Professors' Points

Policy Systems: Crumbling Under Their Own Weight

Frank Heaps
Insurance Experts' Forum, March 25, 2011

Many insurance carriers are in an interesting position these days. They have aging solutions running on outdated platforms managed by a workforce nearing retirement. Many carriers, including some of the largest in the country, have solutions built and delivered decades ago by the very people that are still supporting them. These systems have been tactically enhanced over the years to attempt to deliver on the needs of the business community. Newer business requirements, such as an elegant user interface or Web enablement, require surround strategies to emulate the capabilities of modern systems.

Often the policy enterprise is a collection of poorly interfaced systems. Many of these current systems were built and delivered to support a regional business for a few lines. As the carriers grew, the scope of the system was gradually expanded for new states and new lines with other systems brought into the fold from acquisitions. Now, the regional carriers that grew to become national carriers have a different challenge encompassing a broader book of business than when they implemented their last policy processing system. Replacing a multijurisdictional, personal lines, commercial lines, and workers’ compensation line solution is a much larger mission than a rollout of personal lines in a few states,.

An obvious solution is for system replacement and consolidation. Many carriers have investigated this option to bring together all their business onto one platform for all lines and all states, but stop short of actually starting a replacement project. The reason for this that I hear most is that the scope and cost of a complete replacement is too daunting to undertake and/or the time to rollout is too long.

There is no easy answer but the requirement to upgrade is inevitable. Carriers need to carefully consider:

1. The challenge they face of maintaining aging systems

2. Their ability to recruit and retain younger talent to support these systems

3. The benefits they would receive from a single, all-lines, all-states solution

A replacement project can take years to do and cost millions. Put into perspective: A three-year project for a replacement system that will be the enterprise system for the next 20 to 30 years is worth the effort.

Carriers need to review the details of a system replacement project and understand that there will be challenges ahead, but the effort is worth the reward in the end. Work carefully to develop a realistic implementation, training and rollout plan, and execute with ruthless precision.

In the end, a replacement project leads to lower IT costs, improved efficiency and higher customer satisfaction/retention.

Frank Heaps is the managing director for Innovation in Insurance (i3), and is an adjunct professor of insurance at the Moore School of Business, University of South Carolina.

Readers are encouraged to respond to Frank using the “Add Your Comments” box below. 

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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