Legacy System Risk in the Wake of Mass Retirement

With 50% of the current insurance workforce preparing to retire by 2028, a talent crisis looms over the insurance industry. This mass retirement trend will jeopardize insurers who over-rely on long-tenured employees with decades of knowledge about their company’s aging legacy systems, data, and processes.

1. Insurance Industry Talent Crisis.

In the coming years, the insurance industry hopes to increase its staff by 56% to fill the empty shoes of its 400,000 soon-to-be retirees. However, when an insurer uses outdated legacy systems, it can make talent acquisition and retention exponentially harder. Today’s job candidates desire modern workplaces with the latest technology to improve employee experience and workload. To remain competitive in the job market, insurers must offer modern technology to minimize manual, tedious, and time-consuming tasks that detract from productivity and fulfillment. Insurers who leverage technology to reduce the frustrating friction in day-to-day operations and processes will come out on top. By empowering employees with advanced capabilities, insurers can expect them to perform better in their roles—and stay there.

2. Key Person Risk and the Retiring Workforce.

Key-person risk arises when a business relies too heavily on a handful of individuals who generate enormous value and organizational knowledge to their operation, as is prevalent in the insurance industry. Although only comprising 25% of the current workforce, long-tenured employees are often the only employees with the relevant knowledge and skills to maintain legacy systems and manual processes crucial to investment accounting and reporting functions. As people retire, insurers are losing decades of accumulated knowledge regarding their internal operational systems. This loss of expertise wreaks havoc on insurers, causing inefficiencies and transitional downtime. New employees rarely possess a deep understanding of legacy systems, and they are not eager to learn. New employees are interested in learning up-to-date technology that is easy to use and helps them keep their skillset transferable and in line with industry standards.

3. Legacy Technology and Manual Processes.

While profitability depends largely upon investment income, the insurance industry is hindered by piecemeal, outdated accounting and reporting systems. These systems are tedious, unsuited to handle the modern array of assets many insurers now hold, prone to key person risk, and difficult to integrate with one another. In turn, users struggle to aggregate data, reconcile it into interactive reports, and leverage it to maximize returns on assets. Often, completing basic tasks requires compiling data from multiple incompatible systems. For efficiency, employees frequently develop complex workarounds to accomplish the desired functions that only they understand, thus unintentionally introducing key person risk into your organization.  These manual processes tremendously raise the risk of human error and monopolize work time that could be better spent on tasks that are not easily automated. Legacy systems typically fail to provide any meaningful guidance for determining the long-term effects of transactions on portfolio performance, leading to significant opportunity cost. Without this data, finance teams are severely disadvantaged when deciding how to allocate resources to maximize the insurer’s returns.

The Clearwater Solution:

Clearwater Analytics is the obvious solution for insurers burdened by antiquated legacy systems and vulnerable to key person risk. Clearwater mitigates spreadsheet risk by eliminating the need for manual intervention and providing actionable, accurate data for quick, strategic decision making. The Clearwater Platform provides automated data aggregation, reconciliation, and validation to power Clearwater’s investment accounting, compliance, performance, and risk system — all available on an easy-to-use web-based reporting platform.

Clearwater builds and maintains thousands of connections to custodians, investment managers, brokers, and data vendors, providing a centralized system for back-office and security master data.  Clearwater reconciles cash, positions, and transactions between these sources. This automation eliminates the need for manual and mundane tasks that frankly no new employee is excited to learn. Automated data aggregation and reconciliation allows key personnel who own manual aggregation and reconciliation processes to be redeployed to more meaningful, productive tasks. Having a state-of-the-art solution like Clearwater also helps to attract and retain top talent.

Clearwater owns data aggregation and reconciliation, which redeploys your employees time to be focused on data analytics and strategic decision making. Clearwater provides a daily view into investment holdings and activities. This allows employees to create reports customizable to them and your organization for further insight. Employees can create reports on the fly to answer questions quickly as they arise. Data analysis, as opposed to data management, is the type of work these new and high skilled employees are excited about.

The learning curve for Clearwater is minimal. Each client is backed by our world-class client servicing team of financial analysts, accountants, and NAIC experts. Clearwater offers unlimited trainings, which makes transitioning quick and painless.

If your team has a key person risk or key operational risk, hiring more people may no longer be an option in today’s workforce. With Clearwater, you can replace multiple legacy systems, eliminate manual processes and wasted human hours, and mitigate any key person or key operation risk, permanently.

Speak to an expert today.