SOA Rejuvenates Aging Mainframes
Insurance Networking News, May 2007
However, as carriers begin to explore ways to open up these systems-and make applications and data available to end-users across the enterprise-they are finding themselves at a crossroads, faced with the dilemma of whether to modernize or to replace core policy administration systems.
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The promise of SOA, many in the industry agree, is that carriers can use it to break down systems into standardized, interchangeable components or services that can be assembled or dissembled as business processes demand.
"I suspect that, like The Hartford, there are many companies that have aging, legacy platforms," says Rich Maynard, property and casualty chief architect for The Hartford. "They want to be able to help their businesses improve and gain more market share. Most legacy systems aren't really in the best spot to take advantage of service-oriented architectures."
The rush is on, then, to upgrade, improve or replace many of the policy administration systems that form the core of carriers' internal operations. The policy administration system market in the United States alone has grown from $150 million to about $375 million over the past four years, mainly among property and casualty carriers, says Boston-based Celent LLC, which has been tracking the market nearly 14 years.
During that time the landscape has changed significantly for P&C policy administration systems, says Chad Hersh, Celent analyst and author of the company's biannual study.
"First year TCO has dropped significantly in lockstep with a major influx of newer technologies, such as .NET, Java, SOA, Web services and ACORD XML," Hersh says. "When we started this report in 2003, people were barely thinking of new administration systems-the market was dormant. The change has been unbelievable."
The interest in policy administration systems is driven by pent-up demand, combined with industry initiatives around SOA, says Eddie Jones, senior vice president, marketing and product management, in Fiserv Insurance Solutions, a unit of Brookfield, Wis.-based Fiserv Inc.
"You have a profitable industry sitting on top of systems that are 30 to 40 years old," says Jones, "with the pressures of the need for speed, the need for flexibility, the need to address different audiences and the need to figure out how older systems can work together."
A survey of 100 global carriers by Bermuda-based Accenture also points to a trend toward centralizing policy administration systems. Among North American companies, 24% have already streamlined or consolidated their policy administration systems, and 38% have such efforts under way.
Globally, respondents that have consolidated policy administration systems on average reported a 19% reduction in operating costs, a 25% reduction in IT costs and a 35% increase in the speed at which they introduce products, Accenture says.
However, the survey also indicates many carriers have their work cut out for them-more than a third of the North American carriers, 34%, say their companies use 11 or more policy administration product platforms.
INTEGRATING SILOS
With so many types of policy administration platforms-not to mention other applications that tie into those systems-many carriers are turning to SOA, which supports common standards across the enterprise, to help deliver integration.
A survey by Cambridge, Mass.-based Forrester Research Inc. for Progress Software Corp., Bedford, Mass., shows that at least six of 10 insurance and financial services companies are pursuing such strategies (see "Survey: Internal Integration Main Goal Of SOA Agendas," page 38).
The challenge of integration is acute in the insurance sector because so many lines of business have been run in separate silos for years, says Roger Paehr, product manager of policy administration systems for EDS SolCorp.
"SOA breaks down walls and allows systems to work together. Print, image, workflow-you name it," says Paehr. "SOA allows you those paths outside but also allows you to bridge internally."
The policy administration system "is really the core of the whole puzzle," agrees Mic Maner, senior vice president for life information technology at Fiserv. "In addition to workflow, there are agent interfaces, competitive rating systems, customer portals, medical information bureau interfaces, as well as claims systems and billing."
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