In today’s rapidly evolving insurance sector, industry leaders are increasingly discussing the potential of technologies such as generative AI, big data and digital twins. However, success will come most readily to leaders who put mainframe modernization at the heart of their digital transformation strategy. This can let incumbent insurance organizations turn the tables on newcomers by taking full advantage of new approaches while leveraging their historical strengths and dominance.
Are mainframes still relevant?
Large organizations like banks, insurance companies and communication service providers turned to mainframes decades ago for their undeniable virtues. Mainframes offered high processing power, reliability and security.
The fact that mainframes are still at the core of IT systems of some of the largest insurers is a testament to their utility. Yet, the challenges of mainframe technology, such as its inflexibility and high operating and licensing costs, are now increasingly apparent, pushing a shift toward more modern solutions.
Operating and scaling mainframes is costly, with providers raising fees to offset a shrinking customer base. A critical issue is the dwindling pool of mainframe expertise, as most mainframe experts are nearing retirement or are already retired. Few young tech professionals are interested in mainframes and supporting technologies such as COBOL, Natural, IDMS, PL1, EGL, ADS or Assembler that are gradually disappearing from universities’ curricula.
Open the door to agility and cost savings
Many insurance providers are considering moving away from mainframes, recognizing the downsides. Nevertheless, the real motivation of visionary leaders is the advantages of modernized technology and the innovation potential it unlocks. Starting the modernization journey focusing on achieving agility, rather than avoiding calamity, positions companies to set the pace for industry growth.
To improve performance and efficiency, integrating new technologies into modernized systems is crucial. Unlike mainframes, modern systems easily integrate with the latest technologies and practices. Among other advantages, this shift allows migration to the cloud for increased elasticity, horizontal scalability and reliability. Moreover, server-less approaches and microservices become viable options, meeting today’s customer demands for real-time processing and personalization.
Modernized mainframes also allow for a smoother, faster data flow within various systems, enabling advanced data analytics. Just as important, modernization supports secure data transfer between institutions, aligning with emerging regulatory requirements and open finance. This greater interoperability creates a foundation for new ecosystems based on collaboration and partnerships, expanding customer reach.
See also: The Threat From Quantum Computing
How about the ROI?
Long-term cost savings typically surpass the initial costs of modernization. Insurance providers see an immediate reduction in the maintenance and license costs associated with mainframes. The cloud’s pay-as-you-go pricing model can further amplify savings, allowing companies to redirect funds from routine operations to innovation. The cloud's near-infinite scalability makes it easy to add compute instances, simplifying planning.
Modern IT practices, like DevOps, flourish within organizations that rely on modern systems. Teams adopting these practices work faster and with greater agility. They accelerate development cycles and time to market for new features, products and services. Young professionals seek out organizations with future-ready IT infrastructures. As a result, many insurance companies find that moving to modern systems and practices enhances their ability to attract top talent.
Insurance giant automates modernization
Let’s look at a real-world example. A multinational insurance company with a broad range of products found that its legacy mainframe systems hampered its digital transformation goals. High operating costs and a shortage of people with mainframe skills added to the drag. The company decided to modernize its mainframes, shifting away from COBOL and other legacy approaches to a modern platform.
The company accelerated its journey by using automation to drive modernization's traditionally slow refactoring and testing phases. A 100% automated process enabled the company to transform legacy source code and data to modern standards, primarily Java. The process opened the door to the cloud while simplifying and accelerating development cycles. Perhaps most importantly, the company now relies on a more agile, open and interoperable infrastructure, giving the company the ability to keep pace in a rapidly changing insurance landscape. This modernization approach also enabled significant cost savings and addressed the challenge of finding and hiring mainframe experts.
See also: Why Every Insurer Needs a Modern CRM
Start smart and modernize fast
Mainframe modernization has historically been a daunting undertaking. However, as seen in hundreds of successful projects, a fully automated process, a well-planned roadmap and experienced partners can accelerate the process dramatically and minimize the risk and cost. Once completed, modernization allows organizations to reap all the benefits of today’s leading IT practices, to innovate with fewer constraints and to stay competitive in the insurance industry. Soon enough, we will be able to see who managed to make the shift.
