How are legacy systems impacting innovation in credit insurance?

Legacy systems pose several challenges for credit insurers. How can they overcome these challenges and meet new benchmarks?

In today's fast-paced world, innovation is critical across all industries, and credit insurance is no exception. The industry faces a growing need to adapt and evolve to meet changing customer demands and respond to market changes. However, many credit insurers are constrained by their legacy systems, which prevent them from realising the full benefits of innovation and put them at risk of falling behind.

Users of credit insurance now expect seamless, rapid, and customised solutions, which traditional legacy systems struggle to deliver on. These systems were not designed to manage innovations such as digital portals and real-time responses that are quickly becoming the new benchmarks of the industry.

Those credit insurers that have abandoned their legacy systems and embraced digitalisation are benefitting from advanced data analytics, artificial intelligence, and automation. In an increasingly data-driven industry, this gives them the advantage of real-time insights that enable faster and more accurate decision making, and the ability to customise solutions that more closely meet the needs of their customers. Whilst some credit insurers have embraced new technology, others have not. They still rely on outdated technology, and as a result, are unable to operate with the same level of flexibility or scalability – exposing them to the risk that underserved customers may look elsewhere.

Some credit insurers have tried to integrate their existing systems with new technologies. Unfortunately, in most cases, this impacts their ability to fully capitalise on the new technology, as their legacy systems cannot exchange data seamlessly. This limits an insurer's ability to collaborate effectively with the speed and agility expected by others, and impacts on their overall efficiency. Meanwhile, credit insurers who have disposed of their outdated systems in favour of digitalisation can integrate seamlessly with new technology to provide greater value to customers and drive operational efficiencies.

As with many tightly regulated industries, credit insurance is subject to evolving regulatory and compliance requirements. As changes to regulatory frameworks occur, credit insurers must be ready to respond and comply accordingly. Legacy systems do not always accommodate such changes, so credit insurers must spend significant time and resources to comply. This in turn constrains innovation, as insurers allocate more resources to ensure compliance and fewer resources elsewhere. Insurers can outsource this burden by replacing in-house systems with cloud-based credit insurance software that can manage the updates required to keep up with regulatory change.

In many cases, credit insurers have been operating under the same systems and processes for decades. By nature, they are risk-averse, however their resistance to change how they operate can also be a major stumbling block. For the rapidly changing credit insurance industry, fostering a culture of innovation is now essential to ensure successful transformation, and remain competitive.

Addressing the constraints of legacy systems

In the credit insurance industry, legacy systems and practices can hinder innovation and progress in several ways. To address these challenges, outdated systems must be replaced with transformative technology, supported by a culture that embraces innovation. Credit insurers who do so will be well positioned to capitalise on all the benefits that innovation can bring, not only to their business, but also to their customers. To learn more about key technological changes in credit insurance and how digital transformation can deliver value, download our white paper below.