The Search for the ‘Modern’ Policy Administration System
Technology futurists have been predicting the demise of the mainframe for years. By some accounts, insurance companies should be scrambling to install new Java or .Net-compliant systems and migrate to a cheaper distributed computing platform so they can sit back and reap the rewards of a lower total cost of ownership.
In reality, that’s not happening. Distributed computing has yet to demonstrate its potential in the high-volume world of insurance operations. The vast majority of all policies in the United States are still processed on mainframe computers. But what’s changing about this tried-and-trusted systems environment is the adoption of standards-based business services, such as those defined by ACORD, the externalization of business rules and calculations and the decoupling of core components.
With insurance companies seeking ways to modernize their legacy systems while protecting their investments in infrastructure and applications, the definition of a “modern” system has broadened. Many insurers are modernizing their existing core systems with a service-enabled architecture and configurable components.
“The platform and the programming language aren’t as important as how the system is built and what it can do,” said Stephen Forte, a principal research analyst at Gartner. “A modern system needs a service-oriented architecture and can be easily configured, use standardized messaging to support integration and, of course, be scalable to manage large policy volumes.”
New Role for Policy Admin Systems
Functional components that support rapid product configuration, customer service activities, new business and claims processing now dot the architecture landscape. Insurers are decoupling functional areas that were once the domain of the all-inclusive policy administration system. This shift toward SOA-connected components puts greater emphasis on externalized process management, resulting in a more focused role for the policy admin system and greater choices in software selection for insurers.
This trend is evident in the way insurers are externalizing rules and calculations across multiple admin systems. For the first time, companies are creating a central, enterprise-wide repository for product attributes, rules and illustrations to dramatically shorten the product introduction process.
“There are a number of reasons for the movement to the externalization of rules and calculations, not the least of which is to provide business users with a centralized facility for defining those rules,” explained Richard Burris, director of architecture and technology for CSC’s Life and Annuity Division. “This approach also delivers the added benefit of reducing a company’s dependency on an IT department to provide critical and timely changes to a company’s strategic systems.”
External rules engines and business process management (BPM) tools allow the business logic to be defined by the business users, eliminating the need for programming changes. The externalization trend also reduces an organization’s dependency on various skill sets — whether COBOL, C++ or Java — allowing managers to assign personnel to jobs based more on experience level, rather than prior training.
Developing a Roadmap
CSC recommends insurers develop a roadmap for their legacy environments and streamline and retire systems using a systematic approach. Without a proper analysis, insurers run the risk of adding a new system just to improve speed to market, but in reality are creating a more complex processing environment. These new systems start small but eventually require more servers and higher costs to support greater volume.
The IBM zSeries in recent years has become the platform of choice for consolidation in the insurance industry, and the latest Series z supports Java, Web services (XML) and Linux. With specialized processors for greater throughput, the zSeries is well respected for its transaction management capabilities. CSC’s leading policy admin systems for life — CyberLife, VANTAGE-ONE and Wealth Management Accelerator — run on the zSeries, as does CSC’s Exceed for property and casualty insurers. Both the mid-tier version of VANTAGE-ONE and CSC’s POINT IN, the leading P&C system for mid-sized insurers, run on IBM’s smaller iSeries.
“The fact remains that for CSC systems alone, more than 100 million U.S. policies are processed on mainframe systems,” Burris said. “Looking at it from a cost-per-MIPS standpoint, it can help insurers lower consolidation costs and free up general computing resources for core processing.”
The willingness of software vendors to continually invest in their strategic insurance software — and the involvement of clients in the ongoing enhancement of the system — are key to keeping systems modern. “Technology is only part of the equation,” Burris added. “A vendor’s willingness and ability to deliver on system improvements is essential to keeping the system from becoming obsolete.”
Delivering on Promises
Ultimately, the key decision for any upgrade involving third-party software is based on the vendor’s ability to deliver. Massachusetts Mutual Life Insurance Company looked at a variety of industry offerings as it embarked on an overhaul of its core IT portfolio. In the end, MassMutual decided to pursue CSC’s Accelerator products, in large part due to the relationship between the two companies and CSC’s strong track record of partnership and delivery.
MassMutual has joined a community of life insurers that are endorsing the development of CSC’s Wealth Management Accelerator, an innovative system that allows retiring baby boomers to freely move between accumulation and distribution in a single contract. With externalized rules and calculations and a modern architecture, Wealth Management Accelerator combines CSC’s policy admin and repetitive payment systems onto a single platform, giving CSC’s insurance clients a clear migration path.
“We view CSC as the dominant software provider in the life insurance and annuity industry, and as such, CSC is in a considerable position of influence,” said Stefano Martini, vice president, MassMutual. “CSC runs millions of insurance policies on its wide variety of platforms and through that experience is well positioned to help transform and simplify the technology needed to support this industry. We believe carriers will seek to work collaboratively with CSC in evolving their technology to more contemporary architectures and solutions.”
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