Legacy Systems: Is the Reaper Near?
Insurance Networking News, December 1, 2008
In 2007, Capitol Indemnity Corp. (CIC) began to prepare to enter a new business-commercial automobile insurance-and expand its worker's compensation business. A national P&C firm that writes business on both a standard line and specialty lines basis, admitted and non-admitted, CIC distributes products through an extensive network of independent agents, general agents, brokers and program managers. CIC is not only a complex organization, but also requires the infrastructure to support a sudden move by its parent company, Alleghany Corp., which is constantly on the prowl for merger and acquisition targets, says John Black, director of staff services for the carrier.
After taking a long, hard look at its legacy infrastructure, the Middleton, Wis.-based firm decided it had to simplify its internal structure so it could be more flexible and fleet-footed. Following an analysis of some 99 different software vendors, it selected the Wynsure platform last January from the Eagan, Minn.-based technology provider, Wyde Corp. Since then, it has been full-steam ahead. By March, CIC had already implemented a new producer management system and customer relationship management system. It expects to have brought up a whole new claims system by the end of November, and all of its remaining lines by early 2009. "Some analysts have told us 'you are crazy: you will never get it done,'" says Black. "But the marketplace has changed, and there really are rapid development methodologies now available. You can do some pretty big IT projects much more quickly today than you could five or 10 years ago."
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Bogged down by legions of legacy hardware and software systems, many insurers are grappling with whether to embrace new technology or to cling to time-tested systems. While some carriers that have made full-scale legacy replacements are enjoying greater functionality, faster service and expanded online services, the jury is out as to how scalable and cost-effective such solutions are. Further, daunted by the cost of shelving their mainframes and legacy systems, and weary of resistance from both top business and IT officers to make a dramatic cultural and technological shift, many insurers choose instead to extend systems that have proven, over the years, their ability to expand with business goals.
THE CASE FOR CHANGE
CIC already has reaped rich benefits from its transformation. Wynsure's object-oriented framework has given the carrier newfound flexibility. Due to the highly configurable system, the carrier is reducing its cost of ownership because its business officers-rather than contracted developers-can maintain it. This also has helped it to rapidly conform to industry standards and regulations, as it moves to further protect social security numbers, credit scores and other confidential information. "We are beset with a good deal of regulatory requirements and changing regulations, and the ability to modify the system quickly is a godsend," says Black, noting that CIC followed ACORD standards throughout the design of the application.
Further, the company is better positioned to offer services online, and expects to take new products to market in only 30 to 60 days, down from three to six months, he says. Now, CIC is positioned to "play offense," aggressively launching new products or entering new segments, rather than reacting to business realities.
Driven by the demand to better serve customers, other carriers also are saying goodbye to those legacy systems. Three years ago, Allstate Insurance Co. began replacing its legacy claims infrastructure in a strategy termed "Next Generation Claims Systems" in order to be more responsive to customer and claims adjuster needs. The Northbrook, Ill.-based carrier finished deploying its property lines onto the new claims system early last year, and expects to have the majority of its other business lines, such as automobile and casualty, completed by year's end.
Relying primarily on an in-house, custom-development approach, the company integrated many disparate applications, and now has a single Web-based system for all claims work, giving adjusters access to everything they need anywhere via a mere Internet browser. Consequently, they can get a payment out in the mail immediately, and better serve their customers. "Many legacy rules are geared toward some of the internals of the company, as opposed to the way that you want to handle the customer," explains Mike Jackowski, VP of claim technology services for Allstate.
While modernizing, Allstate is leveraging the assets it has so it can drive new business processes without having to reinvent the wheel. Like other carriers, Allstate has embraced service-oriented architecture (SOA), and reuses the capabilities and services already built within its claims system, enabling it to bring solutions to market with much greater speed. (SOA's popularity has soared among carriers, largely triggered by legacy extension, though results in terms of goals and ROI are mixed at best, says David Inbar, director of marketing and international alliances for integration products of Pervasive Software Inc., a technology provider based in Austin, Texas.)
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