Thu, 31 May 2007 14:59:51 -0500
Caveat Emptor
An insurance technology executive who learned the hard way (and who asked to remain anonymous) encourages the buyer to beware. "If you're truly looking for something to replace your legacy system, don't buy something with lipstick and be sorry," he counsels. "There are a number of products marketed as new that really aren't. I would suggest you dig into the architectural derivation of the product itself. I would question anything older than five years, and anything over 10 I would reject out of hand."
If a vendor is truly using new technology, it should be able to demonstrate an insurer's product running on its system as part of the sales process, asserts Kevin Walma, CIO, AdminServer (Chester, Pa.). "Since one of the tests of new technology is flexibility, buyers should put the vendor to the test and require a proof of concept or test drive," he says.
Buyers also can look to vendors to see through the hype and get to the nuts and bolts of a system, Walma advises. "Another must-do is to speak to other insurers who have implemented the vendor's technology," he adds. "The real-world implementations tell the most complete story -- both the good and the bad."
Still, despite the cautions required in evaluating a new technology system, Walma argues that there's increasingly little point in sticking with legacy systems. "Spending millions of dollars to replicate the current environment or retool/reface what they already have in place is not progress, but rather doing the same thing over and over again while expecting different results," he insists.
While Main Street America Group CIO Joel Gelb says it's understandable that a carrier might want to build a front end on its own legacy system, he finds it hard to explain why an insurer would look to vendor technology to do that. "I think it is likely to just lend complexity that the vendor might be able to mask from you, but it's ultimately going to generate problems and lead you more quickly down the road of having to replace the system," he says.
Gelb muses that it often has been the case that the selection of newer systems has involved a trade-off between technology and functionality -- meaning that to get the benefits of the former one has to be willing to get less of the latter. The Main Street America Group's decision, Gelb says, was influenced by the impression that the Insurity solution provides both. "It has just been redone in pure .NET, so it appears to have no legacy components to it," he says. "But at the same time, it's the product of an experienced vendor and is a very strong system with abundant functionality."
The new technology will enable Main Street America to meet growing pressure to process more products and services through the system quickly and easily, Gelb believes. "It will also enable us to perform what I think will be increasingly complex transactions in real time -- which is the very thing that I think the .NET framework tries to speak to, where we will need to get information from various external sources to execute transactions successfully in real time."
Appleton, Wis.-based P&C carrier SECURA Insurance (2005 direct written premium of $319 million) shared Main Street America's desire to have a commercial lines system that would meet the needs associated with projected growth, according to Ernie Pearson, director, systems development. The existing system, which had been in place for about 11 years, suffered from what Pearson calls "internal inefficiencies" related to complex processing work-arounds dealing with limitations, such as the number of states that could be attached to a given workers' comp policy. Similar to Main Street America, SECURA also had to reconcile two rating systems -- one within a proprietary quick-quote system for agents, and the other a back-end rating and issuance system -- through reentry of data, which resulted in increased expenses and frequent discrepancies.
In addition to the inefficiencies related to these limitations was the challenge of providing ease of use on a competitive level, according to Pearson. "We needed a system that could enable us at a certain time to extend broader transaction-processing capabilities to our independent agents," he explains.
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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