It’s said that death and taxes are life’s only two certainties, but for those in the insurance technology industry, core systems replacement is certainly high on that list. For about a decade, insurance companies have looked to modernize the technology platforms that underpin their business in earnest.
Novarica’s most recent research finds more than a quarter of insurers in the process of replacing their policy administration systems – a project the insurance technology analyst firm calls “painful, expensive, and necessary.” To mitigate the pain of the process, insurers are employing different strategies for rollouts, in order to get end users onto the new platform, with its promise of improved functionality, sooner and with less agitation.
“The expectations for technology are continuing to increase, and when you think about how easy something should be to use, the expectations for that go up every year as well,” says Nate Root, SVP at CNA.
CNA is in the midst of a multi-year rollout of Guidewire’s policy administration and core systems suite, staging by product line. The 15th-largest P&C insurer in the U.S. went live on Guidewire for three lines last year, with five products in process this year. At least three of those will be done by the end of 2016, according to CIO Ray Oral.
“Our legacy administration platforms – and there were at least a dozen of them -- they’re very complicated, trying to tackle all at once would’ve been too difficult,” he says. “We did do some wrapping and componentization to try to expose some services” before the final migration, he adds.
After all, it’s the new features and services that are the selling point for the painful replacement project in the first place.
“The value that modern platform brings over a mainframe-based one in terms of ease of doing business, or even our ability to recruit talent, is huge, Root says. “We want to spend more time with customers and less time getting policy out the door. We also want to enable more direct interaction with the agents, brokers and customers to provide better service.”
Industrial Alliance (IA), a Canadian auto and home insurer, also is in the midst of a conversion. It has been live on EIS Group's core systems suite since 2014. But only recently has a critical mass of end users been working exclusively in it. That can be attributed to IA’s “semi-big-bang” strategy, according to CTO Pascal Lavoie.
“When we gave the requirements, instead of trying to add absolutely everything we had in our legacy system we tried to focus on what we needed for the core business transactions,” Lavoie explains. “It’s always hard to guess what’s in the new system, and some of your requirements may not end up being the same.”
While CNA is rolling out product by product, IA rolled out EIS Group customer by customer: As each customer renewed his or her policy, when they were sent their renewal, that policy was re-issued from the EIS system rather than legacy. After a year and change, 95% of IA customers are now in EIS.
Reducing the onus on IT
CNA and Industrial Alliance cited a common benefit to their new systems: Increased end-user configurability. That’s a big factor in enabling faster rating and underwriting, and consequently speed to market, as the increasingly competitive P&C industry demands product innovation at a high rate.
“With the restrictions of a legacy platform, time to market on a new product is a pretty big deal,” says Root. “Going to Guidewire really shortens that amount of time and makes it a holistic process, more of a business project than an IT project.”
And at IA, actuaries can now manage the rating engine and make any changes they need to without Lavoie having to assign developers, he says.
“One of the things that was unanimously welcomed is that the rating engine can be managed entirely by the actuaries,” Lavoie says. “They told me a few months ago that they were able to do rating logic that they couldn’t do in the past.”
Not only are developers needed at fewer points in the product creation process, but newer systems also allow insurance IT departments to operate less in maintenance mode and more in value-creation mode.
“The fact that we can give some functions to the businesses is really appreciated,” Lavoie says. “The more skilled programmers can focus on what they’re best at and leave the people that know more of the business to play with the administration interfaces.”
And when the business calls on IT for a big project on a tight deadline, IT is able to respond because it isn’t bogged down with other tasks. Lavoie related a story of how IA wanted to enter a distribution partnership with an auto club, and essentially had to create a new subsidiary in a matter of months.
“We were able to start from where we are and modify the product with help from the new partner,” he says. ““The structure of this new system started to do links with their system and it was fairly easy. Within three months we were able to launch a brand new product fully adapted to their vision.”
So, too, is the case at CNA, where CIO Oral says “things that IT people used to need to do can be done by business analysts.”
“Guidewire is a framework, or a conduit that can deliver whatever we need -- it’s accessible,” he adds. “Trying to make our legacy mobile-friendly or digitize transactions was next to impossible without doing extensive programming work.”
Now, CNA IT can make adjustments as needed much quicker and easier and deliver on the promise of speed to market effectively.
The upshot for customers
It’s long been stated across the industry that the behind-the-scenes work insurers are doing to modernize their core platforms reflects a shift from a policy-centric to customer-centric view of the industry and product. But in terms of tangible benefits for customers, policy administration replacement tends to be subtle in its outward value.
“We look at the Guidewire platform as getting us to a platform for specialty and commercial holistically, and bringing together those processes and products so as we’re dealing with a particular insured, they’re seeing a more consistent overall customer experience,” says CNA’s Root.
At IA, customers will see value from the policy admin replacement simply in their ability to perform more self-service tasks, since the self-service portal integrates directly with the EIS platform, Lavoie says. But the company is also planning more direct customer engagement through its Mobiliz usage-based insurance platform, and EIS is a partner in bringing that vision to life.
“We have already had discussions with EIS and [telematics technology provider] Baseline on preparing a module to connect with the UBI solution,” Lavoie says. “The fact that we have the policy system that’s flexible eases the innovation process.”
Current Mobiliz users – a small portion of IA’s overall customer base – are on a rudimentary policy admin system built on Microsoft Dynamics CRM. But EIS is working on its own telematics module for IA and other interested partners. Having that integrated directly in the policy system opens up more avenues for using the technology.
“UBI could also be just an endorsement or addition/option on the regular insurance product, so it opens the possibility of seeing UBI as a way to evaluate the risk, but also a way to simply add services” like driver feedback or roadside assistance, Lavoie says. “Working with a full policy system allows us to add short- or long-term options.”
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