In With The New
Great Solutions
While these requirements grow more imperative with time, they did, in fact, exist when BearingPoint was less sanguine about legacy replacement. Now, however, "There are great solutions available," according to Paul McDonnell, BearingPoint SVP, U.S. insurance segment lead and coauthor of the policy admin report.
Risks still exist, especially with regard to the vicissitudes of implementation, but so do mitigation options, according to McDonnell. "Get help from people who have done it before," he advises. "Ask them how many policy admin systems they have done; if the answer is 'none,' go somewhere else." McDonnell also counsels avoiding vendors selling a "next version" of a system that has yet to be deployed.
The risk and mitigation calculus of life/health systems is a little different, according to Chad Hersh, an Austin, Texas-based analyst with Celent. There are several good reasons to replace life/health policy admin systems, many in common with the P&C space, including the availability of a small number of good modern systems. However, Hersh cautions, conversion costs are very high, owing to the longevity of life policies versus annually renewing P&C policies. "Conversion costs are very high, and the process is very challenging, risky and resource intensive," he asserts.
Furthermore, while systems such as AdminServer (Chester, Pa.) and NaviSys (Edison, N.J.) offerings and EDS Solcorp's (Mississauga, Ontario) emerging Radience platform promise to elevate life/health replacement activity over the next few years, questions remain about the scalability of such systems and their ability to handle the complexities of life distribution, Hersh notes. "It's not that the modern systems can't necessarily scale; it's just that they haven't been proven," he observes.
Dominant market player CSC (Austin, Texas) has the resources to develop a new-technology system but chose not to, according to Terry Meenehan, VP, life and annuities, financial services group, CSC. The reason, he says, is that the vendor's customers - which represent more than 75 million life insurance and annuity policies - feel that legacy extension strategies represent a less-risky option.
"Putting in a new system not only requires the implementation effort - which includes getting out all the product and tax rules - but it also includes Sarbanes-Oxley tracking requirements and integration to all their distribution channels," Meenehan argues. "If any one of those points fails, they have a problem. Whereas with the existing system, all of those points are already in a secure, industrial-strength environment."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio
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