A Great Leap Forward

If insurance systems have demonstrated a gradual evolution over the past several years, the industry may be on the verge of a spurt of development more closely resembling famed biologist Stephen Jay Gould's notion of "punctuated equilibrium."

Last year saw a remarkable burst of vendor consolidation powered by faith in new technology systems. The path to services-oriented architecture became the chief architectural preoccupation within the industry, and consensus on the viability of rules-based platforms has reached a tipping point. The leadership of insurance companies has become focused on the competitive imperative of getting product to market quickly, providing underwriters and claims professionals with sophisticated data-driven decision-making tools, and providing real-time functionality for distributors and end customers. And good financial results -- especially in the P&C industry, which enjoyed a relatively catastrophe-free season -- will only encourage companies' leadership to invest in the technology improvements capable of separating the winners from the losers in the coming years.

That's good news for senior insurance technology executives. But with the opportunities to invest and build come increased expectations. And while CEOs and CFOs look for hard ROI on their new spend, their lean-year expectations remain in place. As a result of this simultaneous business demand for growth and cost reduction, insurance CIOs are at an "uncomfortable crossing point," observes Russ Bostick, senior vice president and CIO for Carmel, Ind.-based Conseco (page 24).

That combined focus on cost reduction and competitive advancement makes the move to new core systems far more likely than it has been in a long time, according to Matthew Josefowicz, New York-based manager of Celent's insurance group. Whereas in the past insurers were more likely to risk "bleeding to death slowly" from legacy costs than "dying on the operating table" of legacy replacement, today they worry they'll simply be left for dead on the competitive battlefield if they don't replace systems (page 31).

Business leaders recognize that getting the right product to market at the right time is only half the battle, and that investment in new technology architecture is necessary to drive customer retention and loss control through improved claims operations, as well as exposure management and regulatory compliance.