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Conversions: No Longer the Black Hole for Resources

Therese Rutkowski October 2006

Say the word "conversion" in a roomful of insurance technology professionals, and you'll likely hear a cacophony of moans, groans and expletives.

That's because converting policy data from one administration system to another is tedious, stressful, time-consuming and costly.

A conversion, if not handled carefully, can become a veritable black hole for resources, says Jim McAdaragh, assistant vice president, business systems, at Sammons Financial Group (SFF).

Despite the pain, however, sometimes conversions are necessary-as they were for Sammons Financial Group (SFG) and AEGON Financial Partners (AFP).

When they are necessary, it is possible to conduct them in an efficient and consistent manner, says McAdaragh.

"Conversions are difficult, and they can be tedious and stressful. But if they are managed correctly and they target blocks of policies that have real business benefit, they make sense to do," he says.

SFG reached the point with its older legacy systems that they required huge upgrades or retrofits if the company were to implement some of the modern products its actuaries were developing, such as indexed universal life products, notes McAdaragh. "So it didn't make sense to put that kind of investment into those systems that were no longer actively supported by the vendor."

Instead, SFG-a Dallas-based holding company for the Midland National Life Insurance Co., the North American Co. for Life and Health, Sammons Annuity Group and Sammons Securities-decided to move approximately one million life policies from three older administration systems over to CyberLife, a component-based, open standards platform for real-time administration of traditional and nontraditional life products and annuities developed by Computer Sciences Corp. (CSC), El Segundo, Calif.

Similarly, the Netherlands-based AFP hit a wall with its legacy administration systems. Created in 2002 by consolidating four previously autonomous divisions- Transamerica Insurance, Investments Group; Western Reserve Life; Life Investors; and the World Financial Group-AFP had inherited nine life administration systems that serviced 3.1 million policies.

"All these groups came to AEGON through acquisition," says J.D. Johnson, CIO of AFP. "When they were acquired, they were left alone as independent divisions. But when you're operating as an autonomous division, there's only so much you can do to lower your expenses."

To cut costs and eliminate redundancy, AFP consolidated its multiple legacy systems into common back-office technologies, including CSC's CyberLife for its life policies, while still enabling the sales and marketing groups to operate independently.

INCREMENTAL APPROACH

A key to both companies' conversion strategies: They are taking an incremental approach-converting blocks of policies in manageable chunks on an ongoing basis determined by the business needs.

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