Technological advancements have permeated nearly every industry over the past few decades, including life insurance. However, despite improvements, technical debt looms large across the industry, casting a shadow over advisory firms' efficiency and adaptability. A survey by Deloitte and LIMRA found that less than half of insurers have modernized and updated their legacy systems. 

“Technical debt” is typically associated with software development. It refers to future costs related to rework caused by choosing the immediate, easy solution instead of investing in a better solution that might take longer to implement or require a more significant investment of time and resources. 

For life insurance advisors, the conundrum that results in accruing technical debt is familiar: trying to keep pace with client, carrier, and team demands in a digital age while entrenched in legacy systems where the weight of outdated technology accumulates over time. The ramifications of technical debt ripple throughout the industry, impacting everything from compliance management to customer experience.

What is technical debt in life insurance?

In life insurance, technical debt refers to outdated or inefficient systems, processes, and technologies accumulated over time due to the industry's reliance on traditional legacy systems. These legacy systems may have been developed decades ago and are often difficult to integrate with new technology.

Some examples include:

• Legacy policy administration systems: Many life insurance companies still rely on outdated policy administration systems that lack modern functionalities such as real-time data processing, flexible product configurations, and seamless integration with digital channels.
• Manual processes: Manual processes for policy issuance, underwriting, claims processing, and customer service can contribute to inefficiencies, errors, and delays. 
• Data silos: Data stored in disparate systems across different departments can hinder data accessibility, accuracy, and analysis. 
• Regulatory compliance challenges: Compliance with evolving regulatory requirements can be challenging for advisors with legacy systems that lack built-in compliance features or flexibility to adapt to regulatory changes.
• Limited digital capabilities: Legacy systems may lack the capabilities to support digital channels, limiting advisors’ ability to meet the expectations of digital-native customers and compete effectively in the market.

The costs of technical debt

Overall, technical debt not only increases the direct costs of maintaining and operating legacy systems but also impedes firms’ ability to adapt, innovate, and deliver value to customers, resulting in broader financial implications for the business. Here are some examples:

• Missed opportunities: Legacy systems may lack the flexibility and agility to adapt to changing market conditions, customer preferences, and regulatory requirements. As a result, advisors may miss out on opportunities to sell new products and enter new markets, leading to potential revenue losses.
• Inefficiencies: Outdated systems and manual processes contribute to inefficiencies in policy administration, underwriting, claims processing, and customer service, resulting in increased processing times, higher error rates, and greater operational overhead, all of which add to the cost of doing business. Plus, the more time teams spend imputing repeat data and chasing documents, the less time they have to spend with clients. 
• Compliance costs: Compliance with regulatory requirements is critical to the insurance business. However, legacy systems may struggle to keep pace with evolving regulations due to their reliance on manual processes, making them more prone to human error. This increases firms' risk, especially those with multiple producers in various states.
• Customer experience: Customers expect seamless and personalized experiences across all touchpoints. Failing to meet customer expectations can lead to customer dissatisfaction, churn, and, ultimately, lost revenue.

What can firms do to mitigate technical debt?

Many advisors, especially independent advisors, may feel stuck doing “business as usual.” While it might not currently be possible to eliminate using legacy systems completely, advisors can utilize tech-enabled brokerages, like Modern Life, to help ease the burden. 

How can Modern Life minimize technical debt?

Modern Life seamlessly integrates technology with personalized brokerage assistance. Our approach ensures that advisors have the support they need while harnessing the power of digital tools to optimize every step of the life insurance process. Here’s a look at how we help advisors minimize technical debt:

• Digital-first processes: By providing advisors with a modern, integrated platform, Modern Life can streamline and automate aspects of the insurance process, reducing the reliance on manual, error-prone methods contributing to technical debt. We offer digital intake forms that can speed up the client onboarding process and, ultimately, shorten policy approval times. 
• Instant quotes: Many clients expect fast turnaround times, but with traditional systems, it could take days or weeks to get a life insurance quote from carriers. Modern Life offers a wide range of products from 30 of the nation’s top carriers and instant quotes for term and permanent products. Advisors can transition from a quote to application with a single click, minimizing redundant data entry while speeding up the application process. 
• Responsive requirement and status tracking: Traditional legacy systems don’t have a central repository for keeping track of the dozens of documents and requirements needed for life insurance. The Modern Life dashboard provides advisors with a user-friendly interface that offers a comprehensive overview of both pending and completed requirements for every case, complete with detailed notes and comments from their dedicated case management team. Additionally, advisors and their teams benefit from weekly round-up emails containing updates on every case. These emails facilitate efficient planning for the week ahead and enable proactive client outreach to ensure swift case progression.
• Dedicated service: Modern Life believes in enhancing human connections with technology, not replacing them. Through our platform, advisors have access to a dedicated brokerage team, including advanced planning and case management support. Our team specializes in assisting with impaired risk and complicated cases and creating analyses to help compare existing policies to new options. 

Next steps

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