portal,” says Petersmark.
One thing that eventually needs to
be addressed by insurers and technology
providers is core systems are still desktop
“That’s not a bad thing necessarily,”
he says. “You are not going to use the
UI conveniently on your smartphone.
Newer core systems are making it much
easier for the integration piece, but it’s
not like they are coming out of the box
with an app that you can hand off to
Petersmark believes the newer
systems are making it easier to have a
seamless and native relationship between
the core system and the company’s web-
site. They’ve taken mobility where a lot
of customers are still getting the mobile
experience: the website.
“The big insurers have downloadable
apps, but they are not terribly rich in
what you can do,” he says.
One issue that companies using a best-of-breed approach have to face is getting
everything online without the confusion
that comes from dealing with four different contractors, explains Fortin.
“What we ended up doing is hiring
a systems integrator to serve as the
program manager,” he says. “They are
doing a fair amount of the configuration
work and they are the prime contractor
so when we have components that are
being worked on by a different company,
they are working under the prime con-
tractor. From my perspective I’m work-
ing with one vendor that is controlling
the project. So if something is wrong I go
to one person. I’ve been down the other
road before and know it doesn’t work.”
Millers Mutual began implementation
last fall and Fortin hopes to have the bulk of
it in place this year with one line of business.
“I suspect it will be two years before
it’s all rolled out and all our products are
converted,” he says. “We are doing a manual
conversion for the policies because we want
the additional information about that policy.
The old system, where, for example, there
may have been 10 items that factor the poli-
cy we might want, say, 30 in the new system
so we can do the granular analytics.”
Furtado sees well over 90 percent of
insurer implementations now following
the incremental route.
“I see all different ways of incremental approaches—agile development, hybrid or modified agile,” she
says. “Carriers are starting to think
through how to manage the risk and
protect the implementation. Is it by a
line of business? Is it by the distribution channel? It’s all around what the
issue is at that carrier that can dictate
the increments. It looks different to
every insurer. It’s all about managing
your risk.” ITA
4. Continuous improvement (regular incremental
The first strategy, replacing with a COTS package, has
become an increasingly popular option with all but
the largest insurers—as vendors have made steady improvements in features, functions, and usability. More
recently some large insurers (over $5 billion in premium) have announced they will use COTS to replace
several core systems.
The second strategy, replacing legacy with a new internally written system, has been the choice primarily
of large insurers, and some specialty insurers and reinsurers. When asked why, CIOs are likely to say their
needs (rules, definitions, processes) are too complex
and valuable (IP again) to be configured into a COTS.
The third strategy, wrapping and extending, external-
izes a lot of the IP from monolithic legacy code bases
and often provides a more flexible and appealing
user interface. Insurers tend to use wrap and extend
solutions for somewhat limited lines of business or
territories, because these solutions themselves require
a significant investment to deploy broadly.
The fourth strategy, incremental improvement, is in
fact the default choice. Almost no IT group will go
a year or two without addressing some of the operational and/or technical problems posed by legacy
systems. These improvements typically combine
elements of the second and third strategies (limited
internal rewrites and wrap and extend).
A Celent survey of CIOs found incremental improvement was the most popular modernization strategy
(being used by 35 percent to 45 percent of CIOs,
depending on the core system); followed by COTS
strategies being used by 20 to 30 percent of insurers.
Rewriting and wrap and extend jostled for third place.
Rewriting was more popular for carriers working on
claims and billing systems ( 12 percent and 7 percent)
while wrap and extend was chosen for 12 percent of
underwriting system renewals and 10 percent of policy