Technology in the life insurance policy administration spacehardly a leader in the race to the cutting edgeis nevertheless moving forward as carriers reluctantly acknowledge a need to update their systems to accommodate the modern era of straight-through processing, experts say.
“Theres a climate of systems consolidation in the life industry and its being driven by mergers and acquisitions,” says Darren Klausner, vice president of systems, Life and Annuity Division, for Computer Sciences Corporation, based in Dallas. He adds that a “second generation” of policy administration systemslegacy batch systems with a low cost of ownershipis “coming to an end,” because such systems are hard to maintain and “not very open.”
Today, says Klausner, carriers are beginning to migrate to third-generation systems that can work more easily with other software programs and platforms. The newer systemsbased on COBOL and Java programming languagesalso are easier to maintain, he adds, although they are still mainframe technology.
While these newer systems have advantages, Klausner also points out that “the cost justification to convert to them is strangling the industry right now, so that enters into the equation.” He says some carriers are selling books of business to reinsurers and “getting out of those businesses altogether,” rather than invest in a new technology platform. Still, he insists, “top insurers are making bets on third-generation technology.”
According to Michael Roe, president and CEO of Edison, N.J.-based Navisys, “Everyone is aware that companies are reluctant to replace legacy policy administration systems. Unless theyre in pain, they wont do it,” turning instead to options such as outsourcing.
Nonetheless, Roe says companies are “aggressively converting off of a set of older Assembler-based admin platforms onto another set of more modern, proven and scalable platforms.” (Assembly language is a basic-level programming language common to most computers.)
The conversions, says Roe, are being done to consolidate acquisitions and simplify back-office environments, as well as to move beyond older, more limited systems. “Companies are merging and looking at their strategies. Theyre asking, What do I need to grow? How do I respond to the marketplace? Administration systems play a big part in that,” especially as regards to newer technologies such as straight-through processing, he explains.
Roe also points to the rise of what he calls a “component-based approach,” in which “a company doesnt need to rip out everything it has. They can do [the conversion] in pieces.” Such an approach, he argues, allows companies to add “chunks of capability,” such as a revamped new business system or a product-line by product-line update of older systems.
“It lets them attack the function where they have the most pain,” says Roe. “If theyre successful, they can build on that.”