If the many sometimes-contradictory challenges and requirements facing insurance executives, one of the thorniest issues has been what to do about policy administration systems. The good news is that, at this point, there doesn't seem to be anyone -- not CIOs, line-of-business executives, vendors or analysts -- advocating for the status quo. No one needs to be convinced that legacy core systems are not up to the task of supporting the needs of a 21st century insurance company.
But that doesn't mean there is anything close to consensus about what the next steps should be. Changes to policy administration systems -- whether those systems are being replaced, updated or integrated with other solutions -- are fraught with cost, risk and complexity. It's essential for the executives leading these initiatives to develop strategies that not only mitigate the risks and reduce the complexity, but also accommodate new business opportunities, regulatory requirements and distribution channels (such as mobile). And this leaves CIOs wrestling with a new set of seemingly contradictory expectations.
Further, insurance technology executives who do manage to resolve these contradictions successfully cannot afford to commit their companies to complex and expensive "big bang" projects, according to Michael Hugos, an author and principal at the Center for Systems Innovation (c4si), who led the 2012 IASA Educational Conference and Business Show's Technology Super Session, "Business in the Cloud." Today, Hugos said, solutions have to be all about quick turnaround and the ability to try many things, building on successes and avoiding the proverbial "paralysis by analysis" that bogs down so many organizations.
[ The Age of Big Bang IT Projects Is Over.]
He advocates a shift in IT to variable cost models that reduce or eliminate operational expense -- enabled by adoption of some form of cloud computing. But cloud is just part of the equation, Hugos emphasized. Having what he called an "agile IT architecture" also is critical in the new operating reality, Hugos said. "Agile and cloud go together," he noted, adding, "The main impact of cloud is agility" -- creation of an environment that enables insurers to be more flexible and to move on requirements or opportunities more quickly.
Although only a year or two ago it seemed unthinkable that insurers' core policy administration systems could run in the cloud, it doesn't look so far-fetched now. Technology, competition and economics are combining to take the "big bang" out of policy admin projects. It's time for IT to embrace a new era of simplicity.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio