As the world has become more customer-centric, legacy systems
used by life/annuity insurers have grown more difficult to maintain with fewer IT resources available to perform maintenance.
Customer expectations also changed the perception of how
businesses should operate in today’s economy. Tom Benton, vice
president, research and consulting for Novarica, believes there is
more pressure for carriers to be faster with product development.
Legacy systems struggle to keep up with the digital/mobile
world, but fortunately for life insurers the market has improved
and they have the money needed
to invest in and improve core
systems. With that comes more
pressure on CIOs to help their
company navigate the software
solution market and make wise
investments, according to Benton.
Observers tend to think of
legacy systems as old, main-
frame-based systems, but Benton
points out there are legacy client/
server systems that were in place
in the 1990s and they have reached
a point where many observers
consider them legacy systems as well.
“Legacy systems are costly and difficult to maintain or make
enhancements,” he says. “Insurers need to look at more modern
Another fear from the past for many CIOs is the last time
they went through a legacy replacement project it involved a
monumental effort, explains Benton.
“It was difficult to convert old policies and in a lot of cases
they either used a TPA for closed blocks of business or somehow walled off those policies in the older system and used the
new system strictly for new business,” he says.
Life insurers have to convert data for a new system, but that
creates additional issues with customer service and a change in
how the company looks at policyholders from a customer viewpoint, not just a policy viewpoint, according to Benton.
Large life and annuity carriers see their P&C counterparts
have the option of buying standalone solutions for the core
areas and not just suites, so Benton feels these carriers want to
pick their pain-point and focus on those to unify their approach
to a particular function.
“The thought process is if we can take care of the pain-point
Time to Revisit Core Systems
Some of the major reasons life insurers have postponed the replacement of
their core legacy systems are starting to disappear.
Corner the Market
By Robert Regis Hyle
and have a unified system, we can put off the core system replacement and work on it as we go, although they eventually are
going to have to do a core system replacement,” he says.
There is pressure from the business side among life carriers
to drive more analytics. This created a data warehouse approach, which has met with mixed success, explains Benton. As
a result, technology solution providers have begun to pay more
attention to the needs of the life carriers who want analytics
embedded into the systems.
“Vendors see that as a need and are providing solutions
in that direction, or at least having it on their roadmap,” says
The vendor market is more fragmented on the life side,
points out Benton. Novarica profiled 27 policy solution vendorss for the life/annuity market and found just a handful that
are considered modern in terms of architecture and configu-rability. Some are simply legacy systems that have been updated.
It has become almost a Catch 22 situation for the vendor
market in the life/annuity space.
“The vendors don’t have many U.S. reference clients, so they
are all chasing after them to get reference clients in place,” says
Benton. “CIOs are sensitive, They want a solution, but they don’t
want to be the first or the only one on a new platform. It’s been
difficult for those vendors to make headway in the marketplace,
but that’s going to change as the market grows.”
Another technology trend is to buy a hosted, SaaS-based solu-
tion, according to Benton. Leading vendors have experience with
SaaS and there is pressure on the CIOs to follow that direction.
“It’s an ability the insurers want the vendor to have, he says.
“The technology on the modern platforms is built on solid
architectural principles. They are configurable and have add-on
capabilities. Many have created mobile interfaces. They are
The lengthy implementation periods are disappearing as
well. Novarica surveyed their research council about the metrics
based on successful implementations and on the life/annuity
side they learned many were taking less than three years. In
the past it has been considered an industry standard that they
would take five to eight years to complete a successful imple-
mentation, according to Benton.
“It is taking less time, which should take some of the fear
away for carriers,” says Benton. “If it’s been a while since you’ve
done a policy administration update, it may be time to take a
look again.” ITA