September 30, 2015 by Canadian Underwriter
Insurers are expected to invest heavily in modernizing and replacing core information technology systems, and chief information officers are looking for new systems that they can configure, Novarica Inc. suggested in a recent report.
“The modernization or replacement of core systems continues to drive the majority of insurer budgets year after year,” Novarica stated in the report, titled Core System Modernization: Approaches and Options. “This is no surprise, as existing legacy technology hampers insurers’ abilities to take advantage of ever-increasing distribution channels, improve product speed-to-market, drive operational efficiency, and get better insight into their business.”
In the report, Novarica discussed findings from a survey of chief information officers at 10 property and casualty insurers with annual premiums of between $100 million and $1 billion. The research was sponsored by Montreal-based Oceanwide Inc., which announced the results Tuesday.
Oceanwide provides software as a service, including policy, billing, claims, underwriting, document generation, agent/consumer portals and reporting.
The carriers surveyed were “involved with a significant modernization or system replacement project within the last five years,” stated Novarica, a Boston-based research and consulting firm. The chief information officers “were asked for their perspective on the modernization process, the key drivers for vendor and approach selection, and how their choice of approach impacted the project.”
Insurance carriers “expect and demand configurability in modern core systems,” Novarica suggested in the report. “They also know that configurability can look very different from different vendors.”
Insurance companies have not “fully embraced” cloud computing or software as a service for core systems, “but those that do have found benefits to cost, implementation timelines, and ongoing support,” according to the report. “Usability and design have major impact on vendor selection and system implementation. While it’s neither a functional feature or a business driver, it’s a key to success that should not be overlooked.”
The report was written by Jeff Goldberg, Novarica’s senior vice president of Research and Consulting.
“While insurers will employ a variety of modernization approaches, we found 70% of those surveyed plan for a gradual rollout to reduce project risk, even if it means a longer overall timeline,” Goldberg stated in a press release. “Also interesting, those opting for a slower rollout typically pair it with a ‘surround and modernize’ approach, integrating modern components – such as a portal or underwriting workbench -with the legacy system.”
Fewer than half the insurers surveyed “are enthusiastic about their current core systems, resulting in the ongoing push for modernization or replacement,” according to the report. “Key capability drivers for insurers are access to new distribution channels, speed-to-market, operational efficiency, and better business insight.”