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Policy Administration

11:15 AM
Mark Cummings
Mark Cummings

5 Key Factors in Core Systems Replacement

With so many moving parts, it's critical to get the core project off on the right foot with the selection of the best-fit offering.

The selection and implementation of a new core insurance application make up a high-visibility effort that can make or break careers. Such projects tend to be long, expensive, and prone to scope creep. They involve a wide range of internal and external resources. With so many moving parts, it’s critical to get the core project off on the right foot with the selection of the best-fit offering.

All too often, the discipline driving a new core platform decision unduly influences the decision criteria. When the business side is leading the charge, functionality breadth and depth tend to rule. But when IT takes the lead, technology can often trump functionality. The best decision will result from a good balance between functionality and technology.

To make the best decision, carriers should adopt a broader perspective and consider these five factors:

Current infrastructure
Outside of identifying a preferred future technology stack, carriers should assess the long-term viability of their existing sub-systems, beyond the core systems. Modern technologies are mostly interoperable, supporting integration methods that can mitigate the potential incompatibility issues of disparate technologies. But there are still costs associated with integrating numerous systems, and being the de facto system integrator comes with risk. 

Identifying which ancillary platforms will remain and which should be replaced is key. Some core systems offer built-in capabilities that can have a significant impact on implementation costs. For example, a modern life and annuity policy administration system that includes capabilities such as agency/commission, claims, illustrations, or reinsurance can mean a significant reduction in integration points, as well as the associated risks and costs. 

Huge functional improvements can be gained by replacing one or more of these systems with inherent capabilities offered with a new platform. Additionally, the ability to retire antiquated systems in favor of an integrated solution can eliminate a significant burden for the IT group, even if done during a secondary phase of the program.

Identification of gaps
Ensuring the new core system provides critical capabilities is obviously crucial, but during the initial evaluation of potential technology partners and their respective offerings, high-level assessments of broad capabilities are best. Defining ultra-detailed requirements before selecting a preferred vendor rarely results in money well-spent. Most core systems have base capabilities built upon many years of successful implementations and best practices, eliminating the need to reinvent the wheel.

If a carrier has gone to great lengths and expense to determine how specific functions must work, it could be ignoring best practices, short-changing the value of its technology partner, and ensuring that a significant element of the project will be unnecessarily focused on reconciling the core system’s out-of-the-box capabilities. Leveraging the base capabilities of a core system can provide eye-opening functionality while minimizing extraneous development.  

Level of integration
Beyond simply allowing the new system to communicate with retained sub-systems, the extent to which common rules and processes can be shared throughout the enterprise is important. Consolidating and sharing rules can eliminate maintenance for superfluous systems.

For a program to be successful, the business and technical communities must both feel a sense of ownership. If one side feels as though its voice has been muted, it will be less likely to provide unconditional support. When both the business and technology communities have an equal say, projects are better positioned for success.

Carrier’s capabilities
When undergoing a significant initiative, such as a multi-year core modernization and legacy consolidation program, carriers should perform an internal readiness assessment. They’ll need to determine, honestly, if they possess resources with the necessary skillsets and the capacity to undertake such a daunting, long-term project. All too often, the resources critical to the proper definition of accurate requirements and the execution of test plans are the same resources providing essential training, guidance, and leadership within the current production environment. The ability of these resources to multi-task is frequently the single biggest factor in the success of the implementation.

The best decision will be made when there is a good balance between functionality and technology. The technology and business experts should closely collaborate and focus on a common goal, while also considering the additional capabilities and factors that will enable them to effectively choose and implement the next mission-critical core application.

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Mark Cummings is VP of Business Development for the North American operations of Sapiens, a global provider of software solutions for the life & pension, property & casualty, and reinsurance markets. View Full Bio

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