Legacy in insurance industry is an established reality. By virtue of being one of the early adopters of new technology, the insurance industry has seen the era of monolithic mainframes. Although there have been many technological advances, the insurance industry still remains one of the most intensive and largest users of mainframes and mid frames. This thought paper attempts to look beyond the known set of hindrances faced by insurance companies owing to their dependence on legacy applications. It also discusses two essential imperatives knowledge institutionalization and competency development that can help organizations efficiently manage their legacy applications.

1. Managing the Legacy Landscape in the
Insurance World
Managing the Legacy Landscape in the
Insurance World
www.niit-tech.com
Ritu Gupta
NIIT Technologies White Paper

2. CONTENTS
Introduction 3
Legacy in Insurance 3
Persistence with Legacy systems 4
Legacy Landscape Management 5
Conclusion 6
About The Author 7
About Niit Technologies 7

3. Legacy in insurance industry is an established reality. By virtue of being
one of the early adopters of new technology, the insurance industry
has seen the era of monolithic mainframes. Although there have been
many technological advances, the insurance industry still remains one
of the most intensive and largest users of mainframes and mid frames.
While mainframes continue to provide significant benefits in terms of
reliability, availability and security, the aging legacy systems are
plagued with a number of problems:
• Limited technical support
• Inflexible business rules
• Over-burdened databases
• Hard to learn interfaces
• Difficulty in integration
• High maintenance costs
• Inability to respond to regulator driven reporting requirements
• Too many changes in the original system logic
• Inability to respond to competitors owing to higher product launch time
Due to each of these factors, unresponsive and rigid legacy
application s negatively impact operational efficiency, resource
utilization and time utilization of insurance companies, creating cost
pressures and increasing compliance risks.
However, the fact is that insurance companies will continue to depend
on these legacy applications. It is therefore imperative to identify ways
and means of reducing the cost of ownership of these applications,
and enhance their effectiveness and efficiency. To accomplish this, the
maintenance teams handling these applications need to have a strong
hold on the functional, technical, and process details of the
application. This ability, however, is challenged by the absence of
proper documentation, a dynamic workforce and skill shortage.
Introduction
3
Legacy systems are integrated with new knowledge management and
competency development systems to centralize the management,
maintenance, and use of information
a) Knowledge Management (KM): KM ensures that the complete
knowledge of the system embedded in the thought processes of
individuals and in the code, is extracted, documented and
institutionalized
b) Competency Development: It ensures that the resources
maintaining these applications have the requisite levels of technical,
functional and behavioural skills, not just to maintain them, but also to
identify and implement performance tuning and productivity
enhancement mechanisms.
This thought paper attempts to look beyond the known set of
hindrances faced by insurance companies owing to their dependence
on legacy applications. It also discusses two essential imperatives
knowledge institutionalization and competency development that can
help organizations efficiently manage their legacy applications.
Insurance companies use legacy systems to manage applications
that handle:
• Marketing channels
• Customer service/claims
• Actuarial calculations/reinsurance management
Market Channel Applications
These applications were mostly used for monitoring the productivity
of marketing/field personnel and estimation of the commission
payable to them. As commission calculations are complex and need
to be paid for decades in case of lifetime policies, it was one of the
earliest processes to get “automated” in the insurance world. Thus
legacy is common in channel management portfolio of insurance IT.
Legacy in Insurance

4. 4
Legacy systems persist because of the expense, effort and potential
risk of business interruption associated with the movement of data
and key business processes to more advanced and contemporary
technologies. There are numerous reasons why insurance
companies persist with their existing systems. Some of them are:
Persistence with Legacy systems
1. Repositories of Processes, Rules and Data
Legacy systems have been continuously involved in processing
policy holder information, creating repositories of insured data,
policy information and the operational processes in vogue. The
information pertaining to various processes/ practices that guide the
business rules are “hard to find”. In such cases, the data used may
not be available anywhere other than in the legacy systems.
This has kept many insurance companies from re-engineering or
replacing legacy applications with newer applications built on latest
technologies (both hardware and software). The risk of losing
information in embedded business logic, business rules and
underlying data is a big deterrent for insurance companies.
2. Reliability of Applications
Many insurance companies still depend on legacy systems to
handle key processes. These legacy applications are reliable and
capable of delivering what they were originally supposed to deliver.
Hence, many insurance companies are reluctant to undertake any
replacements related to these business critical systems.
3. Poor Understanding of the Existing System
It is difficult to find complete specifications that mirror the functionality
of the entire legacy system. This may be due to unavailability of the
original system designers, and insufficient documentation.
In such cases, it is best to resort to the available documentation.
However, in most of the instances the available system
documentation is incomplete and does not include the details of all
the system changes. Replacing a legacy system is dangerous
since businesses face the risk of losing vital business knowledge
embedded in these systems.
4. Expensive to change
Changing from legacy systems to new systems involves huge
resource overruns due to the following reasons:
• Various parts of the systems may have been developed by
different teams, resulting in lack of a consistent coding style
• New programs may have been added or interfaced with other
parts in an adhoc manner
• The level of system documentatio n available may not be
adequate, increasing the amount of time required to
comprehend, assess and make changes to the system
• Designers of the system may not be available
These applications have interfaces with both external and internal
systems (like Point-of-Sale (POS) data entry, commission
management, accounting, agency management etc.). Hence,
altering these applications may impact all/any of these systems.
Typically, front-end processes like agent communication, illustrations,
marketing, and training support within the channel management
space have been ported into newer technologies; Back-end
business processes like agent set up, agency monitoring and
commissions’ management continue to reside on legacy systems.
Customer Service and Claims applications
These applications are the core components of an insurance
company’s operations. They are the storehouses of policy and
claims data, and the pivots on which the entire insurance
organization’s business strategy is developed. The need to maintain
this data over an elongated period of time, repetitive data driven
processes, and complex business processing rules that underpin
the two sets of applications warrant early adoption of automation. In
recent times, the largest part of the aggressive insurance legacy
landscape is accounted for by these two sets of applications. They
interface with almost all applications (except the actuarial
applications) in an insurance company. The competition warrants
insurers to offer better and faster services to their customers.
However, insurance companies still need to manage existing legacy
applications for as long as the policies issued using such legacy
systems are in force and not terminated or ported to other customer
service/claims systems.
Actuarial/Reinsurance Management Applications
These applications are one of the most important information
assets of an insurance company. Data within these applications
is used for designing various products, performing claims
analysis and meeting regulatory requirements. They form the
“heart” of the insurance company’s strategy. The valuations and
modelling requirements of the actuarial department almost
mandated early adoption of automation.

5. 2. Knowledge Institutionalization
Since no system documentatio n is ever really complete, the
previous/ongoing projects, collaborative efforts and communication
carried out during the modification of the legacy system needs to be
maintained in an environment where they can be readily accessed.
Most importantly, the practice of knowledge management needs to
be institutionalized, as the efforts yield rewards over a period of time.
A knowledge institutionalizatio n mechanism should ensure that
comprehensive, indexed, and easily accessible knowledge of the
system resides in the repository and is periodically updated. It should
also have a training management system with an assessment
mechanism to ensure that new members coming on board has good
understanding of applications before embarking on any maintenance
activity. The insurance industry should concentrate on the underlying
idea that knowledge should not get lost due to resource movement
and new resources should be made knowledge-rich within predefined
and short timelines.
3. Competency Development
Knowledge of applications alone cannot ensure successful operational
excellence and cost reduction. To be able to achieve this objective,
the maintenance teams need to have a specific set of technical,
functional and behavioural competencies. This demands the creation
of a competency development framework that details various
competencies required by the role holder. The assessment criteria
measures and creates a development program that generates
competencies in staff members across levels.
Only a fully competent team having adequate knowledge of the
applications and the processes underlying them will be able to
continually improve system performance and productivity.
5
Legacy systems are inherent, inescapable and here to stay. It is,
therefore, important to enhance existing applications to correctly
reflect the changes in business processes and rules. There is also a
need to reduce maintenance costs of these applications through
effective performance management, storage management, and CPU
time management.
NIIT Technologies believes that other than the traditional application
value enhancement methods, insurance companies need to strongly
focus on knowledge acquisition, knowledge institutionalization and
competency development to extract value from investments made on
legacy systems.
1. Knowledge Acquisition
Knowledge exists in embedded business logic, business policies and
rules formed over a period of time from the data extracted from
business operations.
Knowledge can be acquired by following the Top-Down and
Bottom-Up approach. In the Top-Down approach, knowledge from
the original designers of the existing system is documented to provide
a complete picture of the legacy system. The Bottom-Up approach
helps in gathering knowledge when original designers have missed
out on certain areas or when the original designers are not around and
the system documentation is incomplete or has been lost. In the
Bottom-Up approach, tools may be used to extract and document
the business logic underlying the various applications.
These created documents, thus, form the basis for future legacy
support/ maintenance activities.
Legacy Landscape Management

6. 6
In an environment where the market demands high speed delivery
of products and services, the insurance companies’ legacy
systems are slowing them down. Legacy systems are not easily
adaptable and hence require extra effort to integrate, upgrade, and
test them. The cost of maintaining legacy systems is more than the
cost of maintaining new technologies as the latter is far more
flexible and user friendly. However, legacy systems are rich
goldmines of knowledge and processes, which are not available
anywhere else. Hence, maintenance of legacy systems is an
alternative which most insurance companies use, despite the heavy
costs involved. Managements believe that the cost of maintaining a
legacy system is less than the cost involved in replacing them with
state-of-the-art technology due to the risks involved.
Conclusion Maintenance of legacy systems in the absence of proper
documentation and non-availability of resources with requisite
fundamental knowledge base is a nightmare.
A robust knowledge acquisition engine, coupled with strong
knowledge institutionalization can go a long way in helping the
support and maintenance teams to comprehend the business
functionality within the legacy applications, enabling them to create
a modernized application in a relatively smaller time frame.
Maintenance of legacy systems enhances Return on Investment
(ROI) made in the hardware and software systems.
By focusing on these aspects, the insurance legacy landscape
management team can become more effective and efficient;
thereby reducing the Business as Usual (BAU) costs while
enhancing system flexibility.

7. Ritu Gupta heads the Insurance Practice at NIIT Technologies. She has over 17 years of experience,
including 11 years in insurance domain and about seven years in management consultancy.
She has been instrumental in setting up of Vantage Center of Excellence at NIIT Technologies.
She has a post graduation degree from the Indian Institute of Management, Bangalore.
About the Author
D_18_120413
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