What are your
2012 plans for the
following areas?
Continue replacement
already in progress
Replace
Major Enhancements
Maintain
Minor Enhancements
Declined
Answer
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2%
If IT spend is any indication of insurers’ intentions, consider the
planned major strategic projects such as core system replacements or enhancements proof that modernization is a continuous process.
“Despite the increased prevalence of mobile, social
media and cloud, the story of insurer IT budgets
and projects for 2012 is one of continuity rather
than discontinuity,” notes Matthew Josefowicz,
partner and managing director at Novarica.
Spend is indeed up. With the exception
of large life/annuity insurers, who are expected to hold steady or decrease their
IT spend, the majority of property/casualty insurers expects to increase their IT
budgets in 2012, with average IT spending
ratios holding steady in the 2.5-percent to
5-percent range, Novarica.
The results of a survey conducted in September by Novarica of 132 members of its Technolo�y Research Council confirm that investments
in core systems will continue by design, as insurance IT
departments make good on commitments to deliver the business capabilities needed to support growth, achieve competitive
parity and improve operational effectiveness.
want ease of use, self-service and they don’t want to work on
systems that are archaic. So, we want to push a lot of this service
to the agent because at the end of the day you want to add value
to the business.”
Insurers’ business case for legacy modernization
should support incremental improvements such
as above, which can ultimately play out as hard
benefits, but also enable the strategic flexibil-
ity that will allow insurers to compete more
effectively, notes Celent.
“You need a plan that articulates what
needs to be changed, how those changes
will be measured, and the concrete steps
that will be taken to give the evolution
momentum beyond what the passive
players in the market are experiencing,”
Weber says.
In its interview of 86 insurers in May and
June, the research and consulting firm found
that the secret to long-term modernization success
lies in explicitly addressing culture, core systems platforms, and vendor relationships.
During the past five years, says Singh, Great American’s corporate culture ultimately embraced the changes necessary to
push its continuous innovation forward. “To me, we make what
the culture is, and it behooves us as leaders to educate, and find
the optimum players willing to be change agents. Now everyone
wants that change to take place,” says Singh.
As insurers continue on their respective modernization
quests, their motivation may vary widely by size and sector of
company, Josefowicz notes. Nevertheless, he predicts that supporting business intelligence and data analytics, reducing operating expenses, increasing speed to market and improving distributor ease of doing business will be top priorities.
“While there is significant planned activity in the areas of
mobile, tablets, social media and cloud, most of these are ancillary to the major strategic projects that consume IT budgets and
management bandwidth at insurers,” says Josefowicz.
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Source: Novarica
APPROACHES IN PLAY
While some carriers are focused on core system replacement,
others are still modernizing existing systems with a “
wrap/ex-tend” approach, which assumes some re-usable legacy code that
is wrapped and exposed to an enterprise service bus.
“Expectations of surround/contain vs. modern system re-
placement point to certain benefit areas, which helps explain
why both approaches are still very much in play,” says Craig We-
ber, SVP, Insurance Group at Celent, noting that the difficulties
in hiring qualified IT staff with the necessary skills to support
legacy platforms are very real. “Most insurers expect this issue
to get worse.”
The well publicized continued modernization efforts of Phila-
delphia Insurance, Mutual of Omaha, Harleysville, FBL Finan-
cial, Jewelers Mutual, Travelers, Vermont Mutual and XL Insur-
ance Group, to name a few, point to a strate�y that’s been in
play for the past five years at Great American Insurance. The
subsidiary of American Financial Group Inc. has completed a to-
tal replacement of the property/casualty insurer’s core systems,
with policy administration taking the lead.
Great American continues to live out its long-term goal—to
create a technolo�y backbone that enables continuous innovation in the back office and enable the fruits of its modernization
efforts to play forward to the rest of the enterprise and channel.
Great American is not alone. Novarica reports that more than
one-third of respondents report being either in the middle of a
core policy administration replacement or are planning one for
2012. Claims and billing systems have similar levels of planned activity followed closely by agent portal and business intelligence.
“Like everyone, agents are looking for ways to be more efficient,” says Piyush Singh, SVP and CIO at Great American. “They
VENDORS ALSO IN CONTINUOUS MODE
Core technolo�y solution providers such as CSC, which recently inked a deal with Microsoft to extend Integral, one of CSC’s
global insurance administration software suites, to Microsoft
Windows Server 2008 R2 and SQL Server 2008 R2, are making
it easier for insurers to update their age-old systems. Like many
vendors, CSC’s goal is to appeal to a broader set of insurers on a
continuous modernization path.
Having just completed a mobile initiative for its commercial
transportation business unit that includes a free iPhone app that
lets truckers submit claims, check the latest trucking news, find
a nearby truckstop, locate repair shops and make payments,
Great American’s Singh admits that his company will remain in
continuous modernization mode, planning and revisiting the
company’s IT strate�y every six to nine months. “We will stay on
the continuous innovation path, because there is no end-game
to modernization,” Singh says. —Pat Speer
