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4 Ways Insurers Are Taking the Risk Out of Policy Admin Replacement

How can insurance companies mitigate the risk that comes with high-stakes policy administration replacement initiatives? Four insurers reveal their strategies to diminishing risk and optimizing the business impact of new systems.
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Many insurers are faced with the reality that their legacy policy administration systems cannot be efficiently adapted to changing business needs, from product speed-to-market, to agent ease-of-doing-business, to customer experience and data analytics. Traditionally, insurers have had a Hobson's Choice between bearing legacy maintenance costs and business limitations, on the one hand, and accepting the high risk of project failures associated with "big bang" full core system replacements on the other. Not satisfied with these limited options, today insurers are applying a variety of technology and implementation strategies to significantly reduce the risk of core system projects and maximize return on their technology investments.

Here are four examples of how carriers are leveraging increasingly mature technology, process and relationships to gain greater mastery over major systems initiatives.

Right System, Right Way

Risk Mitigation Strategy: Rigorous vendor selection, Agile development methodology.

Matching a system to Armed Forces Insurance's (AFI, over $82 million in 2011 written premium) business profile was critical to success, believes Drew Mazeitis (at right), CIO of the Leavenworth, Kan.-based company. AFI went through three policy administration (PAS) system replacement efforts before its current initiative to implement ISCS's (San Jose, Calif.) SurePower Innovation system, due to go into production in October 2012.

"We're somewhat unusual in that, while we're a mid-sized company, we write in all 50 states," Mazeitis says. "That automatically limits the range of software vendors that may be right for us."

AFI's past experience has also taught the company to steer clear of the risks presented by vendors that have yet to achieve their first implementation or that lack financial strength.

When the insurer began a new replacement initiative in 2010, there were few proven products in the market, according to Mazeitis, who arrived at the carrier in 2008.

"We weren't going to repeat the mistake of buying something that hadn't been tested," Mazeitis says.

Another important criterion for a new system was configurability because, Mazeitis relates, "If we want to write a new product, it won't be a software development project."

With help from analyst firm Novarica to arrive at a short list of vendors, AFI selected ISCS in October 2010 and plans to deliver one state at a time each month for most lines of business. Delivering the first line of business in October 2012, Mazeitis plans to finish by the end of 2014.

The month-by-month delivery schedule is a reflection of the use of the Agile implementation methodology, whereby chunks of functionality are delivered at the end of month-long "sprints." Mazeitis identifies Agile as a major risk mitigator and says of the methodology, "You're continuously accomplishing tasks on the project plan and you're able to see that progress -- as opposed to a 'Big Bang' approach where you don't see the output until the end."

Mazeitis thinks the systems market has matured significantly in the past couple of years -- a factor that has itself reduced the risk in the selection process. However, he stresses the importance of doing one's homework. He also believes the carrier/vendor relationship is crucial. "If you don't get along with the people that you're working with, you'll end up focusing on the wrong things," Mazeitis cautions.

AFI's relationship with ISCS has been a very positive one, characterized by collaboration and candor, according to Mazeitis. "We like them now as much as when they made their presentation a little over a year ago," Mazeitis says. "They are what they say they are."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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