Gauging the Core Systems Modernization Opportunity at ACORD LOMA

Distinguishing between rhetoric and reality is a constant challenge when meeting with vendors and others at a trade show such as the ACORD LOMA Systems Forum, held in San Diego earlier this week. But even the rhetoric shows how the game is changing in the slowly moving world of insurance systems. Enthusiasm was palpable among vendors - and those of their clients that I was able to speak to – about changing opportunities resulting newer-technology systems having proven themselves through multiplying implementations, coupled (if you'll excuse the word) with the demonstrated maturity of integration technologies, development methodologies and project governance.

FAST, an Edison, N.J.-based vendor founded by former NaviSys executives, announced at the show that Austin, Texas-based National Western Life (NWL) had gone live with the first component created using the FAST 8x framework. Mike Hydanus, the carrier's CIO explained to me that FAST has created a series of components at National Western Life that will be the basis of the vendor's offering.

The Fast 8x development platform enabled NWL to essentially build a complete bespoke system like that has all the benefits with none of the drawbacks of the monolithic core systems of the past, in Hydanus's view. Building all at once avoids what he calls a kind of "technical whackamole where you build one thing good but it has consequences for the other things that are not to that standard." It also avoids the drawbacks inherent to the classic dichotomy: traditional systems are functionally rich but inflexible; newer systems are flexible but functionally sparse.

Given the number of newer systems that have been deployed to date, it's fair to ask whether that dichotomy still holds. I put the question to Brian Desmond, VP, Marketing, Guidewire. "No modern vendor has all the bells and whistles as the older vendors but it's only a matter of time," he commented.

Guidewire, having long established its credibility as a claims system vendor with ClaimCenter is now advocating intensely for its PolicyCenter policy administration system. The vendor commissioned a study with the Ward Group which found various areas of inefficiencies in carriers' underwriting processes that suggest an opportunity presented by technology.

"The study results highlight the role of technology in helping insurers attain their underwriting objectives," Neil Betteridge, director, Guidewire Software said in a published statement. "The right underwriting and policy administration system can make all the difference in equipping an insurer to streamline operations and profitably execute their underwriting strategies. This enables underwriters to focus on improving risk analysis and pricing accuracy, supported by better access to customer data, and frees them to interact more with producers and customers."

The success of the newer policy admin systems, in both the P&C and life & annuities segments, has largely been exemplified by implementations in medium-sized companies. At the ACORD LOMA Systems Forum, Oracle Insurance was making the case of modern policy admin for even the largest of companies. The vendor recently completed a benchmark text of the Oracle Insurance Policy Administration for Life and Annuity Version 9.3, running on Oracle Exadata Database Machine X2-2 and Sun SPARC Enterprise M9000 application servers. The benchmark included 100 million policies and more than 2,000 concurrent users.

The success of the test showed that tier-one companies can lower the risk of legacy replacement while lower the cost of core systems, argued Srini Venkatasantham, VP, product strategy, Oracle Insurance. "This showed that we can replace 'Big Iron' with scalable rack technologies and change the mindset [at the largest insurers] that Big Iron is the only way," Srini said.

Well, as one smart Alec attending the conference said about the benchmarking test, "Your mileage may vary," though he concedes that Oracle has demonstrated something beyond the mere theoretical potential of modern policy admin systems to scale.

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