Cost concerns are a common business decision when it comes to replacing or maintaining old technology and processes. Assuming that the cost of implementing modern solutions will be greater than the cost of maintaining the current technology, modern technology can put insurance companies into technical debt and hamper their growth opportunities.
What is technical debt?
Technical debt refers to the time, money, and resources an organization must spend on developing software compared to the cost of maintaining the solutions it originally created. Simply put, technical debt accumulates when an organization prioritizes “business as usual” over technology.
Businesses often have professional debt for the same reason people with medical problems hesitate to seek help – to stop doing things they don’t want to. Like a person who suffers from toothache for months before going to the dentist, organizations go into technical debt to avoid the necessary research, time, and money required to repair their outdated technology.
However, like skipping a doctor or dentist appointment, going into professional debt is a short-term solution. Although the results are very quick for a person suffering from a toothache, who may spend a few weeks avoiding the dentist until the pain becomes unbearable, it may take time for a professional business loan to be realized.
There is no need to hesitate to replace your old technology. While it may not be in the next five months or the next five years, eventually tech debt will come back to haunt those who choose to ignore it and, when it does, it could be a serious problem. Just take the end of the 2022 Southwest Airlines disaster for example.
Technical credit in the insurance industry
The idea that “if it ain’t broke don’t fix it” has been used by insurance experts to avoid investing in modern solutions. And while technological changes have encouraged many agencies, carriers, and MGA/MGUs to rethink their approach to insurtech, not all are convinced.
We know, organizing the whole system is no small task. This is why some organizations still rely on technology, spreadsheets, and manual processes to get the job done.
Deep tree damage can stop creativity
What is stopping people from upgrading their old technology? You know, in addition to the hassle of trying to move a decades-old system with a lot of data. Unfortunately, cheap fraud has a tendency to stop innovation in its tracks.
Human culture tells us that it is wise to continue to invest in modern technology because it will certainly cost less than to rebuild the whole thing in order to find new ways to solve problems. One big, legitimate concern for major carriers: Migrating to a new system could mean disrupting other systems and affecting millions of data points for hundreds of thousands of manufacturers. We know, the technology you have right now works.
However, cheapness is called a mistake for a reason. While the costs and risks of updating your current insurance techstack are real, many organizations don’t even realize the benefits that are already embedded in their current way of doing business.
How does technical credit increase the cost of doing business in insurance?
Spending money on maintenance of old technology and upgrades can bring the appearance of cost reduction, maybe it will actually Save the organization money in the short term, but maybe not forever. Sure, a technology loan can save your insurance business money that you could spend on new solutions, but it costs you more in the long run. Let’s take a look at a few ways old insurtech can impact your sector.
1. It wastes employees’ time
Your people keep things moving at your organization; don’t limit them with repetitive, manual processes that can only be done with automation. Take the manufacturer’s license for example. If business as usual for your freight forwarder means that your boarding team is overwhelmed with data entry and piles of documents to confirm existing permits or secure positions for each partner, it’s safe to say that you’re not maximizing anyone’s time or skills.
2. It opens you up to the next risk
Processes that involve a large amount of human touch (ie spreadsheets and manual data entry) also have a greater chance of human error. While a manual approach may work for some, organizations that manage multiple manufacturers (each operating in multiple states and with different carriers) know how difficult managing compliance can be.
Think of all the money a manual carrier would have to pay to make the switch when states like Massachusetts and Kansas completely changed their state systems. Without transitioning to a compliance management system, an organization may be putting itself at risk of breaching the law.
3. It makes recruiting new talent more difficult
We have already established that the insurance industry is facing a talent crisis. Competing for top talent from a shrinking pool of employers means providing exceptional employees — something that’s even harder to do when old technology makes the job tedious and inefficient. Without new talent, expanding your customer list and gaining market share in the market can be difficult.
These are just a few ways that technology debt is hurting your organization, carrier, or
MGA/MGU. Download our guide to the cost of doing nothing for an in-depth analysis of how business as usual can work for you.
The value of old technology is greater than the sum of its parts
We’re not trying to confuse the issue of changing your entry system. It’s a time-consuming task that most organizations have the best intentions to complete. But how many manual errors and scripts were downloaded that are currently unknown?
The impact of technical debt is direct in how it drains your budget and in subtle ways in how it stifles growth by making your organization, carrier, or MGA/MGU an unnecessary partner, employer, merger and acquisition. Overall, the cost of relying on outdated technology is likely to cost you more than replacing it.
AgentSync can show you what investing in a new system can be like. If you’re ready to sell business as usual to increase efficiency and reduce risk, see what AgentSync can do for you today.
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