Many insurance companies are mired in tech debt and never recognize the harm it does. Here are the causes, symptoms, and consequences of falling behind the technical times.
- Technical debt affects all industries.
- Technical debts have varying symptoms, but they all hold businesses back.
- Insurance companies can fail due to accumulated technical debts.
- Insurers can prevent and pay technical debts if they know what to look for.
Many insurance players are still technical laggards despite the numerous benefits automation solutions, like robotic process automation, offer. It is not our intention to demean this crucial sector by saying many of its players are lagging. Numerous insurance agents and carriers wallow in crippling technical debt.
How can you recognize if your insurance company is mired in a tech-debt quagmire? What symptoms should you look for before seeking solutions like intelligent automation? This discussion examines these tell-tale signs and how they could erode your competitiveness in this tech-savvy era of insurance competition. Remain on board as we progress and show you how to pay your technical debts.
What is technical debt in the first place? Answering this essential question helps us understand its symptoms and crippling effects. Here we define it before proceeding.
- A technical debt, aka a code or tech debt, is the consequence of development teams or organizations taking short-term shortcuts to fix technical problems only to revisit them shortly after. This approach is a quick fix that creates bigger future problems than the ones it seeks to solve.
- Also, tech debt is the deviation of an app from any non-functional requirements.
- It’s also the money your business should be spending on innovation instead of wasting it annually on maintaining deficient systems.
- Strategic: Insurers incur it deliberately for strategic purposes and take on the debt in the long term.
- Tactical: Organizations incur this debt knowingly for short-term gain and hope to pay it soon.
- Inadvertent: Companies suffer this debt without realizing it because their IT teams or advisors do not recognize that a project will not meet its goals or will require extensive ongoing upkeep.
- Incremental: Your business can incur this debt when inadvertent debts balloon.
Technical debts have different symptoms that alert you that your business could soon become technologically redundant. A technologically bankrupt insurer manifests the following signs.
- Your business takes a longer time to optimize customer-facing IT solutions.
- Your company starts facing challenges when trying to meet regulatory requirements because you lack efficient data management practices.
- Sluggish response in systems availability and security because your firm lacks end-to-end landscape visibility and has hidden weak points.
- A general sense of poor and outdated documentation across your organization.
- Decommissioning systems because they require integration to satisfy their minimum requirements.
- Exorbitant maintenance and support costs because special expert knowledge is necessary for adding or refining system functionality.
- Unusual and increasing slowness in your business’s system functionalities.
- Your tech systems and infrastructure are unbearably buggy.
- Your IT people introduce more bugs as they try to fix current ones.
- Increased data inconsistency.
- A volatile production environment.
Does your insurance firm suffer from any of these symptoms? If so, it’s losing time, money, and missing opportunities for growth as your team struggles to drag this debt sled forward into your insurance firm’s future.
You could be set for the following consequences if you don’t contact a reputable technical solutions vendor for timely intervention.
Just like other debts that accumulate interest and penalties, tech debts also lead to crippling costs if not “paid off” promptly. These adverse effects come in different ways, mostly inflated maintenance expenses and inability to move on to new systems due to the complexity of your jury-rigged tech stack.
It’s no wonder that a Consortium for IT Software Quality 2018 report shows that US businesses wasted a whopping $2.26 trillion maintaining buggy applications! Worse still, this multi-trillion-dollar wastage excluded the cost of future tech debts. The report explains that enterprises waste 42% of their time firefighting bugs and another 80% of Operation & Maintenance (O&M) of existing IT systems.
That isn’t good news, and you shouldn’t let your insurance firm or agency be a part of these stats! Let’s look at two examples of popular tech companies to demonstrate how severe tech debt is. We intentionally chose them to show you that even tech-based giants aren’t automatically immune to technological debts.
- Twitter: Initially, Twitter used Ruby on Rails to build its frontend. Soon, this technology couldn’t handle the new search capabilities the tech giant wanted to add. It paid a heavy tech debt by migrating to a Java server, reducing its search latency by 3X!
- Instagram: Instagram also paid a costly tech debt. It launched its iPhone application on a server in Los Angeles. Increased traffic almost crashed its server, prompting it to go down for three days to migrate to an EC2-hosted platform. One of its co-founders likened that costly migration to “open-heart surgery.”
Here are 7 of the most damaging problems your insurance business could suffer if you don’t quickly pay or prevent your tech debts.
- Costly legal problems: Your business might suffer compliance penalties, fines, and lawsuits for violating HIPAA and PCI regulations. HIPAA fines can cost up to $1.5 million while PCI fines can run up to $100,000 per month in addition to other fees that must be paid out as part of lawsuits, credit monitoring, and other fines. Target reportedly paid more than $200 million for its high-profile PCI breach.
- Talent loss: Many Americans still perceive insurance as a tech laggard. Thus, you could lose some of the best tech-savvy talent on the market if your systems are wallowing in debt. The current employees might migrate to other tech-savvy firms, while potential workers might avoid joining your business.
- Unhappy customers: Let’s face the facts — the modern insurer serves a technologically sophisticated and digitally native generation. It expects and demands a seamless, fast, and high-tech customer experience across the digital divide. Failing to fulfill this desire means risking unhappy customers and stifling business growth.
- Missed innovation: Lagging in automation means you won’t deliver new on-demand solutions to satisfy your clientele.
- Organizational deficiency: Your business will face challenges collecting and visualizing relevant data for local and international visibility.
- Lost collaboration opportunities: Your enterprise will miss strategic collaborations with other tech-savvy firms that could have sharpened your competitive advantage.
- Customer migration: Lastly and most dangerously, technical debts can cost you customers. Dissatisfied clients, especially millennial digital natives, could defect to a more tech-savvy competitor.
You can now see the quagmire technical debt has drowned you in and its crippling effects. So, what way forward?
You don’t need to despair because our expert team is more than willing and qualified to help you. Contact us today for our future-proofing technical solutions that will ensure remain a technically relevant insurance player.