- Where Insurance & Technology Meet

Core Modernization: Standard vs Bespoke Implementations

A large proportion of insurers are either planning or executing replacement projects for core business systems. The majority of these center around the soon-to-be “new” policy administration system (PAS), targeting the needs of internal users.

After all, underwriting and policy issuance are really the core activities of insurance companies, aren’t they?  And internal efficiencies are key drivers for the projects.

It seems that there is room for some contrarian views on the subject, and perhaps a business case to to be made for straying from the obvious path.  We’re featuring discussions on core systems replacement at the Technology Conference 2014, and we’d like your thoughts on this in advance.

Starting with Claims

Donegal Insurance Group, a Pennsylvania-based multi-line P&C carrier, decided to put policy administration last on its list of functions in its replacement strategy.  As reported in Insurance & Technology, Donegal’s CIO Sanjey Pandey puts the decision down to risk management and customer focus. “We decided to take a phased approach to legacy to mitigate the risk to the company, and at the same time we’re focusing on stuff that impacts a customer,” Pandev said.

Denegal began its modernization journey 7 years ago with claims, implementing ClaimsCentre from Guidewire.  Success there gave the company confidence and a view of the power of modern technology to access data.  It has followed up with a rating engine from Insbridge, forms production from HP Exstream, and a recently announced engagement with Guidewire for BillingCentre.  Policy Admin is still on the horizon.

The Broker’s Perspective

PWC’s Imran Ilyas believes that one group missing from the table in core systems replacement discussions is the independent distributor community.  Writing in Insurance Network News’ Expert Forum, Ilyas says:

A key component of many policy administration system transformations is to enable agents to self-serve through online quoting tools, reporting and real-time processing. While carriers view this as a positive change, independent agents and their support staff may not.

Ilyas maps out strategies which include engagement, communication, organizational alignment, training, and on-going support.  While this may look like additional drain on resources, Ilyas contends that business success is at stake:

Leading carriers understand that each interaction with an independent agent is both a test and an opportunity and strive to enhance their agent relationships throughout the transformation process.

The Contrarian View

Ram Sundaram, Principal at insurance consultancy X by 2 Inc., believes that following the standard playbook – big, multi-year, resource-intensive projects – for core systems modernization can be a dangerous strategy for insurers, especially those that have held back on technology investments in the past.

In a recent white paper – First Do The Opposite – Sundaram writes:

When technological iterations are undertaken with such infrequency and reticence, the pressure to get them right becomes enormous. Instead of portioning out risk among several, frequent updates, we bundle it all together in one huge, complex ordeal—made worse by attempting to progress through two, three, or sometimes four generations of technology in one fell swoop.

Sundaram discusses 5 contrarian principles:

  • Less is More
  • Generalize, Don’t Specialize
  • Throw Out the Cookbook
  • Distrust and Verify
  • Hit the Ground Thinking

Sundaram believes that each organization must clearly define a unique vision supported by clear (and short) business and technical architectures that meet the specific goals of the organization.  By definition, this will run contrary to the common wisdom.

Sundaram summarizes his argument thus:

…it may yet be a hard-fought struggle for us all. But by following these principles, anyone with enough boldness and courage can minimize the time, cost, and uncertainty of a major transformation initiative

What do you think?

There is much to be said for following a well-worn path when planning and implementing big, long term projects.  But no two organizations have identical needs, so there needs to be a balance.

What do you think is the right balance?  Are there steps that should be followed.  How do you think Canadian insurers are doing with these?

Let us know … And join us at #ICTC2014, where the conversation about core systems transformation will continue.