To bring readers up to date on the hottest topics from its Web site blog, INN is pleased to present a comprehensive look at one of the more controversial topics covered by our bloggers - how insurers view legacy systems. The topic originated from one of our most popular contributors, Joe McKendrick, who started the online discussion by asking "Why is 'Legacy' a Bad Word?"

There are arguments defining legacy systems on both sides: legacy technology means old, slow and inflexible. Modern technology means fast, new and agile. But for many insurers, legacy still represents solid, reliable technology. According to INN contributor and blogger Joe McKendrick, the word "legacy" has received a bad rap, being described as outdated, closed, proprietary and "all sorts of other nasty things."

In spite of the pejorative connotation these systems seem to bring, there are many reasons why insurers - steeped in legacy hardware and, therefore dependent on legacy applications - find the idea of ripping these systems out a bit overwhelming.

"Sometimes a legacy systems assessment reveals additional issues," says Dennis Steckler, senior architect with STA Group, a Chicago-based consulting firm. "IT has to determine what they are facing, such as the age and condition of the code, its language, how organized the data is, whether there is sufficient documentation, etc."

Brian Elsmore, CIO at Tower Hill Insurance Group LLC, Gainesville, Fla., agrees. "The language can still do what it does, but it's a dying technology in terms being able to find qualified help. No one wants to be trained on it, because there is no market for it afterwards."

In those environments where there is a sizable legacy capability, a larger problem lies in extracting business rules, says Scott Schenker, senior managing director at SMART Business Advisory & Consulting LLC, Devon, Pa. "The platform's embedded rules are the biggest challenge," he says, "because the rules have expanded for a long time, and the understanding of those rules is embodied in a very small number of people. It's not the language, but more the knowledge gap in staff able to deal with it."


Language and business rules barriers aside, the big problem is not with legacy platforms, notes Matthew Josefowicz, director, insurance at New York-based Novarica.

The issue is with legacy applications that are poorly documented, incompletely understood by the people responsible for maintaining them, and unable to provide new functionality, he says.

"Legacy applications were built by legacy employees to support legacy operations," says Josefowicz. "If you still have the same employees to maintain them, and the same operations for them to support, legacy applications are not the problem. But if your business is evolving (new products, new channels, new internal operations or workflow), then these applications are often a major inhibitor."

Elsmore has experienced first-hand the angst of both an evolving business and legacy application replacement. As a result of the mass exodus of insurers from Florida following the turmoil related to several P&C catastrophes, Tower Hill found its niche as one of the state's largest writers of residential property insurance. Keeping up with the company's growth has become a top priority.

Some of the insurer's 10-year old core system applications use the Q-PRO 4 language, designed for IBM PC-DOS, Generic MS-DOS, Novell Netware and all LANs and networks.

"Pro4 keeps upgrading their system, so we've been able to move to 4GL," says Elsmore, "but we've stripped out more of our legacy app functionality."

To accommodate its growth, the carrier adapted its legacy core system and a Web front end to integrate with its Oracle database. "We still run a lot of our operations out of the back office," adds Elsmore, "but we're picking our battles, because with bureau reporting, there isn't much value in rewriting that legacy application."


Instead, the company is investing in more Web technology, including a comparative rating engine on the front end. "Policy submission and issuance was a big thing for us," Elsmore says. "Agents can log on, submit and bind right from their office. Core billing still comes from legacy, so by getting the systems to talk, we've found a way to create scalability."

Customer- and partner-facing applications need to be brought up to date with the latest Web-enabled technology, notes McKendrick.

Insurers also need to ask themselves: What makes the best fit based on their unique requirements, says Catherine Stagg-Macey, senior analyst with Celent's UK office. "Can they still conduct core processing? Can they wrap their legacy systems with newer systems to get scale? Can they get upgrades - a single view of the customer? Can they use the system to address new business issues? If the answer is yes, leave it where it is."

The pressure to modernize legacy systems isn't just about keeping up with company growth. It also can include a proactive approach to competitive advantage.

"It's often called for by a new CIO or CEO who comes in with a perspective that says 'Here's where I want to be strategically,'" Schenker says.

Having started a massive legacy systems transformation shortly after joining the organization, Piyush Singh, CIO of Great American Insurance Co., a property/casualty insurer based in Cincinnati, is all about executing a strategy that looks ahead and strives to build the corporation for the future - keeping in mind that competition does not stay static.

"It's not that legacy is a bad word," say's Singh, "and I'm not against the mainframe as a technology. That being said it should not be about technology but about where business application innovation is taking place - and that is not on the mainframe."


The analogy Singh offers is the kitchen appliances. "When you sell your house or have people visit, do you get the best possible reception when you have old, and dated equipment? While it still might be good to prepare edible food (as legacy systems are), keeping up matters when you are going to be compared with competition or others. What worked very well in the past may not be adaptable or agile in the future. The question that needs to be asked is, 'What will it take for the company to survive in the long haul?' If you want to be in the market and compete effectively in the future, you must consider new and innovative ways to help the organization rise above the rest."

Whether upgraded or not, legacy remains the core system of record for most insurers, points out Stagg-Macey.

McKendrick confirms this trend, noting that at least 80% of the worlds' data still resides on mainframe systems, "and this percentage is likely higher for the insurance industry," he says.

It's a given that as carriers look to the future, however, the business side will play a major role in crafting the decisions behind future architectural direction. And those decisions, says Schenker, will involve interconnectivity between administration, claims, receivables and other sources of data.

Whether moving data or taking a federated data approach and leaving it at the source and making it available through metadata layers, it will also involve risk.

"At times it may look like a plumbing exercise," he says. "And it may take longer than expected. But legacy transformation will be expected to quickly improve the overall capability of the organization."

For McKendrick, there is room in the often-heard argument for having the best of both worlds.

"There are plenty of options and solutions now for wrapping older mainframe and midrange systems in Web services, virtualization and service oriented architecture, and made into full-functioning parts of this new world," he says.

To find the original blog that spurred this discussion, search "Why is "Legacy" a Bad Word?" at

(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.


Rip and Replace, or Modernize? Not a Choice Specific to P&C Insurers.

The word "legacy" has many different connotations, both positive and negative, from mainframes that have been chugging along for decades, to systems that quickly prove to be untenable for sustaining carriers' operations.

With so many new generations of solutions constantly coming on the market, the challenge for many insurance companies has been deciding whether to "rip and replace" an existing system with newer technology, or to "modernize" the existing legacy system by surrounding it with new middleware and upgrades.

For some carriers, the choice isn't so difficult. A legacy system may reach a point where it requires more patching, upgrading and even manual workarounds than the system is worth. Even systems deployed on modern servers may end up hampering corporate growth, as was the case for Missouri Professionals Mutual (MPM), a medical liability carrier based in St. Louis. At MPM, a custom-built policy administration system was creating immense and costly instances of data corruption. "Medical malpractice is a very quirky type of insurance," says Timothy Trout, managing director for MPM. For one, the older system was creating overlaps between policy versions. "If a policy started on January 1, and they endorse it on February 1, that first version should have ended on January 31. They had all these versions overlapping, and that caused all sorts of headaches," he explains.

In addition, every time a policyholder made a change, an entirely new record had to be created. For example, if a policyholder terminated his policy, the system forced MPM's end users to create a new file, resulting in multiple files on the same customer. "You would never think it would be difficult to determine how many doctors we insure," Trout says. "In our legacy system, we ran three different reports as part of the larger report, and we would get three different numbers. The reporting was suspect."

To address these data corruption and duplication issues, MPM conducted a rip and replace of its legacy policy administration and billing application, and implemented an off-the-shelf package from Ravello Solutions. The new, streamlined system integrates with the company's policy management and claims systems, which are now deployed as "virtual servers," versus previously being maintained as two separate systems within two separate silos.

Some insurers do not have the luxury of rip and replace, as countless key applications and processes are embedded within their legacy infrastructure. This is particularly the case with carriers running their operations off mainframe systems. "Many of our legacy policy administration systems are 40 years old now," according to Rich Maynard, property/casualty chief architect for The Hartford. "A lot of mainframers who built them are no longer around - they're long retired. So it's difficult to take advantage of new technologies."

However, Maynard doesn't have any intention of doing away with his company's mainframes any time soon. "We believe the mainframe is going to play a role in our future state. The mainframes are the best database servers in the world. From how it is secured, how you can monitor its performance and tooling, it is still better than the distributed platform. The mainframe has been around much longer, and has a lot more of those rigorous things in it that distributed platforms don't yet have."

The solution The Hartford adopted includes development of a service-oriented architecture that extends the functionality of the company's mainframe engines. "We want to build multi-tiered applications that are loosely coupled, that leverage the principles of service-orientation and leverage the appropriate platform in delivering that," according to Maynard. "Today, we are not loosely coupled; we have large, monolithic policy administration systems, all custom developed within The Hartford. The future says we want to be more service oriented, we want to be in a position where, if our rating service is provided by vendor X, I want to be able to take vendor X out, and put vendor Y in, because we've created a commodity rating service. In the end, it's the formulas and the rates that give us our competitive advantage - not whose rating engine that we're using."

Legacy has a different meaning for every carrier, but remains a concern each has to face. At MPM, this has meant moving on to a more flexible and standardized application platform altogether. The move "has been very good for us," Trout says. "It's made us more efficient and smarter. It gives us the ability to track details we've never tracked before. With medical malpractice insurance, dates and times are critical. And the new system has made us much better at doing that." With its new-found flexibility, MPM now can move forward with plans to expand operations to neighboring states, with little additional operating costs, Trout says.

— Joe McKendrick

(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

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