You've heard the old saying about getting "out of the frying pan and into the fire," right? Unfortunately, it appears this is a common theme for insurance companies replacing legacy systems and implementing new technologies. In the frying pan analogy, many insurance companies are constrained by legacy systems that are hard to maintain and even harder to customize. Fortunately, avoiding the proverbial "fire" of a new system that is equally hard to maintain is now easier than ever.
Maintaining a core processing system today is extremely different than it was even 10 years ago. For the first time, insurance companies have real options when it comes to maximizing this important investment. There are self-service options for those with a skilled in-house IT staff, vendor-based or application service provider options for those without significant budget, time or staff and skills in-house, and business process outsourcing (BPO) or hosted options for virtual insurance companies or those brick-and-mortar establishments that want as little to do with technology as possible.
The key to staying out of the fire is choosing a system that mirrors a personal skill level with the level of maintenance required. Choosing an option that an insurer's staff is ill-equipped to maintain can result in headaches and budget concerns equal to those experienced with the legacy system being replaced. However, by selecting a system based on a modern technology platform, level of maintenance or staff involvement in customization is a variable that can actually be controlled. By looking closer at each of the possibilities, insurance companies can match their internal skill sets and appetites for self-sufficiency against each option.
CHOICES
For the company looking to do most maintenance independently, modern vendor-based solutions promise higher levels of self-sufficiency. Typically, this is accomplished through tools that enable higher levels of configuration or customization combined with transaction and workflow design.
The obvious upside to this approach is cost-efficiency through reduced maintenance costs. Doing a large percentage of the maintenance work in-house does not completely eliminate the need for vendor assistance, but it does reduce an insurance company's dependence on an external vendor for maintenance.
Other insurance companies may prefer a more traditional view toward packaged software applications, relying on the vendor for just about everything. In this scenario, the solution is hosted in-house, and internal IT staff can customize it to meet specific needs. However, the internal staff is largely hands-off when it comes to maintenance of the solution. The benefit of this approach is that the insurance company retains expert services that can quickly and easily maintain what's been purchased - but this often comes with a heavy price tag and no foreseeable end to this dependency.
The last category consists of insurance companies that don't have the infrastructure to support a solution in-house over the long term. As a result, these companies opt for a BPO or hosted option. This option provides flexibility from a contractual standpoint, but the trade-off is typically a plain vanilla approach with hefty external maintenance costs. However, for a company without the right IT staff or skill set in-house, or if the company has not yet settled on a long term direction, this is an attractive option.
The key to succeeding with any of these options is to capitalize on the strengths and capabilities of existing IT staff in order to maintain a packaged solution. When looking at core processing systems available today, there is no question that the scalability of these products, the modern code base, and the inclusion of workflow and configuration tools have placed an amazing amount of self-sufficiency in the hands of insurance companies. Today, there are also product configuration tools and solutions that require less and less hardware, making it almost too good an opportunity for insurance companies not to invest more internal dollars toward becoming self-sufficient.
THE PAYBACK
Investing time and training dollars on internal IT and maintenance self-sufficiency can return immense cost savings. Committing relatively little in the way of internal systems support, insurance companies now have the ability to free up significant budget dollars for critical projects in the long term, while also ensuring internal IT staff can keep their core processing system on the road for many years to come.
Rich Barbarino is director of business implementation at OneShield Inc., Westborough, Mass.
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