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Celent: Product innovation a key measure of IT’s impact on insurers

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The vast majority of life and health insurers say the business impact of their current IT environment can be measured by an ability to create and manage new products.

Celent, a research and advisory unit of the management consulting firm Oliver Wyman, New York, published this finding in an executive summary of a new report, “Tracking the Progress in Core Systems Replacement: Global Life Edition. The report analyzes data from 90 life, health and annuity insurers, about the current state of their IT environment, future plans, views on data migration and modernization preferences and vendor roles.

When asked to describe their objectives for replacing legacy systems and how these systems have changed over two years, life and health insurers today express a greater preference than two years ago for addressing all legacy systems in some manner (e.g., patching, replacing, or wrapping. The proportion of insurers who have no plan to replace systems has also dropped to 6 percent from 14 percent two years ago.

In 2010, there report adds, the goal among life/health IT departments was to replace legacy systems where there was a strong business case (49%), and replace on a case-by-case basis (26%).

When asked how about their favored approached for modernizing their company’s IT systems, nearly 7 in 10 (69 percent) of survey respondents flag “wholesale replacement.” Wrap/extend existing systems is the second approach (41 percent), followed by outsourcing (36 percent).

Additionally, nearly two-thirds of respondents (65 percent) report choosing a strategy because it matches the corporate risk appetite. Nearly six in 10 (57%) chose the approach for cost reasons; and 41% chose it because it matched current IT skills and abilities.

Almost two-thirds of respondents, the report adds, indicate their company has greater responsibility for configuration business rules.

Increasingly, their companies are also taking a stronger lead in user acceptance testing, reflecting a greater sense of ownership of these types of projects (42% of respondents).

When respondents were asked whether they planned to convert data as part of a legacy systems conversion, and how much success they had in the past, nearly two-thirds (66%) of insurers say they would convert selectively, and another 27% said they would always convert data. Seven out of 10 insurers note that their success of past data conversions was average, with 4% rating it as poor.