MP3 Players. Smart Phones. Social Media. These technologies have become so ubiquitous to our daily routine that it’s hard to remember life before them. Yet, all were introduced within the last 20 years and have continued to transform rapidly. Think about
your first MP3 player, and then think about how you consume music (and podcasts) today. There is probably little comparison.
Now, consider that the average age of an installed insurance core system—across all segments—is approximately 20 years. How much opportunity has the industry missed in these two decades by continuing to embrace legacy systems while technology advanced at
breakneck speed around it?
To be fair, the U.S. insurance industry (and health insurance, in particular) is one of the most regulated economic sectors. It is not, however, immune to digital change—as we can see with the rise of Insurtechs. Gigabit Magazine reports
that “at least 86% of insurers think their revenues will be at risk from future technological disruption,” and investment in Insurtechs doubled between 2017 and 2018, according to FinTech Global.
Health insurers—especially those eager to explore the opportunities of Medicare Advantage plans—feel growing pressure to move with new speed and accuracy. They must be able to create new products, modify plans, execute new reimbursement models, and much
more. Moreover, they need the ability to interact with members and plan sponsors intuitively and immediately through the digital channels to which they are accustomed.
Flexibility is poised to emerge as the new gold standard in health IT systems, yet many payers remain ill equipped as they remain saddled with rigid legacy systems. A majority of health insurers would agree that they should have replaced some or all of their
legacy systems well in the past, yet they continue to tolerate the status quo due to the high cost of legacy transformation projects, risk—perceived and real, and the lack of staff to run and maintain modern systems.
The ability to accelerate digital transformation while fundamentally reducing risk offers endless potential for insurers. For example, they could:
- Improve conversion while reducing member acquisition costs by introducing seamless, compliant, digital, and data-driven processes—from sales through enrollment
- Gain greater flexibility across the business—from defining plan features through payments— while reducing administrative costs with a flexible, highly-automated, transparent core processing environment
- Leverage disruptive technologies such as blockchain, internet of things (IoT), artificial intelligence (AI) and machine learning (ML) to further infuse value across front- and back-office processes
Increasingly, cloud computing is the clear path forward—emerging as a powerful force multiplier that health insurers can leverage to accelerate their digital transformation.
Cloud services provide a secure and cost-effective approach to legacy modernization. They offer scalability, transparency and the ability to adjust to demand rapidly. Cloud also accelerates deployments, boosts employee productivity, improves stakeholder
collaboration, and results in higher customer satisfaction. Additionally, the economic benefits of cloud computing are significant since it provides a greater value and the potential for reduced costs.
- Cloud deployments have an average 2.3 times lower total cost of ownership compared with on-premises deployments
- The payback period for cloud deployments is 2.2 times faster than on-premises implementations
- Cloud provides long-term operational benefits thanks to lower initial and ongoing costs
- Cloud deployments are faster and require fewer internal resources