De-risk legacy to redefine engagement

De-risking legacy systems with a digital API wrapper will speed up the claims and servicing processes and enable ease of use for both internal team members and policyholders simultaneously.

In brief

• The evolution of technology and computer systems has led to legacy insurance information being dispersed among various systems.
• A digital application programming interface (API) wrapper can feed old systems into a modern back end that provides only the data that is needed.
• A wrapped system benefits both the internal worker and external customer, creating an experience that is quick, seamless and less risky.

Years ago — and even in the not-too-distant past — life insurance policies were distributed on paper. When Sally Jones took out her life insurance policy in the 1940s, for example, the policy documents sat filed away in a cabinet for years. As technology evolved, carriers began to key the information into computer systems. Sally’s information eventually made its way into a digital record. New systems, though, become old systems, and policy data would repeatedly need to be moved every time a new process or software was implemented — or not, as is the case today with so many legacy systems still at work.

Systems aren’t the only things that change throughout the years; interest rates adjust, and policies get rewritten — a legacy policy could have more than 30 amendments attached to it. At this point, Sally’s policy information, including everything added on, was alive in multiple systems in multiple ways.

To lift and shift information out of old systems without losing pieces along the way is very time consuming — not to mention, risky. Chief technology officers (CTOs) and chief information officers (CIOs) are often tasked with modernizing legacy systems and bringing their legacy information up to date, but it is a considerable — and costly — mandate that often ends up being laborious and potentially unsuccessful.

Even when a new system is implemented, the previous legacy policy system still needs to be maintained and updated until the new system completely takes over, which increases the risk. Legacy modernization remains a huge priority for CIOs, though; in 2021, 55% of them said they are conducting a modernization project of systems.

What life insurance insurers should consider is de-risking their legacy policies rather than undertaking the nearly impossible task of core replacement. A digital application programming interface (API) wrapper can feed old systems into a new, modern back end, giving carriers a reprieve from legacy tech without putting them at risk with existing policyholders.

What is a digital API wrapper, and how does it reduce risk?

Regardless of the digital iterations of a policy, each essentially can be visualized as a workbook with millions of tabs full of information. Some of it is outdated, legacy information; a handful of these tabs are specific to the policyholder and their policy and must be retained (e.g., health information, loans/payments, beneficiary changes, billing). A few non-specific policyholder tabs may include the policy definitions, mortality tables, rate tables, etc. The rest is essentially not useful or necessary anymore, like new business, dated underwriting information, etc.

Imagine you can wrap the relevant tabs in a digital API and feed them into a modern back-end system. By doing so, you could utilize the modern claims, billing, service, etc., and reduce the policy data to only relevant information. That’s the job of an API wrapper.

• A digital API wrapper allows you to decommission the unnecessary components of a legacy system, reducing the technical debt. This lessens the risk of losing a critical piece of data, such as a pricing table or amendment to that policy, which is typical of a life-and-shift conversion. It also provides a more modern, unified experience for everyone involved — from the internal customer, or claims processor, to the external customer, or policyholder.
• A digital wrapper also helps consolidate the functions that would be present across multiple legacy systems and feed them into a modern back-end system. For instance, there is a quote and illustration function in multiple legacy systems for similar or different products. Culling this function out of all the legacy systems and creating an API would provide a consistent and standardized quote functionality. This would also help de-risk as this will be an incremental journey defined by the business function.

Imagine being the beneficiary in this real-life claims scenario:

Your uncle passes away, and you have a paper statement with his pension information, and you call the insurance company to locate the policy. They tell you they don’t have any records of your uncle’s policy, even though you’ve got a paper record in hand noting a policy deposit was made as recent as a week ago. The representative sends you to another customer service team, and they also don’t have the record, even after looking through a few systems. This happens a couple more times, without resolution. Months later, your aunt receives a letter with information on how to make a claim for the pension.

How does this happen? With so much data that’s been migrated from system to system, and in some cases, with the addition of new systems year over year, it’s hard to know where policy information lives, increasing the insurance company’s risk. With a digital API wrapper in place, claims representatives, call centers, agents, etc., are all using a single, modern platform to manage and service all policies, regardless of how old they are or what policy system they are in. Anyone you reach can access the right policy information in a streamlined system.

As baby boomers continue to retire — taking with them their knowledge of legacy systems — and are replaced by new workers who also don’t want or know how to work on a mainframe, it will be increasingly critical to shrink and integrate legacy policies with a digital API wrapper. A system like this cuts down on training, legacy knowledge needed, the amount of technology carriers have to manage, IT resources and more. While digital API wrappers aren’t a silver bullet, they do allow you to selectively choose the tools used by creating a true ecosystem.

Execute a three-step process

Here is a three-step process to embark on a transformation program to transition from a legacy system to a digital API wrapper:

1. Perform an inventory analysis. Most insurers have multiple legacy systems that have been brought in as core platforms or home-grown systems that have been enhanced over the years. Take stock of all these core platforms and prioritize the ones that you would like to be digitally wrapped with APIs.
2. Start small. Once the inventory is confirmed, it is essential to identify the functions that can be digitally wrapped. Follow the “Fast-fail” approach by identifying the least critical function and develop the APIs. Once this goes through the “Test & Fail” approach, you can select the next function. This will also help your business see a ‘Proof of Value.’
3. Implement at scale: Once the ‘Proof of Value’ is established, it is time to implement at scale in an iterative manner.

This means looking at the beneficiary as a customer. Traditionally, the policyholder is our customer. However, if we see each beneficiary as a potential policyholder, we better understand the importance of updating claims, automating systems and utilizing data to improve their experience and retain their business.

In conclusion

An API-wrapped system helps both the internal life insurance claims team and the external customer at the same time. Customers get the information they need quickly and painlessly, and insurance companies don’t have to sift through dozens of policy admin systems and still risk coming up short.

If there’s nothing consistent about the back end of your claims department, how do you expect to give a consistent, unified claims experience for the customer? The same scenario applies to servicing. It’s crucial to minimize legacy technology to remove the restraints and risks.

The digital API wrapper is what will enable you to get rid of all the other pieces of technology that give internal teams a headache. It allows information to feed into a modern system for a unified internal and external customer experience. Everyone wins when technical debt and risk is eliminated.