It is easy to understand why insurers are avoiding modernization and continue to stick with legacy systems that are working for now. But as insurers continue to fall further behind modern technology, the potential revenue they're missing multiplies.

The good news is that there is a relatively simple path insurance executives can take to modernize quickly and smoothly. Two improvements over the past several years have made the transition to modernized technology much easier for “early adopter” companies that have been willing to make the change.

The first was service oriented architecture (SOA) or more commonly referred to as web services. SOA is a way to share data between systems and applications to create operational improvement. SOA systems can move data into and out of legacy systems to accomplish a required task more quickly and efficiently. The ability to connect legacy systems with new technology allows for a smoother transition into modernized structures without forcing insurers to completely overhaul everything at once.

Business-intelligence systems have also helped insurance companies better transition to modernized structures. Business-intelligence systems are used to collect information and make it easier to access throughout the organization. For example, insurance companies have extensive management and statistical reporting requirements that require communication between several different systems. With business-intelligence systems, data within siloed systems—policy administration, accounting or claims—is much easier to access. With the ability to aggregate data across difference business departments or siloed systems, insurance companies can deliver improved management reporting and insight as well as simplified statistical reporting.

It's important for insurance companies to analyze current systems and truly understand what they can and cannot handle. Companies need to understand that data is what keeps their businesses running, and accessing, reusing and repurposing that data is the key to making a significant return on investment in their technology infrastructure.

It is commonly assumed among insurance executives that legacy-system replacement is the only option to improving technological efficiency. But it has become clear that entirely revamping systems is simply not possible, and that solutions to help increase efficiency while still maintaining current system data may be the easiest way to improve.

As a result, it is not crucial for insurance companies to partake in complete system overhauls to reap the benefits of modernized technology. Many companies have taken a middle-ground approach by investing in business-intelligence systems and SOA technologies that have allowed for the integration of legacy-system data with modernized technology to streamline workflow. For many insurance companies this is a suitable solution. For those that do plan to completely overhaul legacy systems in the long run, these types of services can act as excellent transitions, as the shift from a core legacy system can sometimes prove to be more daunting than expected.

It is now more important than ever for executives to understand the most effective ways to streamline their current systems. How insurers are able to go about this depends entirely on what individual systems can handle. Regardless of which path is taken, investing in appropriate technology now will give your insurance business a significant competitive advantage in the long run and can act as a stepping stone towards a complete system overhaul down the road.