ranks chief among causes for insurers’ complex environments. With most insurers utilizing multiple disparate systems (ranging from legacy to modern) to carry out their core processes, managing core systems alone has become burdensome.

However, the complexity extends beyond claims, billing, and policy systems. Insurers have more specialized tools than ever available to them—and with the pressure to modernize looming large alongside growing customer expectations, they’re taking advantage of those options.

Today, an insurance company may leverage distinct tools for e-signature, content management, data and reporting, fraud detection, claims estimation, and many other purposes. While each of these applications streamlines a specific element of core insurance processes, they can further reinforce operational silos.

The real-life impact of complex operating environments

Different departments within an insurance company often operate in silos, creating process breakpoints that require manual intervention. Given that many core systems do not “speak the same language,” introducing extra tech only further compounds this efficiency issue.

If they do not integrate with every relevant system, ostensibly handy new tools can create even more work in core processes by adding another manual step to cross-system workflows.

For example, if a claim disbursement solution is connected to an insurer’s claims system but not their billing system, it can create latency in system synchronization and add extra steps to financial reporting processes.

By adding new front-office tools in a bid to improve customer experience, insurers may ultimately create more process bottlenecks by ignoring the related back-office inefficiencies.

Although the abundance of modern applications can certainly contribute to environment complexity, it bears repeating that this issue of poor interoperability isn’t only due to the proliferation of new tools. Due to years of growth, organizational changes from mergers and acquisitions (M&A), and other factors, most insurers are now left with a “Jenga tower” of legacy systems where removing one could mean risking major consequences.

Still, with a talent shortage looming and IT costs on a long-trending upward trajectory, insurance companies can’t afford to hire skilled staff to manage so many disparate tools. Given the time and effort required to do this, it’s little wonder that a survey of nine leading insurance companies found that the more complex the IT system, the higher overall operations and IT spending.

Insurance companies’ complex environments aren’t only a drain on efficiency but also on ROI. Despite their investments in new tech, an overwhelming majority of insurance CIOs say they haven’t achieved the expected benefits of modernization—the complexity of their environments is a key culprit.

In fact, McKinsey notes that IT costs per policy for players with modernized IT can be 41% lower than for players with legacy systems, but many insurance companies who modernize core systems still struggle to realize potential savings, partly because of a lack of decommissioning old systems and partly because of overly complex configurations.

So, despite the best of intentions, many insurers who have invested in new tech are now saddled with overly complex operating environments that drive IT costs higher and sink efficiency—but it doesn’t have to be that way.

How to simplify your operations with automation

Automation solutions such as workload automation and orchestration (WLA&O) and robotic process automation (RPA) can help dismantle hardened silos between different departments and systems, creating a single point of control for orchestrating complex workflows that span multiple core systems and ancillary applications.

By integrating with disparate systems—whether modern, legacy, or homegrown—WLA&O builds bridges for process automation anywhere from a single interface.

This central command hub creates greater visibility into processes long shrouded in complexity. In a PeerSpot review of WLA&O solution OpCon, a Senior System Programmer for a large insurance company shares how this visibility impacted his organization:

A comprehensive WLA&O solution enables flexible, event-driven scheduling of batch processes, allowing you to build a dependency chain of cross-system tasks and, in turn, simplifying and streamlining complex environments. As a result, processes run more efficiently, and insurers greatly lighten the burden of managing so many disparate systems without assuming the cost or risk of decommissioning legacy tech.

And if manual work remains once WLA&O has been fully deployed, RPA can cover the “last mile” to unlock true end-to-end automation.

Complex environments may be the status quo for insurers, but the right automation solution can help you sidestep the pitfalls of complexity. To learn more about how WLA&O could address your organization’s biggest challenges, download our Insurance Quick Guide to Workload Automation and Orchestration.