With the stakes--and their IT investments--high, many insurers have made it clear they aren't ready, willing or able to discard their legacy systems and migrate their applications completely to newer platforms.

But a certain percentage of legacy system advocates are beginning to closely examine a strategy that involves operating in an open, flexible environment-pushing processes to the Web -and still keep their legacy environment intact.

How can insurers get the best of both worlds? Oklahoma City-based American Fidelity Assurance Co. (AFA) discovered it could accomplish this mission without having to face the pain points that accompany a major "rip and replace" legacy conversion project.

Back in 1987, AFA performed a full replacement of its legacy environment, and for years has regarded it as a core asset of the operation. Then, over the past year or two as AFA recognized the Web as an effective way to offer real-time capabilities to its customer groups, the company had to decide if it wanted to perform another legacy overhaul.

The overwhelming response: No way. The better option was to find a flexible solution to push real-time data to affiliates from the company's mainframe system and from its network server environment.

"We have found over the years that our mainframe is more reliable than a network server," says James Lupton, vice president of information services for the privately-held American Fidelity, which sells life, disability and long-term care products to trade associations and educational districts. "You hear all the time about how network servers go down, or about how one company's server 'stays up' more than the other guy's," he says.

"But the mainframe always stays up. That said, there are a lot of advantages to operating within a network server environment. So we endorse both."

Earlier this year, AFA embarked on a project that would enable it to put its data wherever it makes the most sense-on the mainframe or on network servers, says Lupton.

"We can store the data in any of these repositories and rely on enterprise transaction systems and XML to extract data seamlessly," he says. Using these solutions enables AFA to pull data from any of these repositories without having to perform modifications or re-write code.

The project is being conducted with AFA's long-time technology partner, Reston, Va.-based Software AG.

The early returns on the project are paying dividends for AFA: Its network of 1,200 brokers are enjoying the benefits of "jet-issue" of policies, without human intervention. Jet-issue is saving the company $1 million a year in processing costs, Lupton says.

The company's customers conduct business from the AFAdvantage Web site, an online service center first launched in 2000, which provides real-time access to critical information. Not only do customers love it, but the feature has also reduced call volume to AFA's customer care center.

Adoption suppressed

Web services adoption has not been an easy sell for insurers. Moving to true Web services continues to be undermined by two key factors: Insurers operate within legacy system environments, which runs counter to the non-proprietary, open-oriented platforms required for Web services.

Moreover, insurers have invested significant time and money in developing proprietary Web sites. Therefore, they want to make the most of these investments.

But the top brass at AFA wanted to optimize the company's legacy investments by launching a program that would also leverage the power of the network server environment.

"People are realizing that it costs a great deal of money to move working, stable mainframe applications to network systems for the purpose of accessing data in a distributed processing environment," Lupton explain.

"The bottom line is, the mainframe is a mature server platform. It's powerful and more stable and less expensive overall, and it supports a tremendous number of applications in one place."

Working with Software AG for years, American Fidelity expanded the relationship when it licensed the company's Enterprise Transaction System (ETS) and XML Business Integration solutions.

"American Fidelity has long regarded its mainframe systems as a core asset, but the company needed to leverage that investment to implement an enterprise transaction processing solution," says Garth Knudson, solutions marketing manager for Software AG.

Software AG has about 20 insurance customers, Knudson says. Over the past 18 months, most have moved toward open standards. he says. "Many of them have concluded that point-to-point processing is slow and unwieldy. Web services give them the agility they want and need."

Arming agents

Often, insurers perceive Web services as an odious undertaking because they know their systems have worked fairly well for years, Knudson says. "They're afraid that Web services means they will have to rip and replace legacy systems," he says. "But the truth is: They can do it one component at a time."

When American Fidelity explored its options for providing real-time capabilities to its affiliates, it identified Software AG's ETS and XML Business Integration as the best choice to modernize its mainframes. The product suite would enable the carrier to leverage existing business systems, enhance performance, open applications to new environments and integrate disparate platforms to create cost-effective, seamless links between its legacy systems, according to AFA's Lupton.

The carrier's agents and brokers can now accept and issue policies without human intervention. "We're populating our laptops in the field with data from the mainframe combined with data from employers," says Lupton.

Here's how it works: American Fidelity receives customer applications from agents' laptop computers-including digital signatures-then transmits the applications, forms and data to a server. It then runs the data through its mainframe systems to issue policies, storing the images back on its PC imaging system, and producing finished documents for mailing-all untouched and completely automated.

Loaded with all the company's underwriting and business rules, the laptop computers can transmit data in real-time to the company's home office supported by Software AG's EntireX Communicator, a component of the Enterprise Legacy Integrator suite.

In the near future, Lupton says American Fidelity hopes to stop mailing paper policies to customers and distribute all policies electronically. Currently, 40% of jet-issue policy applications are completed electronically.

Web's role

Executives say the project would be incomplete without the establishment of a dynamic front-end system.

That's where American Fidelity's AFAdvantage comes into play. The Web portal provides the company's six customer groups real-time access to policy and claims data. For each customer group, the carrier provides a "My Page" interface, which is customized to their relationship with the insurer.

The six customer groups are able to access claims, commission statements, billing, balance inquiry and forms processing from the self-service site.

As more AFA customers go to the Web site to download forms, the company is saving about $500,000 a year. That's because fewer form requests are now placed at the home office or call centers, says Lupton.

AFA also plans to add more services to AFAdvantage in the coming year, including real-time commission statements for agents and brokers. In complying with HIPAA requirements, AFA is receiving transaction statements from providers, and validating, translating and storing them on Software AG's XML repository.

The company is also increasing laptop capabilities, which were first deployed in 1994. Agents can use laptops to jet-issue group or individuals applications. "We don't have to print anything out in the field," says Lupton.

Software AG executives believe more insurers will eventually take the leap to push their processes out to the Web. And it will be easier if they're assured it can be done without having to overhaul their legacy systems.

"American Fidelity is a great example of an insurer that had a goal of using true open standards and true Web services to solve real business needs," says Mike Champion, senior technologist for Software AG.


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