Taking the Best Path to Modernization
Success Story videos: China Pacific Insurance and Starr Companies
For years, insurance companies were widely regarded as behind the times when it comes to technology. Insurance products are relatively complex and labor intensive to administer, creating challenges for back-end systems and processes.
Further, the insurance sector has undergone decades of mergers and acquisitions, leaving most major players saddled with complex application portfolios and aging legacy systems.
Watch our success story videos: China Pacific Insurance and Starr Companies
Faced with increasing competition and demands from consumers and agents for online and mobile services, insurers are rethinking their organizations, processes and technology to tackle large-scale modernization programs.
In many respects, the global insurance industry ($4.5 trillion in premium revenues, 2011) has moved to the forefront of some of the most difficult challenges — modernizing core applications and processes, creating enterprise architectures, and gaining insight about products and customers from multiple sources of data.
Gartner in 2012 ranked “modern core systems” as one of the top technologies with the greatest impact on insurers, yet with so many variables affecting operations — products, risk tolerances, sales and distribution channels, and regulatory requirements — insurance companies are taking many different paths to modernization.
CSC is helping the world’s leading insurers find the best path — whether that involves replacing legacy systems or moving to a new operational model based on Business Process as a Service (BPaaS). Insurers are also cutting costs, increasing speed and doing a better job of aligning IT solutions to business priorities.
Here’s a look at three insurers and the paths they followed.
China Pacific Life High-Performance Business Transformation
China’s decision to open its financial markets to foreign competition set China Pacific Insurance Company on the path to the industry’s largest-ever business transformation program.
One of the country’s leading insurers, China Pacific Insurance serves more than 115 million customers — nearly as many policyholders as are served by the top 50 U.S. life insurers. However, the company was administering policies on multiple legacy systems spread across 38 regional branch operations and nearly 1,900 sub-branches.
Key processes such as responding to customer requests and introducing new products were challenging. To compete more effectively, the company chose CSC’s policy processing software used to support more than 60 million policies for multinational and regional insurers across Europe and Asia.
The sheer size of the nationwide rollout posed daunting challenges — from mapping the data to other systems to creating a scalable environment to process transactions for 45 million policies a day.
CSC specialists in software and high-performance computing proposed a massively parallel computing solution. To map data across the enterprise, CSC’s business intelligence experts created a first-of-its-kind Insurance Industry Data Model (now used by North American insurers).
“The establishment of the platform allows us to get ahead of others in the fields of technology and information,” said Wang
Jing, director of China Pacific Insurance’s nationwide rollout. Customer service was improved with 15,000 employees and 210,000 agents, brokers and external partners accessing the system with a response time of less than 2 seconds. With a single system, month-end reports are now completed in 3 hours instead of 10 days, giving the management team reliable data and much greater control. The company’s achievements were honored in 2011 with Celent’s “Model Carrier” award.
John Hancock Financial Low-Cost, Flexible Platform
A marketwide downturn in demand for investment products sent Boston, Massachusetts-based John Hancock Financial on the path to an entirely new technology platform that could save millions of dollars.
One of the most widely recognized U.S. brands, John Hancock is a unit of Canada-based Manulife Financial (US$508 billion in funds under management, 2012) and offers a broad range of financial products and services, including life insurance, fixed and variable annuities, mutual funds and 401(k) plans.
The company has relied on CSC’s software for annuity administration for more than 20 years. With the market for annuities softening, the company talked to CSC about ways to modernize and reduce technology and support costs — while retaining software’s many features.
CSC proposed moving the software from a mainframe to a mid-tier, distributed platform using the open source Linux operating system. The approach combines the advantages of IBM’s System z with the flexibility and open standards of Linux.
“We talked to CSC about the zLinux option and were intrigued,” said Tony Todisco, vice president, John Hancock Annuity Systems. “No one else had done it, but CSC hosts our mainframe and they had already had success moving companies to a mid-tier environment.”
The replatforming project reduced John Hancock’s annual costs for software and computing capacity by $2.2 million. CSC’s hosting service essentially provides the company with a distributed private cloud infrastructure that enables secure and scalable virtualization.
Todisco added that John Hancock continues to benefit from CSC’s client community, composed of hundreds of business and technology professionals using the same systems. “Anytime you get together with peers in other client companies,” he said, “you learn a lot through sharing ideas and best practices.”
Starr Companies Rapid, Low-Risk Nationwide Rollout
What if you could expedite the rollout of a new insurance business nationwide? Starr Companies ($2.4 billion in premium revenues, 2012) asked that question after deciding to launch a workers’ compensation insurance business.
Starr Companies supports specialty lines that include aviation and aerospace, marine, professional liability, accident and health, and political risk, but the prospect of entering the U.S. workers’ comp market and complying with varying state laws on work-related injuries posed a major barrier.
“Before we write one dollar of business, we need to ensure that our operation can fully support the effort and the related regulatory requirements,” says Mike Toran, CIO of Starr Companies.
The company talked to CSC about Workers’ Compensation as a Service™, a cloud-based Business Process as a Service platform that provides access to CSC’s processing system and trained staff to manage reporting and compliance. The company signed a contract in September 2011 and just three months later quoted the first policy — a rapid launch for any type of insurance product.
“The hosted solution is working for us,” Toran says. “The cloud model allows us to communicate with different states, manage the assorted file feeds and integrate data without creating additional internal overhead.”
Modernizing sales, claims and service
CSC also supports insurers with software and services for strategic areas, such as sales and new business. CSC’s cloud-based Software as a Service (SaaS) apps, for example, allow agents to manage electronic applications and client information on mobile tablets and smartphones. This platform combines social media and sales automation tools to create more effective customer relationships and drive sales.
Claims management is another key focus area for auto, home and commercial insurers that must satisfy claimants while ensuring they pay only what they owe. Carriers use CSC claims tools to manage each step of the process, detect fraudulent claims and control costs from outside vendors such as law firms and repair shops. Claims adjusters can access their work in the field on mobile tablets, and managers can access at-a-glance dashboards to evaluate overall operational performance.
CSC works with companies on increasing efficiency and speed— from creating straight-through processes to give agents faster quotes to bridging multiple systems to help call center personnel provide immediate responses.
What’s the best path?
Organizations can take many different paths to application portfolio modernization. That’s why the first step is planning. What is the current state of operations and IT systems? What is the desired future state, and how quickly must that goal be achieved? Choosing the best approach requires a candid assessment of technology and operations and a clear roadmap for the future. As it was for these insurers, the results can be transformational.
Rich Carreau leads the Technology Office for CSC's industry solutions and software.