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09:55 AM
Kathy Burger
Kathy Burger
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Insurance Industry Still Unclear As To How To Proceed With Legacy Systems

Doing nothing with their legacy systems is not necessarily an option, but what it is that insurance carriers should be doing is not always so clear.

The time is now ... possibly. Or maybe not. Those are the messages about legacy systems -- modernization, replacement, upgrade, extension, whatever -- that I have been hearing in recent weeks. At last month's ACORD LOMA Insurance Systems Forum, a persistent theme was, "It's time to do something about legacy systems" (for Insurance & Technology's coverage of the event, visit the ACORD LOMA Insurance Systems Forum Report). But, not surprisingly in this industry, what it is that carriers should be doing is not always so clear.

As often is the case when it comes to IT strategy, the challenge is not that there are no options -- rather, there are many options, none of them apparent slam dunks and all of them containing some risks: Do nothing (assume that the old core systems will continue chugging along and that they can be extended as the business changes); upgrade in some fashion, through middleware, integration, wraps, etc.; outsource; or replace -- presumably with a new packaged solution but possibly via in-house development.

The strategy that is most in favor these days -- at least among the analyst and the vendor community (no surprise) -- is to invest in a flexible, services- and/or rules-based packaged solution. Yet many insurance technology executives think that implementing a package can turn into a kind of back-door in-house development project once all the necessary integration and customization has been accomplished.

We laugh when we hear anecdotes about the do-nothing approach, but it's not always clear who will have the last laugh. It reminds me a bit of what went on during the Y2K conversion era -- it seemed as if there were many executives who were watching the clock, hoping they'd be gone (retired or in new jobs) before they would have to address the issue. Perhaps there are executives who believe that if they just can hold out long enough, resolving legacy issues will be someone else's problem.

That brings us to the role of the core systems (policy admin and claims) vendors. As the saying goes, they are both part of the solution and part of the problem. There clearly are a growing number of new, flexible-yet-robust (somewhat) proven solutions out there. At the same time, the long-standing household name players, recognizing that their products are in many cases the legacy systems in question, are in the process of some kind of reinvention. It's not clear yet if the end result will be (choose one cliché) too little too late, window-dressing, much ado about nothing or a perfect fit.

No wonder there's still more talk than action at most companies.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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