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Policy Administration

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Policy Admin System Replacement: Insurers Shift Focus From Systems to Functionalities

The age of monolithic policy admin systems may be over as carriers recognize that capabilities, not systems, create a modern, competitive insurance organization.

Interboro Insurance Co.'s policy administration replacement initiative was in key respects a classic case. The Mineola, N.Y.-based P&C carrier needed to support a strategic change of course but was burdened by inflexible and costly legacy systems.The age of monolithic policy admin systems may be over as carriers recognize that capabilities, not systems, create a modern, competitive insurance organization.

Interboro's ($22 million in 2007 written premium) situation was more extreme than most, in that the company had been placed in rehabilitation from April 2004 to February 2007. During that period the company's premium shrank because it was prohibited from writing new business. But its ability to grow once rehabilitated was constrained by a sclerotic late-'90s-vintage auto policy admin system that the vendor would cease to support in March 2008 and an even older homeowners' line platform, according to David Nichols, president and CEO.

"Given the history of the company -- what we had gone through, the nature of the systems in place and the relationship with the vendor -- we really had no choice but to implement a new system," Nichols says.

As soon as the carrier emerged from rehab, it sought the help of Austin, Texas-based CastleBay Consulting to find an appropriate policy administration system to replace its existing ones. Interboro selected a system from STG (now Edison, N.J.-based MajescoMastek). The carrier began implementing the system in August 2007, and by March 2008 it was live with basic functionality for auto, followed by homeowners' in July 2008.

While the carrier has yet to launch the system's Web-based front end, it is on track to achieve its objectives, according to Nichols. "Our goal was to implement the system for something less than $1 million within a 12-month timeframe, and I believe we will have achieved that," he says.

While Interboro sees the platform's enhancement as an ongoing project, the current system has been favorably received by agents and internal users alike, and its cost profile marks a significant improvement on the carrier's legacy systems, according to Ralph Vagnoni, CastleBay's lead consultant for the Interboro engagement. The carrier projects premium growth of about 25 percent in 2008.

Given Interboro's predicament, policy admin replacement was the right solution. But that is the case for a rapidly diminishing number of companies, whatever their troubles. It's not that companies don't need to modernize -- of course they do. Rather, given the state of technology, wholesale replacement of systems is unlikely to be cost-effective and may be the wrong concept altogether.

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

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