Growing challenges with older systems and an improving market in 2010 are leading many insurers to revisit the policy administration replacement discussion. Increasingly, insurers are buying packaged software to run their core business functions. Most organizations, however, have built in-house systems for back-office functions in the past and thus have limited experience in managing a large-scale systems implementation of packaged software.
Furthermore, most carriers have limited experience configuring (as opposed to customizing) package solutions that allow for workflow and business rules to be modified without changing the source code. As a result, many implementations are delayed and over budget. Improved vendor relationship management, packaged implementation, knowledge of how to get the most out of packaged software (including managing upgrades and new releases), and expertise in configuration best practices are needed.
In general, business leaders underestimate the criticality of modern systems to their market success, and IT leaders fail to link investments in legacy system replacement to business outcomes. Developing a business case for core system replacement requires collaboration. CIOs should work closely with business leaders to build metrics that justify and sustain operational improvement initiatives.
But insurers shouldn't try to do everything at once. Develop an application portfolio road map to determine your greatest needs for modernization. Ensure that your team has adequate implementation skills. Develop solid service-level agreements and contracts with time lines, penalties and rewards for meeting milestones. And select vendors with a proven history of implementing solutions in your line of business.