The document discusses the transformation of legacy systems in the insurance industry. Legacy systems present challenges like being difficult to change and update as they are based on older technologies. Insurance companies are transforming legacy systems to support new business models and customer needs. Common strategies for legacy transformation include modifying existing applications, replacing applications, or retiring applications when they are no longer needed. Successful legacy transformation depends on effectively migrating data and business rules to new systems.

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

2. CONTENTS
Introduction 3
Legacy Systems 3
Challenges Associated with Legacy Systems 3
Legacy Transformation 3
Advantages of Legacy Transformation 3
Transformation Challenges 3
Conclusion 7
About the Author 8
About NIIT Technologies 8

3. Insurance industry is undergoing a phenomenal transformation.
The continuous sluggishness of top line growth is steering the
industry towards newer business models and requisite
technologies to support them. Time-to-market, though a
perpetual need, has today become a real imperative for
businesses to break through this stagnation. Bringing the
consumer closer to the business, providing facilities to easily
access information, transact, and ensuring continual commitment
from distributors are some of the key growth factors that drive this
industry. To support this business change, the underlying IT
landscape is also undergoing a rapid transformation. The legacy
landscape in particular, is rapidly changing as these platforms are
inherently constrained and unable to support business
simplification and enterprise-wide data interpretation,
Insurance companies have typically been among the earliest
adopters of automation. In an industry where almost all the
participants offer identical products, providing better customer
service is undoubtedly one of the most important differentiating
factors to gain competitive advantage. IT capabilities, be it
mainframes, client-server, multi-tier or other emerging
technologies, have automated all insurance processes and
information available at finger tips. In this race towards
automation, insurance carriers have become heavily dependent
on proprietary, homegrown systems. Traditionally, applications
were developed around specific lines of business, thereby
leading to incredibly siloed systems and processes.
Large-scale consolidation within the industry has further
complicated the issue, with a large number of disparate systems
basically performing the same task. Besides, from a technology
perspective, most of these legacy systems are poorly documented
and irregularly updated. Systems are unable to cater to the needs
Introduction
A legacy system is an old method, technology, computer system, or
application program that continues to be used - typically because it
still caters to the users' needs, even though newer technologies or
more efficient methods of performing the task are available.
Legacy Systems
A few of the typical challenges faced by organizations using legacy
systems are enumerated below:
• Legacy systems which have been developed in the past using
older technologies do not just include the software and the
hardware but also processes and procedures (policy-centric and
customer-centric, bureaucratic, fast and easy to use) that are
difficult to change
• These systems become repositories of business knowledge that
is not available anywhere else
• These systems are business-critical and are maintained not only
because of the information repository but also because it is too
risky to remove them
Challenges Associated with
Legacy Systems
3
of emerging business models. Evolving business models decrease
the distance between customers and providers. The need for direct
and easy communication and the transparency between the two
increases, and products silos are curtailed. The insurance industry
is struggling with a multitude of applications that require extensive
maintenance and have mediocre capabilities.
This white paper aims at helping organizations understand the issues
involved in effective management of the existing legacy systems.

4. “Most legacy systems are written in COBOL [code], and
nobody teaches in COBOL anymore. The maintenance of
legacy systems is going to get tougher as this generation
that knew that language moves on into retirement. There's
significant risk in the older systems, as the employees that
maintained them retire or move on, taking their
operational knowledge with them. Every company that
has these large systems eventually is going to have to do
something with them.”
Robert Fullington, EVP and CIO of Life of the South
(LOTS), Jacksonville, Florida (USA)
4
In a typical legacy system set-up, some distinct or identifiable
features can be noticed:
• Hardware: Mainframe or mid frame based
• Application Software: Usually written in obsolete programming
languages
• Application Data: May have large instances of redundant,
incomplete and inconsistent data
• Business Processes: Software structure and functionality may
not support enhancements/ changes
• Business Rules: May be implicit and embedded in the system
software
• Support for Software: Since software is maintained in-house,
suppliers may no longer be in business, or may not support the
system
• People: The resources/ users who were associated with the
system may no longer be working or alive (in some cases); thus
constraining the knowledge about such systems
These inefficiencies have forced insurance players to clearly define
and implement legacy transformation strategies.
Legacy transformation is the process of bridging the gap between
legacy and strategic architectures. It is cost-effective, time-efficient
and risk adverse.
The transformation process consists of understanding and
documenting the existing system; decomposing the application
into data; presentation and processing logic; creating and
extracting reusable components; and if desired, converting the
legacy code into Web compatible languages.
Legacy Transformation
Advantages of Legacy
Transformation
Transforming a legacy system offers organizations a number of
distinct advantages including:
• Reduced operational cost
• Usage of current business processes and modern technology
• Minimal dependency on resources associated with legacy
systems
• Comprehensive documentation of system with complete
knowledge of processes
• Ease in deployment and enhancement of functionality
Transformation Challenges
One of the key challenges in legacy transformation is data and
business rules management. Both involve significant participation
of resources managing the data and the code, in-depth
understanding of the processes along with the rules that govern
them and the associated data. Only then synchronous transfer of
data and rules to the end state system(s) is ensured. While it may
be relatively easy to access data, getting access to system
specific knowledge like the embedded business logic and the
associated rules is the real challenge. In fact, even with respect to
data, comprehending system specific knowledge is a major task.
Most legacy applications in the insurance industry have
substantial data related issues like inaccuracy, incompleteness
and redundancy. Information pertaining to business rules and logic
defining the processes and data is typically available either in the
form of documents or through the users’ expertise. A typical
scenario that legacy transformation programs confront is the lack
of documentation (or minimal documentation) and inability to
access or translate system experts’ knowledge into usable
information. Experts leaving the system (retired/left), paucity of
communication, or lack of cooperation by the experts as they feel
threatened by the transformation program are some of the
challenges with respect to the documentation of the knowledge
from the experience of the experts.
Thus for the success of any transformation, it is imperative to have
a robust knowledge management and code comprehension
framework. The transformation team needs tools to extract system
knowledge from the code, structure to ensure effective knowledge
transfer from the experts, templates to record the extracted
information and transferred knowledge, and a learning plan to
ensure that all the system knowledge is imbibed by them.

5. Developments in legacy transformation tools and techniques
provide businesses the opportunity to review their legacy portfolio.
When the requirement is to transform a single legacy application, the
choice of direction is decided by the quality of the application and
the availability of off-the-shelf products to replace it. Generally one
(or more) of the following four alternatives can be used by insurance
companies to deal with legacy transformation.
1.Leave the Application as is
There are some cases where there is no requirement to change
the existing application. For example: The insurance company
might no longer offer a particular product and the policies currently
serviced may all be near maturity. Hence the company can decide
to continue with the existing application without investing more on
these lines of business or the systems handling them.
2.Modify or Upgrade the Application
Depending on the need and the extent of the change desired, the
insurance company may decide to either modify the features of
the existing application or upgrade it to newer technologies for
better service. Some of the initiatives that an insurance company
can take include:
a. Web enabling services:
This activity involves re-engineering the interfaces and
screen components without disturbing the existing legacy
database (non-invasive). It is usually a preferred alternative,
if the insurance company is having budgetary constraints
and intends to appeal to a wider audience and enhance
service levels.
Transformation StrategiesTransformation Strategies
Most transformation programs last for a period of 2-3 years.
During transformation, an organization may face lack of
knowledge continuity due to changing organizational priorities.
This leads to reallocation or attrition of resources. Knowledge
institutionalization, through a resilient knowledge management
framework, can once again play a significant role in reducing
dependency on the knowledge repositories, by transporting an
expert’s knowledge into it. This repository, supported by a strong
competency building framework, can ensure that the new set of
resources become productive quickly, thereby reducing the
impact of reallocation or attrition.
Another challenging area in insurance legacy transformation is the
data itself. As mentioned earlier, insurance data on old legacy
systems is infested with inaccuracy, insufficiency and redundancy
issues. Understanding and then transforming this data clearly into
the new system is any transformation team’s nightmare. Even
though all organizations face the same challenges, they tend to
throw different sets of data transformation issues. An iterative
approach to data transfer can play a pivotal role in ensuring that
the lessons learnt from resolving issues in earlier iterations can be
effectively utilized in subsequent iterations. Also, since the amount
of data to be converted is huge, the usage of tools that enable the
process of transformation is extremely important. Typically, a large
number of off-the-shelf Extract Transform Load (ETL) tools have
been positioned to address the same. In this case, the
transformation rules are complex, since these tools have been built
with data warehouse as their final destination.
In case of data migration, the rules need not be complex, as
transformation is aimed at cleaning the data and not transforming
and drawing business intelligence out of it. Thus, it is usually preferred
that simpler data conversion tools are used for this purpose.
Another recommended method for data conversion is “Policy Life
Cycle Mirroring” – in this method, based on the history of all
transactions in the source system, a new policy is processed in the
target system if it allows backdating of transactions.
5

6. 6
3. Replace Existing Application
Insurance applications need to change over a period of time. The
reasons for the change may include regulatory changes, updates
to products terms and conditions. Existing applications may not
be in a position to handle all such changes and hence require a
replacement; either through a bespoke development or through
an off-the-shelf product. Also, if there has been a merger or an
acquisition where the businesses being serviced are the same,
the insurance player(s) may embark upon consolidating the two
businesses and thus the underlying applications as well. In such
business consolidation scenarios, the organization may decide
either to transport the requisite functionality of one (or more)
application(s) to the other or replace one (or more) application(s)
with a new functionally and technically richer application.
4. Retire (shut down) an Application
This option is chosen when the company decides to exit a line of
business and all the associated policies have matured. For
example, certain policies that were specifically designed for a
specific purpose/ business segment may no longer be sold or
serviced (World War II soldiers!) and hence they are no longer
needed. Or a company may decide not to offer a product
specifically designed for a state/ target segment that it no longer
wants to service. Maintaining these applications would be a
superfluous cost and hence need to be shut down. Retiring is
one of the most difficult options to exercise, considering its
impact. Multiple processes (to access the application) have to be
redesigned, certain data may have to be preserved for as long as
the company exists, and then there are regulatory needs that
mandate some reports. This option results in decommissioning of
the application. It is also a future step for option one (where the
legacy application is supporting a closed book of business and is
being maintained as it is till the last policy matures) and last step
for option three (where one or more applications are getting
replaced). Once an application is shut down, it is
decommissioned and all its requisite repositories (business rules
and/or data) are transferred either to another application(s) or to
an archival system.
b. Componentization and Integration:
The existing application is untouched. However, the business
rules and the processes are converted into Component Object
Model (COM) objects with better functionalities and on-premise
deployment with straight-forward integration into existing
applications. It is generally adopted by insurance companies that
are in a rapid expansion mode, through mergers or acquisitions.
All the above options lead to consolidation and/ or
decommissioning of some or all of the legacy applications.
Decommissioning is the practice of removing a service
(application/ database/ platform) while retaining access to the
business-critical data stored within the system. Post
decommissioning, a legacy system is deemed unfit for
performing the regular operations. The data residing in the
decommissioned system may or may not be migrated to the
target system. In either case, continued access to the data is very
critical. By decommissioning redundant, unnecessary or
technologically obsolete systems, companies achieve tangible
benefits. At the same time, there are certain issues such as:
• Companies typically decommission systems or applications to
reduce the infrastructure costs and mitigate operational risks.
Some scenarios where decommissioning has been frequently
recommended is when a business is thinking of selling/ exiting
a division or line of business
• Mergers and acquisitions bring with them older/ redundant
systems
• Inability of existing systems to accommodate newer
technological demands
• Scarcity of resources having knowledge of legacy systems
Consolidation, on the other hand, is the process of identifying
similar processes in discrete systems and integrating them into a
process that represents almost all the features in these systems.
Consolidation results in generating powerful set of tools and
features that enable users to have a unified view of information
stored in multiple systems and locations. Consolidation also
enables insurers evolve new systems to provide scalable,
consistent, and reformed data that can be used by enterprise
applications and business processes across various administration
systems. Typically, consolidation involves decommissioning of one
or more system(s).
Based on client’s requirements, an appropriate strategy to transform
legacy applications has to be devised. These strategies depend on
issues like transfer of assets with/ without data, database and
interface compatibility, transition support, post transition training etc.

7. Certain specific needs, an organization may have, to transform
legacy applications have been listed below:
a. Replacement of the legacy system with a new system
b. Enhancement of existing functionalities
c. Decommissioning of the system
However, the core elements of strategies are components of data
and business rules. If the data is relatively clean and policy history is
not maintained as live data, “point in time” data migration is
recommended. However, if the data is plagued with inconsistencies,
redundancies and the system allows backdating, “recreate from
issue” or “policy lifecycle mirroring” (wherein all the transactions
from policy issue to date are recreated through an alternate source
of input), it is more suitable for active policy conversions.
Many insurance companies still depend on legacy systems to
handle key processes like claims and policy administration. These
applications are reliable and are capable of delivering what they
were originally supposed to deliver. Hence most companies are
reluctant to take-up any replacement activities. Certain issues like
(a) limited technical support, (b) inflexible business rules, (c)
Conclusion
7
over-burdened databases, (d) hard to learn interfaces, (e) difficulty
in integration and, (f) high maintenance costs are some of the
issues that insurance companies face with their legacy systems.
Despite these drawbacks, insurance companies have been
apprehensive about replacing their legacy systems due to costs
and risks involved.
However, the escalating competition, ever-increasing expectations
from customers and regulatory mandates has prompted many
players to consider transforming their legacy applications.
Legacy transformation usually takes two standard
modes—consolidation and/ or decommissioning. It would not be an
exaggeration to state that a successful legacy transformation is all
about successful data and business rules migration from original/
source system(s) to new/ target system(s), ensuring that the
interests of all concerned parties (users and managers of old and
new systems) are addressed. The key ingredients to achieve this
objective are knowledge acquisition from the system using tools and
templates; knowledge acquisition from experts using knowledge
transfer structures and templates; knowledge institutionalization;
and iterative data transfers using appropriate tools or
methodologies.

8. 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
NIIT Technologies is a leading IT solutions organization, servicing customers in North America,
Europe, Asia and Australia. It offers services in Application Development and Maintenance,
Enterprise Solutions including Managed Services and Business Process Outsourcing to
organisations in the Financial Services, Travel & Transportation, Manufacturing/Distribution, and
Government sectors. With employees over 7,000 professionals, NIIT Technologies follows global
standards of software development processes.
Over the years the Company has forged extremely rewarding relationships with global majors, a
testimony to mutual commitment and its ability to retain marquee clients, drawing repeat
business from them. NIIT Technologies has been able to scale its interactions with marquee
clients in the BFSI sector, the Travel Transport & Logistics and Manufacturing & Distribution, into
extremely meaningful, multi-year "collaborations.
NIIT Technologies follows global standards of development, which include ISO 9001:2000
Certification, assessment at Level 5 for SEI-CMMi version 1.2 and ISO 27001 information
security management certification. Its data centre operations are assessed at the international
ISO 20000IT management standards.
About NIIT Technologies
A global IT sourcing organization | 21 locations and 14 countries | 7000+ professionals | Level 5 of SEI-CMMi, ver1.2
ISO 27001 certified | Level 5 of People CMM Framework
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