Why smart insurers are modernizing their mainframe now

In a market that calls for insurers to be broadly agile and digital, an insurer’s master framework can either spur progress or inhibit it. While the mainframe computer was once a valuable core technology function, many older mainframe computers lacked the flexibility to meet the demands of customer expectations and rapid digital advancement.

Call for modernization of mainframes

Insurers want to reach a digital end state and include the enabling functions they need to perform in the cloud using a faster, better, and cheaper path. Modernizing the mainframe is the final step towards enabling business capabilities, reimagining business, and driving the cloud operating model.

If we look at the market forces that shape the broader industry, insurance companies To be more flexible to keep pace with rapidly changing requirements. This is due to a combination of factors, from the high inflationary environment expenses for insurance operations and the increase in claims, to the impact of the global pandemic and the expected recession. With a high interest rate environment and expected volatility in the future, costs must come down, and one of the costs that increases year by year is mainframe maintenance.

Zooming in on the insurance sectors, this need for flexibility manifests itself in different ways. P&C insurers not only need to be more flexible, they need to focus on the marketing points of differentiation while commodifying non-differentiation. The life, annuity (L&A), and retirement industry would benefit from opening up distribution, a feat that isn’t currently possible because so much of that logic is built into the mainframe. Therefore, the focus is on updating the main computer to enable digital channels. Group and pension companies are undergoing a stressful transformation – meaning the sector requires reimaginings from the ground up in order to improve customer relationships and gain a competitive advantage – with group hurting on margins, and pension hurting on margins and volume. Finally, group and health insurance companies are challenged to reduce their cost basis, and drive growth, for example, by adding a health class to their offering.

From a cost perspective, the mainframe upgrade issue is obvious. Demand for insurance infrastructure is growing, as business capacity needs drive higher use and cost of one million instructions per second (MIPS). An aging mainframe also has an impact on talent, as dedicated staff will have to provide for maintenance and upkeep – a diminishing skill set as more and more senior employees retire from the workforce. Ultimately, this manifests as a significant business risk.

Updating the mainframe isn’t just about overall agility, it’s also about securing a foundation for an important technology shift. In a recent report on Claims transfer and underwriting using artificial intelligenceAccenture demonstrates through extensive industry research that AI has emerged as a transformative technology and a critical differentiator in the insurance industry when applied alongside humans. However, the transformation of AI is not possible if the insurance company does not decommission and modernize the mainframe platforms first.

Mainframe update results

Mainframe modernization provides some attractive benefits. By running in a lower-cost environment, operating costs are significantly reduced, and the use of a more modern platform greatly reduces platform resource costs. Together, this can lead to a 40 percent reduction in operating expenses. While these savings are significant, they are not the only benefit. More importantly, mainframe modernization—through speed, flexibility, and access to critical mainframe data—has a powerful impact on business value. As a recent blogger for Accenture, Mainframes: The last frontier of cloud migration It asserts that customers are able to tap into their mainframe data, which can contain decades of business transactions, and use that data to fuel analytics or machine learning initiatives that can deliver a competitive advantage. The blog post also demonstrates the important role mainframe modernization plays in closing the skills gap – it can address the problem many companies face as their mainframe experts reach retirement age and it can also attract new talent interested in modernizing core business workloads.

The update also provides the ability to deploy new features, products, and capabilities much faster, and in combination with interoperable applications, promises up to five times faster deployment speeds. New business capabilities such as the ability to integrate artificial intelligence and machine learning, real-time decision making, and efficient data processing are also unleashed. These benefits can be achieved through conservative modifications, or complete transformation of the system. It all depends on the strategic priorities and growth of the insurance business.

New platforms and migration technologies allow for compressed conversions

Mainframe modernization is not a one-size-fits-all proposition. It is driven by the insurance company’s unique market needs and the strategic objective of the business. There is a wide range of options available for updating at a pace that is convenient and necessary for the insurance company. Today’s mainframe migration technology supports this, allowing for automated, rapid, and low-cost migration to the cloud. This technology includes SaaS solutions, cloud maturity, and advances in migration technologies.

In terms of methods, insurance companies can carry out the following interventions, all of which differ in scale and severity:

• re-statuteMigrate an application without changing the programming language to another platform/operating system
• re factor: Harnessing Accenture’s language migration toolkit to migrate from legacy HTML code to modern HTML code, using (semi)automated tools to mitigate risks around legacy skills, increase flexibility and reduce costs
• replaceDefine a managed service/application that can provide the required functionality, including data extraction and migration to a new system to reduce complexity and costs.
• to imagineComplete business reimagining with rewritten, commonsense applications

How can insurance companies start their mainframe modernization journey?

There are nuances in how the mainframe update is implemented in the insurance. These solutions vary in intensity from the business benefits to the technology used. Application depends on whether the insurer specializes in life and annuities, group and health, retirement, personal/small business and large business lines. However, there are three main steps that determine the direction of each keyframe’s update journey:

1. Determine work priorities
   1. a. What are the top business priorities?
   2. B. How do these cope with the major issues caused by running on the mainframe?

2. Determine budget constraints
   1. a. What is the available budget today?
   2. B. What is the period available to achieve the return on investment?

3. Determine the ability to transform
   1. a. What is the IT team’s ability to transform?
   2. B. Are there resources available?
   3. c. Is there much other change going on?

Following this process results in a unique update plan for the mainframe.

Accenture’s insurance master framework modernization methodology will help you develop a journey that aligns with your goals. Contact us to get started.

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Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.

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