Insurance CIOs Debate Policy Admin Success Factors at I&T Executive Summit

Insurance executives struggled with the questions of technology architecture, business/technology alignment and the challenges of emerging technology during a roundtable discussion entitled "Policy Administration System Transformation Success Factors, on the morning of Tuesday, Nov. 8, during Insurance & Technology's Executive Summit at The Boulders Resort and Spa, Carefree, Ariz.

A show of hands from the assembly of roughly 20 insurance technology executives, intermingled with vendor representatives, demonstrated an overwhelming opinion that buying is better than building for most aspects of policy administration system modernization. Executives debated the relative merits of implementing single-vendor suites as opposed to best-of-breed approaches to core functionality, but all agreed that the age of rules-based, configurable systems had arrived.

However, carriers implementing modern policy administration systems must face the problem of reviewing and transferring rules from legacy systems, the assembled executives agreed. Driving business rules should be a business-led initiative with IT as a partner, and rule mining should be accompanied by verification of rules and reconciliation of incompatible and non-compliant rules embedded in the legacy system, it was agreed.

Some suggested "success factors" were to:

- Minimize customization, and to keep the upgrade path easy and flexible;

- Emphasize the importance of architecture, focusing on customer, then product, then policy;

- Embed IT professionals in the business to aid in the development of requirements and to keep long-term initiatives aligned to business objectives, within technology and resource constraints;

- Ask "What would a start-up company do?" while bearing in mind legacy "baggage," in order to avoid simply automating legacy business processes and perpetuating suboptimal technology approaches.

Controversy arose on the question of what should be the system of record. Should insurers continue to think about policy administration systems as the heart of their technology environment, or should a needed reorientation to customer-centricity make policy administration peripheral?

"The policy administration system is where the transactions happen," commented Michael D'Ippolito, associate VP, application engineering services, Nationwide (Columbus, Ohio).

"Some companies use the client system as the system of record," countered Paul McDonnell, a partner with PricewaterhouseCoopers (PwC, New York).

Insurance carriers are starting to embrace a technology architecture that puts policy processing systems around a central hub, offered Ravi Koka, a Pittsburgh-based partner with Polaris Software Labs. "'Federation, not integration' is the new mantra," he said.

It is vital to get business buy-in to initiatives, and continually re-engage to hold them to their commitments, observed John Campbell, senior VP and CIO of American Modern Insurance Co. (Amelia, Ohio).

Campbell also argued that insurance CIOs face a difficult challenge in making long-term decisions in the face of technology change. "Five years from now the technology landscape could look very different," he said.

Several participants in the round up agreed that front-end, customer- and agent-facing technology was changing very rapidly, but that core processing technology was slow to evolve.

"Technology hasn't changed," asserted PwC's McDonnell.

Paraphrasing Nicholas Carr's notorious dictum that "technology doesn't matter," Polaris' Koka offered that "Technology doesn't matter, architecture matters."

McDonnell replied that technology does matter as the enabler, but was irrelevant on the level of particulars. "What matters ultimately is your [insurance] product, and that has nothing to do with technology," he elaborated. "The P&C industry is not a static environment, it's constantly changing, with opportunities for new products, new risk niches. Unfortunately, few companies want to do the necessary work to adequately analyze those aspects of their business rather than dismiss the challenge as a technology problem."

Jon Griggs, VP, IT, Harleysville Insurance (Harleysville, Pa.) echoed McDonnell's sentiments, noting that, "We have to acknowledge what stays relevant as the enabling technology changes: products, price and service."

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