Need Core Systems Replacement Success? Think Small!

No Comments

To mitigate risk with large technology projects, experts suggest careful planning and on-going control of scope.  There’s an old adage that advises:  “Start small and be prepared to scope down.”  Now, some data from the US and anecdotes from Canada suggest there may be one more piece of advice for success:  “Be small, and be happy.”

We’d be interested in your comments.

Looks like size matters …

Analyst firm SMA is reporting that there has been progress in core insurance systems replacement.  Quoted in Insurance & Technology, Karen Furtado, an SMA partner, summarized progress from 2011 to 2013: “On average, 24% to 31% of companies have a modern current system in place — over a quarter of the market has modern and current solutions in place. That’s good.”

In addition, there seems to be an interesting twist to this, relating to the size of the organization.  One measure of core business systems replacement is the capability of retiring existing legacy systems.  From that point of view, it appears that smaller organizations (under $1bn in assets),  are rationalizing systems more quickly than larger counterparts.  Two thirds of personal lines carriers have only one system.  For carriers over $1bn in assets, the percentage with only one system drops 27 basis points to 40%.

But are they satisfied?

Furtado notes that the smaller organizations have a higher degree of satisfaction, noting that “struggling with the implementation actually is owned by the over $1 billion,” which includes business / technical  scope,  schedule, and budget. Moreover, according to Furtado, larger organizations have greater challenges with integration to other systems.

Small and happy in Canada …

We don’t have detailed data, but we have noted some smaller organizations which have had unique success in implementations.  Last year, CAA Insurance (Ontario) implemented the Guidewire InsuranceSuite™, which included rating, underwriting and policy administration, claims management, and billing functionality.   The really impressive part is that CAA completed all the functionality in parallel, including external integrations, in 14 months.

Let us repeat:  All Functionality … In Parallel … 14 Months.

Earlier this month, Norfolk Mutual successfully implemented the Mutual Concept Computer Group’s Insurance Business Solutions (IBS) product for enterprise back office  management.  Not that they were competing with CAA, but the project, from infrastructure set up to ‘go live’ was competed in 9 months.

We take a ‘pregnant’ pause here: Go Live … 9 months.

What’s even more impressive, the MCCG solutions has been implemented by 28 other mutual insurance companies in Canada.  Small can cooperate.

What do you think?

Smaller carriers have challenges in competing with larger insurance entities when it comes to capacity and scope.  However, it seems that they have some advantages when it some to deploying core systems packages.

We’d like your opinion.  Is it good to be small?  Give it a little thought, and drop a short note below.

Seriously, What is ‘Technology Modernization’ – and Why Should Business Managers Care?

1 Comment

Since the early days of this century, strategic planning documents have referenced ‘technology modernization.’  For example, “In order for us to achieve our strategic goal of profitable, sustainable growth, we will need to include  technology modernization initiatives in the plan.”

Now, after a decade or so of use, we are getting some different perspectives on what this actually means.  We’d be interested in your perspectives on what ‘modern technology’ means in your environment.

Attacking legacy systems with modern technology

Going into the 21st century, many (perhaps most) insurers, and some brokers, faced a huge challenge.  Keeping up with needed changes to core application systems (policy, billing, claims) took a multi-year holiday due to the urgency of fixing the year 2000 problem.

The resulting  backlog was so large, and the methods of making the changes so difficult (due to constraints of the systems) that many organizations started to look at alternatives in order to ‘modernize’ the ‘legacy’ (read: old) technology, which would, in principle, fix the existing problems and allow for easier changes going forward.

There were two general approaches:

  1. Rip and replace.  Buy or build new systems with modern technology and take out the old. This was going to be expensive, and take years to implement.
  2. Surround and supplement.  Maintain the existing systems’ core functions (policy, billing, claims) and put modern technology front end pieces in place, such as user friendly screens, separate analytic/reporting tools (often Excel spreadsheets), new print tools, etc.  Cheaper than 1, but only a band-aid really.

Many insurers committed to large projects, set up steering committees, and got to work.  An unspoken assumption was that the modern technology platforms would ensure that we could go forward with certainty that we would never have to face this again.

Never say never

Turns out that ‘modern technology’ might be a bit fuzzy around the edges. says that the term ‘modern’ encompasses a time frame from middle ages until now,  and “‘modern technology’ is widely used to refer to the continuing development and advancement of electronic instruments.”

In other words, modern technology is a moving target.  This is not bad, but it does have implications, most of which fall on the business managers to recognize and address.

Today’s legacy was yesterday’s modern

Peter Symons, from Mariner Innovations, has penned several posts in this space looking at details of modernization in today’s environment.  Symons’ contends that the modernization decision is not a yes/no question, but, rather, a determination of the approaches required for specific situations.   Symons writes, “It is important to understand that one size of Modernization does not fit all customers – one size does not even fit all systems within one customer.”

Symons  provides details on how to evaluate requirements, breaking this into three discrete steps:

  1. Assessment – what is the state of the current software, and what does it do?
  2. Strategy – how is the software going to be modernized?
  3. Transformation – the process of Modernization.

The face of modernization is changing

SMA – Strategy Meets Action recently published a perspective authored by Karen Furtado, ‘The Changing Face of Insurance’, which is being distributed by NTT Data Insurance Solutions.  Furtado notes two changes in P&C insurance that are impacting modernization journeys:

  1. The insurance industry is more complex and its sense of urgency “is much greater than it was just five or ten years ago.”
  2. “Business capabilities that were considered to be leading or even bleeding edge in the insurance industry not too long ago are now in the mainstream. Many capabilities that were once considered advanced are now table stakes for competing effectively.”

This approach has everything to do with modernizing business capabilities, and engaging technology as an enabler.   Furtado stresses that strategies and tactics must be constantly reviewed: “In order to respond to the increasing demands of a fast-changing world and the marketplace that serves it, insurers must commit to changing too, especially in the areas of the customer, distribution channels, products, and data.”

 What does ‘modernization’ mean to you?

I’d appreciate your comments.  Does ‘modernization’  have real meaning in your organization?  Is it helpful in aligning business with technology?  Is there something better to facilitate the communication and alignment?

Keep me modern, please.

Innovation/Collaboration Go Operational at #acordloma13

No Comments

If we had a dollar for every time the mantras of Innovation and Collaboration were invoked at the recent ACORDLOMA Forum in Las Vegas, we’d have easily paid for our hotel bill and several meals.  There were lots of references to innovative thinking, collaborative processes,  innovative products, collaborative  technologies,  innovative delivery mechanisms….(you get the point).  This could have been just exercise in new buzz phrases, but, fortunately,  there were examples of disciplines being applied to  assist in reaching real, quantifiable results.

We’d be interested in your thoughts.  Can innovation and collaboration be operationalized to produce desired results?

Chubb & Son Put Innovation Into Process

Case in point was the presentation by Jon Bidwell, SVP and Chief Innovation Officer at Chubb & Son on ‘social Innovation in P&C Insurance’.  Bidwell cited what he referred to as the ‘Good Idea Paradox’, which says that while rigorous, repeatable processes are at the core of most modern management practices (e.g., six-sigma, LEAN, etc.), formal processes rarely yield innovation.  Moreover, empirical research (including Bidwell’s work at Chubb) demonstrate that when asked for suggestions, the highest value contributions tend to come from the lowest volume contributors to the process.

To address this, Bidwell has introduced an ‘Innovation Platform’  at his company which facilitates cross departmental discussions of suggestions using a social media metaphor.  In addition, the platform has tool to rapidly capturing ideas and patterns of conversations.  alternatives and facilitates rigorous scoring of the results in a time delineated framework.

Bidwell provided an example of a suggestion by a field marketer for a mobile tool which was taken from idea to working application in 60 days.

In practice, the technology platform is Microsoft Sharepoint with tools that analyze users’ patterns of utilization and  content analysis.  The user interface is designed to resemble social media which provides for ease of introduction to a large percentage of the user base.

At present, this platform is contained within the Chubb organization, but Bidwell indicated there are some discussions about taking this to select business partners.

Collaboration For the Masses

Karen Furtado and Mark Breading, partners at  analyst/consulting firm Strategy Meets Action (SMA), note that collaboration is a key element in extending innovation across organizational boundaries.  More significantly, there are methods that can be used by organizations of any size to funnel collaborative methods into operational actions with two techniques:  Ideation and Crowdsourcing.

The concept of Ideation is simple.  Get front line individuals to bring an idea to the table that would improve products, services, or processes.  Each member of the group defends his or her position and at the end there is consensus developed through some ballot process. This can be done within an organization or, as Furtado and Breading noted, across organizations, e.g. carriers and agents.

The use of social technologies – such as Twitter and LinkedIn – allows this principal to go a wider group (Crowdsourcing).  In order two bring some discipline to this, SMA recommends that the results of the crowsourced ideas be vetted by organizations with a structured methodology.

What Do You Think?

Insurance depends on predictability and, by definition, innovation and collaboration encourage some unpredictable behaviour.  Are the techniques above methods to channel unpredictability into new, productive results?

Collaborate with us and share your thoughts.



Solstice 2012: The World Didn’t End; Insurance Technology Continues to Progress

No Comments

We have to confess that we waited until after the Solstice had passed this morning before we decided to set fingers to keyboard.  It seems that the doomsayers were wrong, and the 2012 solstice brings us a new beginning.

Perhaps this is a good metaphor for the world of Insurance and Technology: a few doomsayers, but continuing small victories for the optimists. seeks, through this blog, to engage you in a discussion about how technology is, and should be, used to support the business of insurance in Canada.

We started this year with our best estimation of trends in the insurance technology world.  We think we got some right, some wrong, and some we just missed. We’ll take some time over the holidays to take stock of these.

We think we see some new trends for 2013 (and beyond).  We’ll write these down as well and ask what you think.  All of this will be published after the holidays.

Right now, we just want to thank everyone who has participated in this blog.  First and foremost, we want to thank you and everyone else who drops by to spend a few minutes.  We KNOW how much media you have to choose from and are humbled by your choice of this blog for a part of your time.

We’ve had consistent growth in traffic and, more significantly, in discussion around the postings.  Some of these are comments on the blog itself but many are in other venues, especially LinkedIn groups.  Special mention here to the Canadian Insurance Broker Strategy group, moderated by Greg Purdy.

We’ve also benefited from guest contributors to the blog, including Gordon Alexander (IBM), Mark Breading (Strategy Meets Action – SMA), Karen Furtado (SMA), Bill Garvey (Eastern Shores Consulting), Catherine Kargas (MARCON), Eugene Lee (Guidewire), Greg Maciag (ACORD), and Greg Purdy (Pathway Partners).  They have shared their expertise in  articulate posts, offering an important variety of opinions and voices.

Behind the scenes, we had wonderful help from the small, but vibrant team.

We’re off now until after Chrismas.  We wish you all the best for the holidays and for 2013.

(By the way, the picture included here has no purpose except to please the Editor.  It is, of course, from the Hubble, whose keepers refer to this on their site as a ‘Holiday Snow Angel.’)

Policy Admin Systems Turn 50; But What’s Their Life Expectancy?

No Comments

The Insurance Policy Administration System (PAS) just turned 50.  Quite an accomplishment.  But, is its long-term future guaranteed?  Some recent developments and comments are suggesting that the Policy Administration System in its current, singular form might have served it purpose and that the future may belong to a more hybrid environment.  We’d really like your thoughts.

In 1962,  IBM launched the first insurance policy administration system, the Consolidated Functions Ordinary, 1962 .  Chris Doggett,  CEO of Adminovate recently penned a column in Insurance & Technology marking this anniversary.  In addition to celebrating how far we’ve come, Doggett made an interesting argument that while we’ve progressed in many ways since, we have lost some of the value of the early systems’ elegant simplicity.   He writes:

“In a noble attempt to improve the user experience, I would argue that today’s solutions have created a user interface that often decreases productivity, increases the amount of training needed, and complicates customer service interaction — hardly a good recipe for ease-of-use and process efficiency. …

“While I do not assert that we need to embrace the revival of monochromatic green screens, I must admit that there was business efficiency and an elegant simplicity to their design. Users carried out processes with a series of logical keystrokes, and system screens guided users from the beginning through to completion in a linear approach. Once these steps were learned, users could process rapidly and effectively.”

It should be remembered that there are at least 3 generations of ‘legacy’ insurance systems.  Those of the 1960s were replaced by ‘integrated packages’ in the late 1970s.  By the end of the 1980s, the ‘client-server’ model was the required model for new systems .  This structure was displaced in this century by web-based offerings which are considered ‘current’ generation.  Each of these generations brought new functionality, more complexity and, typically, higher base costs.

As technology continues to increase its rate of change, staying perpetually ‘current’ would be an organizational and financial challenge for any insurer.  Insurance & Technology’s Anthony O’Donnell recently wrote a column entitled, “Is their Still a Need for Policy Administration in Insurance?”  in which he cites several sources who suggest that the risks involved in full core replacements are motivating insurers to look at alternatives to full core system replacements.

O’Donnell quotes Karen Furtado from the analyst firm SMA, saying:  “This doesn’t mean that PAS have lost their importance or that insurers aren’t addressing capabilities associated with them. What it does mean is that the days of policy systems having to be all things to all people are becoming history.”

Components are being used in some cases to supplement PAS functionality.  These components may have other characteristics which are not found in the traditional PAS model.  Some insurance products and processes are becoming more complex, requiring completely unique systems for underwriting and servicing.

For example, the introduction of Pay-As-You-Drive automobile insurance programs based on sophisticated monitoring of vehicle and driver behaviour using Telematics, will change how automobile insurance is rated and administered.  Telematics schemes require systems external to policy systems to monitor telematics devices, aggregate data and model results.  A number of vendors active in the Telematics business are recognizing the needs for insurers and have begun introducing offerings, which include historical data, to allow insurers rapid entry into this new business segment.

As insurers begin to examine other insurance schemes based on dynamic data management (perhaps driven by social media or other ‘big-data’ sources), we may see a proliferation of point solutions emerging, which could permanently supplant portions of policy administration systems, such as. rating and data storage capabilities.

This construct is somewhat hypothetical at this point, but the vendors are not.  They see the insurance industry in the same why as IBM did in 1962:  still big and in need for automation.  The market will be judge of the future, but in the meantime, we’d like your thoughts.   Do you see factors which ultimately threaten the venerable Policy Admin System?  Leave a comment below.  And we’ll pass your birthday wished along to PAS.




Corporate Culture and Social Media

1 Comment

There is increasing evidence that use of social media has the capability to improve customer service, enhance marketing, and even streamline internal processes for insurers and agents/brokers.  So why isn’t the insurance industry beating a path to the new media?  Perhaps we have a culture clash.

Karen Furtado, partner at Strategy Meets Action (SMA). Furtado shared her comments on Social Media and Insurance at a Duck Creek’s “Channeling Energies” conference (covered in Insurance Networking News.  According to Furtado, there are endless opportunities, including customer/agent engagement, referral leads, customer service improvements and branding.

However, Furtado notes that the opportunities come with challenges.  “Insurers need to understand, based on primary goals, who will take responsibility for its development and upkeep.  Should this fall to the HR department? To Marketing? Or should IT take ownership?”  These can be challenges to the organization’s culture.” Furtado also suggests that some insurer managers may not understand, nor support,  social media use by employees on company time

Corporate culture was the subject of  a recent post on an influential marketing blog, The BuzzBin, entitled. “It’s not You, it’s the Culture.”  Commenting on leadership, the blog’s author,  Priya Ramesh noted that top-down leadership can limit uptake of social media which would benefit the organization: “The head of the organization definitely impacts the social media adaption rate. The key decision-makers need not be social media savvy but their realization and acceptance is hugely instrumental in steering the company in the right direction.”

We don’t know of any survey among leaders in the insurance community in Canada on Social Media, but a recent survey of independent agency principals in the US by IVANS, indicated found 52% of agents do not currently use Social Networking tools and further 38 percent of agents say have no plans to do so. That would suggest that there is at least a significant minority of agencies where the corporate culture is a barrier for the immediate future.

For those organizations which have a desire to move forward, SMA’s Furtado has some solid recommendations:  “The first step is to create and communicate rules of how to interact on behalf of the company,” she said. “Next, depending on what you want to accomplish, create a team that can “own” the initiative, monitor its progress and build on it, creating additional avenues for growth.”


What (or Whose) Legacy Needs Replacing?

No Comments

Tell me if you’ve heard this one before:  “This is the year of legacy system replacement in the industry.”  Ok, old news.  But we are finally getting realistic appraisals of why some legacy technologies persist, and the reasons may be more analog and carbon-based than digital and silicon-based.

Since the 1990s, pundits have been predicting the imminent demise of legacy technology.  Some even wrote eulogies.  Consider this explanation (written by the History of Computing Foundation in 2002) for why the Y2K bug was such a non-event: “most legacy systems were replaced due to the normal update cycle before the year 2000, were (sic) the millennium bug was treated as a routine check in the new systems.”

The reality is that within most organizations with any history, there are technologies that qualify as ‘legacies’ of a previous era.  The problem with legacy systems in insurance is that they are like that TV  bunny …  They keep going and going and going with little effort (which is not to say grumbling) on the part of the users or, more importantly, the users’ managers.

Robert Regis Hyle postulates in a recent article in PropertyCasualty360 that “Making changes in your core systems is often the defining moment in the career of a CIO. As much as they hate the legacy systems they inherited from their predecessors, IT leaders have to feel a grudging admiration for the dependability of those old systems.”

In other words, the CIO is facing a possibly that her/his legacy in the organization will be that of replacing a system that works with one that does not.  So is it fear and insecurity that prevents change?  Probably so, but it might also be the lack of support for risk taking that comes into play.

Karen Furtado, of SMA, Strategy Meets Action, wrote recently “SMA observes that frequently companies approach technology updates with their eye focused more on the limitations they want to free themselves from, rather than the possibilities that could transform their businesses.”  That’s fine if the business only needs incremental change.  However, if a fundamental change is required, the incremental approach might only mask, and possibly even compound the problems.

We believe Furtado’s recommendation is correct here:  “The critical link between the strategy and the technology, the definition of functional business capabilities, needs to be shaped and guided by the business strategy.”  If the strategy is to build incrementally, perhaps incremental change is sufficient.  But if an organization is looking at transformational change, then the risk/reward calculus needs to be calibrated to adequately support  the decisions on the legacies; those of the organization’s systems and those of the people making the decisions.


Blue Taste Theme created by Jabox