The call to modernize core insurance systems has become such a constant trope that one might think it hardly needs to be repeated anymore. And yet, recent events show that this need has actually intensified: for example, the service demands of distributors and policyholders have increased dramatically as the result of an explosion in popular adoption of handheld devices and the anytime/anywhere service they imply.Carriers that have successfully undertaken modernization initiatives are in a position to begin pulling away from their laggardly competitors; not only are the more modern companies capable of providing service, but they are leveraging greater data access and integration for analytical purposes, in areas such as marketing, profitability analysis, claims/loss control, risk management and decision-support more generally. Laggards not only can't compete in the eyes of customers, but they are burdened with expensive maintenance and dead-end systems that only a limited number of aging professionals can operate.
There is room for optimism, however, because the transition to newer technology has become less risky, as we reported in the recent policy administration-themed debut Digital Issue of Insurance & Technology. Newer rules-based technologies are more tested, the organizational challenges of using configurable system are well documented at this stage, and vendors have much more experience with implementation.
However, capital investment costs and policy migration issues still inhibit full modernization efforts at many if not most carriers, as Billy McCarter, MajescoMastek's senior vice president for distribution, emphasized in a recent conversation. "Replacing legacy systems should be a top priority for all carriers, as we experience a generation 'change-over' and see those with the knowledge to maintain existing systems retire," he says.
Fortunately, newer technologies have provided increasingly effective means to extend the life of existing systems. For example, MajescoMastek has utilized service-oriented architecture (SOA) to build its service bridge offering, which unifies data from policy admin systems to branch office systems, new business systems and practically any other systems. "This can serve as a medium-term and lower-cost solution to increase the life of the legacy systems, while providing clients the ability to make queries faster and more efficiently," McCarter asserts. "While a complete legacy modernization is ideal, it does not always make sense. For this reason leveraging the latest advances in technology, such a service bridge, can be a great way to extend the life of your systems while remaining competitive in this tough market."
A similar approach has been taken by FirstBest. In addressing the limitations of legacy policy administration systems, the adoption of SOA has gone from being a "nice-to-have" to a "must have," according to Julian Pelenur, CTO, FirstBest. "What we've seen is a systematic transition to componentize policy administration systems through service interfaces and make available the core functions to other applications," he comments. "But before carriers can add new features they need to fundamentally rearchitect because the market is asking for the ability to invoke these functions remotely."
In order to provide internal and external users with a transparent connection to legacy systems to provide novel functionality, FirstBest builds front ends to legacy systems with its FirstBest UMS solution. Pelenur cites an implementation at DeRidder, La.-based Amerisafe.
"Amerisafe had a policy admin system that was originally purchased from a vendor but evolved into an in-house system," Pelenur relates. "The carrier invested a great deal of time and money customizing 'to the nines' because of their specialized way of doing business. It worked well but eventually reached the end of its useful life. Amerisafe's strategy is to build replacement pieces, one at a time."
The components of the system that are not replaced immediately are bridged as a temporary measure and wrapped with a Web service. "This is perhaps less than elegant, but it is a step that lets them put in a new front end and replace pieces one-by-one without disrupting users," Pelenur says. "It is a gradual, measured strategy that addresses first the most pressing needs - in this case, for a front end that brought features that they couldn't get from the old technology, such as collaboration, workflow and business rules."Newer technologies have provided increasingly effective means to extend the life of existing systems. For example, MajescoMastek has utilized service-oriented architecture (SOA) to build its service bridge offering, which unifies data from policy admin systems to branch office systems, new business systems and practically any other systems.
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