The core systems replacement cycle is speeding up.

Twenty years ago, even if you spent your entire career working at the same insurance company, you might have to go through the implementation of a new core system once, maybe twice. Technology — and the speed of business that it enables — is changing that.

Faster pace of change

Technology is advancing at an exponential rate, and that includes the technology underlying the business of insurance. Moore's Law predicts that processing power will double every two years. Other technologies exhibit similar exponential advances. Before solid-state drives emerged, the cost of hard-drive storage dropped by half annually. In 1997, 1 GB of memory would set you back about $100. Ten years later, the price had dropped to less than $.50 per GB.

When processing power was limited and storage was expensive, that affected how we used those assets. The exponential advancement of these and other technologies removes the obstacles that had previously restricted their use — which opens many, many new avenues of technological advancement and business innovation. In the next ten years, we can expect similar advances in the technology that we are using today.

New challenges

Ten years is a critical number in insurance technology. In 2007, new insurance core systems did not have a variety of capabilities that are necessary to deal with the challenges of today. Mobile and policyholder collaboration is a mandate. Advanced use of data and analytics has become a base-level requirement.