Legacy system upgrades worth pain for long-term benefits, say tech experts

Despite challenges insurers face with upgrading legacy systems, modernisation opens up a raft of potential opportunities and cost optimisations, insurance technology leaders from FWD and Peak3 said during a Hong Kong FinTech Week panel on Tuesday (Oct 29).

Cloud adoption can also help address issues by providing scalability, speeding up time-to-market, and reducing long-term maintenance costs, said to Christoph Krieg, Chief Strategy Officer of Peak3 (formerly ZA Tech).

“We see efficiency and efficiency uplift in three main areas – change costs, run costs, and then really business benefits, [the] operational savings that we can realise,” said Krieg. He cited examples where clients launched new products in months instead of over a year by leveraging Peak3’s configurable cloud-based platforms.

“You create efficiencies through this. You can pass through to your customers as well,” said Krieg. “If they want to do a minimum value plan (MVP) [or] a proof of coverage (POC), we can get this up and running in a matter of weeks and get it live, instead of saying we need to build now the environments [and] we need to train the teams.”

FWD Insurance also embraced a “cloud first” strategy, migrating over 90% of applications to realise savings from optimised cloud utilisation.

“In the past, we relied heavily on propriety legacy technology for system integration, which limited the interaction with our core insurance platforms due to integration difficulties and performance concerns,” said Elly Kwong, CTO of FWD Hong Kong & Macau.

On managing costs while maximising benefits, Krieg emphasised adopting cloud solutions incrementally through an MVP approach rather than full migrations. “Naturally, you then have all the benefits that you have, the scalability, the reliability, the security of the cloud components from an AWS [or] an Azure that is provided there,” said Krieg.

Kwong outlined FWD’s ongoing “FinOps” framework to optimise cloud resources through right-sizing and clearing unused assets. 

“We adopted new integration technologies which have improved the integration efficiency and quality,” said Kwong. “Cloud adoption has also been crucial to its success in hosting hundreds of reusable APIs across three platform layers. We needed a scalable and automated environment cloud technology.”

When modernising complex legacy systems, both Kwong and Krieg recommended platforms with modular microservices architectures to flexibly decouple and reuse components. “We manage to reduce the log by block size by 30% and archive logs that are over one week old, resulting in a lower storage cost,” said Krieg.

Forward-looking insurers are embracing modernisation to stay competitive in an industry being disrupted by new digital-first entrants. FWD now processes over 95% of health claims automatically through integrating AI with legacy platforms.

“At FWD, our customers can have their claims approved and receive payment into their bank account within one minute,” said Kwong. “Claim submission is very straightforward using our new services app. You only need to enter information about your claim and upload supporting documents, and FWD will handle the rest.”

Peak3 similarly helps clients launch products regionally on single platforms to harmonize processes across countries. “If you’re able to run a multi-tenant instance for your clients doing proper public source, for us this is a bit of a game changer,” said Krieg. “[And] now speed to market with clients as well, which gives them the opportunity to experiment.”

Overall, “embracing these [modernisation] strategies has overcome capacity associated with legacy systems while unlocking new growth potential and opportunities and driving customer engagement,” said Kwong.