Three years ago, I gave a presentation trying to distinguish "modern" P&C core insurance systems from truly modern ones, arguing that a modern codebase, essentially .NET or Java, wasn't enough to bridge the gap from modern to truly modern.

Instead, a "truly modern" system would need to have most of the following eight attributes:
-A configurable rules engine
-Business process management tools
-Visual, configurable workflow
-Essentially no code changes
-Model-driven architecture
-Modern codebase, such as Java or .NET
-Platform/database independence
-A truly modern user interface (Web 2.0 at a minimum)

Few applications met these criteria back in 2010, and an even smaller number of life/annuity solutions did. Today, there are many more P&C solutions that meet the criteria above, and a handful of L/A systems would as well. However, it's no longer 2010.

Core systems now need to address a world of app stores, mobile capabilities, voice recognition, touch-screen computing and many more technologies that have been "consumerized" in the past three years.

It is increasingly difficult for complex core systems to catch up to the present state of the art since the definition of a "truly modern" solution is a moving target. Refurbishing or rewriting large systems naturally takes time, which means that whatever a vendor begins building may not be considered advanced by the time it's actually finished. The vendor landscape is littered with solutions that seemed promising as they started development, but that were laughably outdated by the time they made it to market.

However, a change in the way software is developed and deployed is offering a glimmer of hope for the future of core systems, but it comes with some caveats. Over the last few years, the advent of rules engines, platforms, frameworks, configuration tools and business process management has sped up systems development. With the strong adoption of cloud, SaaS, and most importantly agile software development, new applications can be built and deployed quickly enough to stay truly modern and help insurers avoid capital expenditures.

Perhaps the most critical, but least exciting, is the agile software development methodology. Agile development is highly iterative, enables frequent, rapid feedback from customers and typically delivers functional systems more quickly than the waterfall approach, albeit ones that aren't as complete. Agile developers instead tend to release a module at a time until the solution is complete. By working on smaller chunks and getting the system to market quickly, vendors can move into upgrade mode and keep the system current sooner.

Some of the newest systems, and even a few overhauls of older ones, are leveraging consumer technology concepts along with modern software development and deployment approaches to get in front of the technology curve and stay there.

From a consumer technology perspective, several policy administration systems are using app-store functionality to improve certain aspects of the systems ranging from integration adapters to upgrades. Several other core systems are offering mobile capabilities, such as agent or consumer apps, out of the box. Still others are optimizing for touch-screen PCs, laptops, tablets and smartphones. As the consumerization of technology accelerates, vendors will need to keep pace.

A carrier recently lamented their aging mainframe was capable of just 600 million instructions per second (MIPS), claiming my cell phone was probably more powerful. 600 MIPS sounded fast to me, until I found that, with its quad-core processor, my cell phone can handle 32 billion instructions per second, or 32,000 MIPS. Until carriers get up to speed with the technology consumers literally carry in their pocket, satisfying consumer demand will continue to be a challenge. The newest crop of systems, though, aims to help carriers do just that.

Chad Hersh is a managing director at Novarica, a research and advisory firm focused on business and technology strategy for insurers.


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