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SOA Rejuvenates Aging Mainframes

Joe McKendrick May 2007

For many carriers, policy administration systems are the ultimate "legacy applications." Many were custom-built years ago by in-house development teams and still run on mainframe systems with "green-screen" terminal interfaces.

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.

Then, there's the middle road taken by The Hartford Insurance Cos., which has headquarters in Hartford, Conn. The company is pursuing simultaneous modernization and replacement strategies to upgrade mainframe-based policy administration systems, some up to four decades old, with newer applications that support SOA (service-oriented architecture).

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."

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