“Legacy applications should be measured along criteria such as ease of integration, skill sets, vendor support and scalability. If the applications meet [these] criteria, the time for replacement has not yet arrived,” she said.

“It is imperative insurers address the legacy problem. How this is done is dependent on the current IT environment, business pain points and the company's risk appetite,” said Celent. “With careful design and planning, insurers can avoid creating the next generation of legacy systems.”

The firm, in its report, added that “with the global [financial] crisis well underway, insurers need to reexamine their IT projects against a combination of strategic goals, including getting bigger by growing revenue, getting leaner by reducing expenses and increasing productivity, and getting smarter by making better use of their data.”

Celent cited several viable approaches to addressing legacy IT within an insurer but no absolutes. Survey respondents showed “an overwhelming preference” for replacing legacy with new systems. “Close to two-thirds of both large and midsize insurers had this as one of their preferences,” said Celent.

The second preference among respondents is to wrap or extend the existing system, leveraging existing investments where possible, said Celent.

“For large insurers, the third preference would be to outsource part of the application portfolio, while midsize insurers showed a preference for rewriting applications in modern code,” the survey found.