If the leading policy administration software executives were a bit surprised to see a standing-room-only crowd at their ACORD-LOMA Insurance Systems Forum session in Orlando on May 23, it's because they had yet to see results of a general session poll that would occur the following day: a full 46% of voting attendees reported policy administration systems as a high investment priority (see page 10).The topic for discussion for the session, "What Do the Experts Say About Administration Systems?," was finding cost-effective ways to merge systems and reduce complexity and associated costs.

"The big bang of getting to one [policy administration] system is a myth," said Mike Key, president and chief operational officer for Fiserv  Insurance Solutions, Cedar Rapids, Ia. "Many of us have many different sized systems. The decision to move is based on the number of staff and costs attributed to your legacy systems environment."

Keith Macbeath, director of solutions management, global insurance, for Unisys, Philadelphia, told the group to examine their policy administration strategy from a business plan perspective, not just an IT perspective.

"Look at the big picture," he said. "It's really a question of data management vs. policy administration." Macbeath stressed the importance of looking at long-term issues affecting support staff before undertaking a consolidation project.

Mike Risley, president, life and health, CSC Financial Services Group, Austin, Texas, told the audience an even more conservative approach may be needed.

"Policy administration systems should be the core of all your systems," said Risley. "Replacing policy administration systems is like replacing the engine on a jet - while it's still flying."

Risley suggested an alternative approach that takes best-of-breed components, such as underwriting and claims, and moves them to separate systems.

"This is hard stuff," he said. "Large companies are stuck with multiple systems, but a small company could conceivably get all their business on one system end-to-end."

Don't reinvent the system

Macbeath acknowledged that although there are inherent budgetary challenges in policy administration system consolidation, there is light at the end of the multiple systems tunnel.

"Customers are starting to look at standards-based architecture to get a quick win," he said. "In particular, an XML schema-switching strategy, which helps break the link between changes on one system to changes on other systems, should be one of the drivers of your maintenance budget."

Risley agreed. "Thank the heavens for XML," he says. "It's a key driver, and a key technology to consider."

Risley suggested using externalized rules to dramatically reduce testing costs. "Every investment dollar you spend you will never recover in today's market," he said. "And luckily we don't have to invent systems any more. The systems of the future gobbled up investment dollars just to build the architecture. Now we don't have to worry about that."

Making change a standardized procedure-and a part of the business plan-makes the IT side of a consolidation project less of an issue, advised Macbeath. "Technology tools allow you to square the circle," he said.

Once your model, process and budget are in place, it's a matter of management, the three presenters told the audience. "It's a lot about vendor management. There is a lot of promising new technology and some of it is really going to work," joked Risley.

On a serious note, he added, it's important to hold the vendor to due diligence. "The more business you do with a vendor, the more leverage you have with them."

Macbeath recommended carriers hold vendors accountable-to the carrier, to other vendors on the project, and to the business drivers.

Key closed with some final advice: "Help your business side understand your requirements," he said. "Maintain the business focus and let the business issues dictate.

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