Perhaps one of the last bastions of the “legacy era” of insurance systems is still within the core nervous system of carriers' operations: policy administration systems. Efforts to modernize these systems – meaning to make them interoperable with other applications and support Web-based standards – have been proceeding with fits and starts over the past decade, it's been a tough slog.
But change they must. Frank Petersmark, former CIO of Amerisure and current CIO advocate with X by 2, for one, has seen the challenge of managing aging policy administration systems firsthand. “Policy admin systems have been slow to change,” he agrees. “That's because insurance carriers have had to put a lot of customization into their policy admin platforms – to the point where often those systems aren’t even recognizable anymore from their original state. Carriers have also built big and hairy maintenance and support teams around these platforms.”
I recently had the opportunity to chat with Frank about these challenges as part of my work for the November INN feature on “7 Must-Haves for Today's Policy Administration Systems.” It was certainly a huge challenge at Amerisure over the past several years, extending back to 2001, when Frank initiated the rebuilding of a policy administration system from the ground up during his tenure as CIO. When they began, there was a dearth of available solutions that could bring policy management systems into the 21st century.
“We didn't see any that was that good in marketplace, at least in our view,” he says. “Carriers were often left with this choice of building or buying. We decided to do sort of a hybrid build and buy, buying a rating engine and putting rules around it. In hindsight, it probably wasn't exactly the best way to go, but it was just an example of how difficult it can be for carriers to find something out there.” He adds, however, that vendors have come a long way in the past five years in providing open platforms based on industry standards and greater flexibility.
While the tools and solutions have improved, many carriers still think their highly customized policy administration systems carry competitive advantage. “Even though we all do exactly the same thing, we like to think we're different,” he points out. “We all create policies, we all play claims; but we all have our own special way of doing it, which complicates the world.”
Ultimately, the ability to deliver capabilities faster and with better information is the only competitive advantage carriers have in today's economy, Frank adds. “But this is sort of a 'follow-the-leader' product world. The only competitive advantage is finding ways to very quickly react to changes or opportunities in your marketplace. Insurance companies don’t yet know how to leverage the information they already have to quickly create a new product or get into a new geography.”
At Amerisure, Frank and his team were working to consolidate the company's policy administration information onto a single platform – a challenge that many carriers are now up against, he says. But there's a lot of legwork that needs to be done even beyond buying and installing a new system. “Just think it through, you usually have different teams supporting different policy admin systems, who know that specific system, who are familiar with their specific data stores. Sometimes they’re proprietary databases, forget DB2 or Oracle or SQL Server. They have their own access algorithms for the data.” But it's worth the effort to start bringing this information together, he adds.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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