Meeting in the Middle(ware): Evolving Insurance Connectivity Services

By Chuck Johnston, Vice President and Service Director, Insurance Information Strategies, META Group.

Insurers seeking to develop enterprise level customer view and integrated processes must develop robust data integration methods that can support enterprise-level load and complexity. A services-based architecture based on data and process abstraction will give insurers transforming to holistic financial services companies the flexibility and speed necessary to compete in a post 2000 financial services market.

Insurers seeking to become customer centric by implementing or upgrading CRM processes and technologies are currently inundated with differing options, conflicting architectures and a plethora of vendors. Often overlooked by eager technologists focusing on Operational CRM and portal solutions, the key to renovating insurance value chains and becoming more customer-centric financial services players lies in connecting these new processes and technologies with existing insurance processes and technologies. By 2002/3, insurers developing holistic financial services platforms will wrestle with a higher level of complexity than financial services companies moving into the risk business driven primarily by more convoluted legacy business and technical architecture. Successful insurance-based financial services companies of 2004/5 will have re-architected their business processes and data models to abstract higher-level business functions from the details of legacy system interfaces. Those companies that do not adopt this layered approach will be unable to repeatedly re-invent themselves to maintain advantages in a rapidly evolving financial services marketplace.

META Group believes in 2002/3, most insurers will implement point-to-point enterprise application integration (EAI) solutions in many cases combining multiple single thread pipes through custom applications. By 2004 insurers will move to EAI/business process solutions that integrate and abstract multiple legacy insurance and other financial services applications to both manage customers holistically and to create and manage bundled financial services products.

META Group believes that insurers seeking to implement enterprise CRM programs that include both traditional CRM solutions and portal strategies must develop an enterprise data management and connectivity strategy that encompasses both the new systems and existing technologies. Insurers seeking these solutions generally follow 1 of 3 major paths:

1) Develop point to point connections to shuffle real-time customer data between application systems and operational CRM systems and/or limited-use portals (>70% of insurers)

2) Aggregate a collection of point-to-point connections to feed a persistent operational data store that becomes the semi-authoritative source (~25% of insurers)

3) Construct a set of layered services that abstract the enterprise customer data model enabling real-time customer data access across multiple systems (<5% of insurers)

Point-to-Point: Taking the Direct Approach

Insurers have used distributed CICS and OS/2, TCP/IP sockets, first generation IBM MQ Series and other early middleware processes and products to develop early distributed client/server applications long before the phrase enterprise application integration (EAI) was coined. Unfortunately, many of these useful (and at the time highly innovative) applications have become some of the most problematic legacy applications in today's insurance companies. Lack of enterprise data definitions, highly proprietary and sometimes arbitrary interfaces and (at best) fragile operational support structures have led to many insurers targeting these systems, rather than older (but more stable) legacy mainframe systems. It is important to note that these problems are related to a lack of design standards and operational support for early distributed systems, not the point-to-point model. Many insurers and vendors are employing more robust point-to-point models (e.g., Navisys's XML-based architecture, the recent Siebel/Vitria/PMSC partnership, CSC's wrappering existing systems with a Websphere/MQ Series combined with legacy systems) that support critical LOB initiatives. META Group believes that these solutions will remain viable for insurers through 2004 but due to their more limited application in enterprise initiatives (especially in consolidating multi-line customer/product information) will be supplanted by 2005 by maturing enterprise services models.

The Vicious Circle: Freshness and the Operational Data Store Approach

Insurers, following the lead of many banks (seen as more customer-centric), have attempted to develop operational data store (ODS) based customer files that become the (semi) authoritative source of customer data (See IIS Delta "Juggling Customer Data"). At first glance, this appears to be an attractive option for insurers seeking to create a 7/24 externalized environment utilizing older, batch oriented systems. Unfortunately, insurers have had at best limited success in implementing these solutions due to the extreme difficulty in synchronizing the ODS with the many underlying data stores and systems which feed it. There is also a tendency within this model to circumvent the ODS and update source systems directly when implementing lower level systems functions within the LOB, as the ODS is seen as an enterprise, not LOB utility, leading most insurers away from this option for the authoritative source of customer data by 2004. META Group believes insurers will continue to implement ODS-based solutions to deal with specific tactical initiatives requiring consolidated data as well as being utilized as "time-shifting" components in layered, enterprise customer data services architectures.

Servicing the Enterprise: Abstracting the Customer

A combination of industry consolidation (leading to multiple systems performing similar business functions), convergence (with multiple product lines focusing on the same customer segment) and a move toward insurance vertical systems with standardized interfaces (e.g., Castek component-based P&C admin system, Navisys's XML-based architecture, CSC's exposing its monolithic administration systems through a Java inteface) is heightening interest in component and service-based architectures. Many insurance IT departments have already implemented some service-based infrastructure components (i.e. directory services, security, systems monitoring, data transfer) and larger insurers (especially stock companies) are evaluating ERP systems to help them manage their business, moving monolithic, closed systems away from their architectural center.

META Group believes that insurers transforming themselves into financial services companies will develop a service-based, customer-focused architecture to tie together the disparate systems and business processes converged financial services companies must encompass to be successful. This service-based architecture will require these companies to put higher level process management technologies in place to manage customers and products at a higher level of abstraction to avoid a legacy system interface driving new business processes. Currently, both Silverstream and DWL offer insurance-friendly solutions in this higher-level data abstraction and real-time process management space that interface to a variety of middleware solutions. Silverstream is currently engaged with Chubb, Amerisure and Mutual Insurance Company of America using their eXtend product to externalize quoting and claims processes.MetLife is implementing the DWL Customer solution on top of its Unifi architecture to develop an enterprise customer management solution, positioned to support 100 million customers-under-management corporate goal in the next 10 years.

Business Impact Insurers achieving enterprise customer-centricity using an abstracted data/process architecture will be best positioned to drive the continuous product/market/offering transformation necessary to compete in the post 2000 financial services organization, both organically and through M&A.

Bottom Line> Insurers seeking to develop enterprise-level, customer-centric processes and views will use traditional middleware products and operational data stores to achieve tactical goals, but insurers must embrace a services-based architecture to achieve the scale and scope necessary to truly manage enterprise customers without limiting LOB competitive positions.