For Aidan McManus, SVP and CIO of New York-based Tokio Marine Management (TMM), the decision was reasonably straightforward. "We had a legacy mainframe system that we were leasing from a vendor, and that system was proving over the years to be increasingly inflexible," he relates. "It took too long and cost too much to try to keep that legacy mainframe-based system in sync with our evolving business needs."
Those limitations drove TMM ($442 million in gross written premium) to seek a nonmainframe, Web-based application that offered the desired flexibility and gave the carrier more control. "We were looking for a system that we could have initially customized by the vendor but that allowed us to maintain some level of configuration going forward, so that we didn't need to go back to the vendor each time we needed some change made to products," McManus explains.
Toward the end of 2004, TMM simultaneously began developing requirements in conjunction with its end users and surveying the marketplace for solutions. As the requirements became more refined, the pool of vendor candidates shrank from more than 100 to about a dozen finalists, according to McManus. "The Castek product Insure3 suite impressed us as being probably the most configurable product out there in the market right now," he recalls. "Castek's affiliation with i-flex solutions [which acquired Castek in 2005] gave them the implementation capacity and gave us the confidence to realize that this was a company and a product that could get the job done for us."
Considering the legacy replacement effort a "once-in-a-decade" occasion, TMM took advantage of the opportunity by embarking on a multiphased initiative that includes the Castek (Toronto) implementation, creation of an enterprise data warehouse and the implementation of an enterprisewide messaging infrastructure based on IBM (Armonk, N.Y.) MQ. "It's all going very well and on schedule," McManus reports. "We start user-acceptance testing in August. Our first use of the system will happen in November, and I'm pretty excited about our prospects."
Reflecting on his decision to move forward with newer technology, McManus acknowledges that the older mainframe-oriented systems still have their place, as they bring a certain economy of scale and reliability. "If you're running very traditional lines of business without a lot of product innovation, some of the older technology systems can serve you well," he comments. "If you're not looking for fast turnaround times and you're not concerned with the investment that might be required to bring those systems in line with a fairly complex set of business requirements, then you're better off with one of the traditional platforms."
However, McManus continues, "If your business requires you to be more nimble and you need to bring more innovative or complex products to market quickly, then it behooves you to consider bringing some configurability in-house."
The amount of configurability a carrier brings in-house -- and how -- may depend on several factors, not the least of which is the size of the company. But the state of policy administration technology is such that the way of the future is clear, in many observers' view.
"There are still carriers interested in systems bought on old technology and then wrappered, but those are growing fewer and further between," says Chad Hersh, an Austin, Texas-based senior analyst with Celent. "The longer that the modern systems continue to sell at a brisk pace, stick around and prove themselves, the more that vendors of older systems are going to have to confront that."
According to Hersh, that process is already under way. "A great example is CSC's [El Segundo, Calif.] Wealth Management Accelerator," he argues. "If it is truly not an issue to have older code bases, then why is the new Wealth Management Accelerator going to be COBOL-free within three years? Why invest all that money in getting off COBOL if COBOL is not dead?"
Hersh allows that the issue isn't so much the language as application design. Still, he insists that COBOL presents staffing and other challenges. "If you can't find people to maintain your system and it takes three times as long to build out new functionality as it does with a newer system, what good does it do you?" he poses.
And the problem isn't the mainframe, either, Hersh adds, since new systems can be run on the old hardware platforms. "The real issue is systems that are flexible, easily maintainable at a reasonable cost and that grow with the carrier without having to rely as much on the vendor," he says.
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