Why smart insurance companies are modernizing their mainframes now | Insurance Blog

In a market that requires insurers to be agile and digitize at scale, their mainframes can either help or hinder progress. Mainframes were once a valuable core technology capability, but many legacy mainframes lack the agility to meet customer expectations and the demands of rapid digital advancement.

Mainframe modernization demands

Insurers want to reach a digital end state and embed the enabling functions they need to perform in the cloud using a faster, better, and cheaper route. Mainframe modernization is the last mile to enable business capabilities, reimagine your business, and advance cloud operating models.

Looking at the market forces shaping the broader industry, insurers We need to be more agile to respond to rapidly changing demands. This is due to a variety of factors, from the higher inflationary environment costs of insurance operations and increased claims, to the impact of the global pandemic and anticipated economic downturn. Given the high interest rate environment and expected future volatility, costs need to be reduced. One of the costs that has increased over the years is mainframe maintenance.

Focusing on sectors within insurance, this need for agility manifests itself in many ways. P&C insurers not only need to be more agile, they need to focus on points of differentiation in marketing while commoditizing non-differentiating elements. The life insurance (L&A) and retirement industries would benefit from unlocking distribution, a feat currently impossible as much of its logic is embedded in mainframes. Therefore, the focus is on modernizing mainframes to enable digital channels. Group insurers and retirement insurers are undergoing a compressive transformation, as group insurers are seeing lower margins and retirement insurers are seeing lower margins and scale, leading to a shift in customer relationships. This means the sector needs to fundamentally rethink its operations in order to improve and gain competitive advantage. Finally, group and health insurance companies are faced with the challenge of reducing their cost base and driving growth, including by adding wellness layers to their services.

From a cost perspective, it’s clear that mainframes need to be modernized. Business function needs are increasing demands on insurance infrastructure, increasing million instructions per second (MIPS) usage and costs. Legacy mainframes also impact human resources. This is because dedicated staff is required for maintenance and upkeep. This is because skill sets are declining as more and more senior employees retire. Ultimately, this presents itself as a significant business risk.

Mainframe modernization not only improves overall agility, but also ensures the foundation for significant technology transformation. In a recent report, Transforming claims and underwriting with AI, Accenture has demonstrated in extensive industry research that AI, when applied in conjunction with humans, is emerging as a transformative technology and key differentiator in the insurance industry. However, AI transformation is not possible without insurers first tearing down and updating their mainframe platforms.

Mainframe modernization results

Modernizing your mainframe offers several attractive benefits. Running in a cheaper environment significantly reduces operational costs, and using a more modern platform significantly reduces platform resource costs. Combined, these can reduce operating expenses by 40%. These savings are important, but they’re not the only benefit. Most importantly, mainframe modernization has a significant impact on business value through agility, flexibility, and access to critical mainframe data. Recent Accenture blogs include: Mainframe: The final frontier of cloud migration He emphasized that customers can leverage mainframe data containing decades of business transactions and feed that data into analytics and machine learning efforts to provide a competitive advantage. This blog post also explains how mainframe modernization plays a key role in closing the skills gap. Mainframe modernization can counter the problems faced by many companies as mainframe professionals reach retirement age, and also core businesses interested in modernizing their workloads. You can also attract new talent.

Modernization allows you to deploy new features, products, and capabilities faster, working with interoperable applications to promise up to 5x faster deployment speeds. It also unlocks new business capabilities such as AI and ML incorporation, real-time decision making, and data processing efficiency. These benefits can be achieved through conservative adjustments or complete system conversion. It all depends on your insurance business’ strategy and growth priorities.

New platforms and migration technologies enable compressed transformations

Mainframe modernization is not a one-size-fits-all proposition. This is driven by the insurer’s unique market needs and business strategic intent. There are a wide range of options available to modernize at a pace that is comfortable and necessary for insurers. Current mainframe migration technology supports this, enabling automated, fast, and low-cost migration to the cloud. This technology includes advances in SaaS solutions, cloud maturity, and migration technologies.

In terms of approach, insurers can deploy the following interventions, all varying in scale and intensity:

• Replatforming: Migrate your application to another platform/operating system without changing programming language
• refactoring: Leverage Accenture’s Language Migration Toolkit to convert legacy programming language code to modern programming language code, reduce risk associated with legacy skills using (semi-)automated tools, increase agility, and Reduce costs.
• Exchange: Identify managed services/applications that can provide the required functionality, such as extracting and migrating data to new systems to reduce complexity and cost.
• rethink: Completely reimagine your business with rewritten and streamlined applications

How insurance companies can begin their mainframe modernization journey

There are nuances in how mainframe modernization is applied within insurance. These solutions vary in strength from business benefits to the technology used. Applications vary depending on whether the insurance company specializes in life and annuity insurance, group insurance and health insurance, retirement insurance, individual insurance/small commercial insurance or large commercial insurance. However, there are three key steps that determine the direction of any mainframe modernization.

1. Defining business priorities
   1. a. What are the top priorities for your business?
   2. b. How do these align with the major problems posed by running on the mainframe?

2. Identify budget constraints
   1. a. What budget is available today?
   2. b. What is the time frame available to realize ROI?

3. Determining the ability to change
   1. a. How capable is your IT team to transform?
   2. b. Are there resources available?
   3. c. Are there many other changes occurring?

Following this process will create your own mainframe modernization plan.

Accenture’s insurance mainframe modernization methodology helps align your efforts with your goals. Please contact us first.

Accelerating the future of insurance: Modernizing technologies such as AI and cloud-powered data analytics can help insurers achieve profitable growth through both increased revenue and reduced costs.

learn more

Get the latest insurance industry insights, news and research delivered straight to your inbox.

Disclaimer: This content is provided for general information purposes and is not intended to be used as a substitute for consultation with a professional advisor.

Disclaimer: This document references trademarks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement, or approval of this content by the owners of such marks is intended, express or implied.