When choosing a policy administration system, insurers arelooking for the ability to make as many changes as possible through"rules and tools"-based configuration rather than code-basedcustomization.

"Configurability is seen as table stakes for policyadministration and most other core systems as well," says DonaldLight, senior analyst in Celent's insurance practice.

"For years, product and marketing departments wanted to controltheir own destiny—manage rating, regulatory, and other productchanges independent of IT," says Dan Colarusso, senior vicepresident and CIO of Cypress Insurance Group. Gaining that controlis a driving force behind the company's in-progress migration frommultiple systems currently managed by a BPO to a single SaaS-basedversion of MajescoMastek's STG suite.

Likewise, Canadian specialty lines insurer Jevco is in theprocess of consolidating numerous legacy administration platformsto Sapiens' RapidSure suite.

"The gains we are looking for include getting new products tomarket faster and making changes to existing products more rapidlythrough new configuration capabilities," says Bryan Harper,assistant vice president of IT for JEVCO.

But when it comes to configuration capability, not all systemsare created equally. Configurability is "one of the most overusedterms" in the policy administration market today, says KimberlyHarris-Ferrante, vice president and distinguished analyst atGartner Research.

"In its simplest form, configuration means that the system isbuilt in a fashion that allows unique workflow, product rules, andsystem changes to be done in a table-based format whereconfiguration is stored separately from source code. However,there's a wide degree of variability in how vendors defineconfiguration," she says.

Selecting the right administration system requires understandingthe differences among vendors; successfully implementing andmanaging a system once the choice is made requires understandingfive key aspects of configuration and assessing how they willimpact both business and IT.

BALANCE

Configuration requires balance. In choosing among vendors,insurers need to balance their ability and desire to configure apolicy administration system against the amount of out-of-the-boxdomain content and insurance-specific functionality itprovides.

"There are some vendors that offer a 'toolkit' approach. You cancompletely configure the inner workings of the system to make itlook like your own unique system. However, you need sufficientskills trained in configuration in order to reduce implementationrisks," says Harris-Ferrante. "Implementations often are morecomplex and time consuming due to skills transfer required forconfiguration, which must be taken into consideration in projectplanning."

In 2008, life insurer Columbian Financial Group (CFG) began aproject to consolidate six different legacy platforms with a modernpolicy administration system. Stuart Smith, vice president ofinformation systems at CFG, reports that after evaluating severalvendors the insurer's IT staff preferred to go with a highlyconfigurable system, which he declines to name.

"We would talk about a functionality, and the vendor would say,'If you want it to do that, it can,'" he says. "However, there wasno structure to the system. It was just a blank slate—anappliance."

"While it was a developers' delight, it was a nightmare on theimplementation side," adds Peggy Rubin, executive vice presidentand COO. "When we talked to reference customers, we found thathaving business tell the configuration team how every single itemin the system should work was an overwhelming task. We found othercompanies spending two or three years just getting the systeminitially configured."

Mitch Letho, senior vice president at Innovation Insurer Group,recommends an approach that combines configuration capability withprebuilt templates and content. "Every insurer issues a policy, andevery policy has a coverage, so those two items should be elementsof the system out of the box," he explains. Those elements shouldhave common attributes, such as "limit," regardless of the line ofbusiness to which they apply.

"It gets confusing when the insurer has to create every elementfrom scratch, or when you are required to copy or recreate commonelements that are core to insurance between different lines ofbusiness," he says. "You need a balance of prebuilt elements andtemplates and the ability to configure fields to reflect yourcompany's unique underwriting philosophy and rating."

Smith says CFG found that balance in the ALISpolicy administration system from FIS Software, which merged withSapiens in July 2011. "The system is built with a particularunderlying process flow and data model that gave us something tostandardize on," he explains. "At the same time, the designerprovides a level of abstraction between product data and processesthat allows us to do business-level configuration."

First deployed in late 2009 with CFG's single-premium whole-lifeproduct, the ALIS platform has allowed CFG to launch new productsin under three months, compared to about a year under its legacyplatforms. The company is continuing to consolidate remaininglegacy environments to ALIS.

The business side also needs to understand there are limits toconfigurability in choosing the platform that provides the bestbalance for their business. The further an insurance company getsfrom industry standard forms and content, the more some platformsare stretched.

"Once you start peeling the onion, how much of the system istruly configurable—and what are the implications of that for bothbusiness and IT?" asks Light. "Whether a system can do 98 percentof what a company wants or significantly less is something insurersneed to assess in the selection process to avoid cost and timeoverruns."

Harper says that for JEVCO, a 70 percent figure is good target."You could push that to 90, but we would spend more time trying tocreate configurable rules for unique situations versus simplycustomizing the system," he says.

JEVCO rolled out its first line of business to the Sapiensplatform, branded internally as "Jevcom," in 2008 in nine months.Today the company can deploy new products in about six weeks.

Unfortunately, the configuration balance of systems can bedifficult for insures to assess, according to Light. "The range ofthings that insurance companies might want to configure is large,"he says. "In practical terms an insurance company can't ask threeor more vendors how configurable their systems are for 1,000different scenarios."

He advises companies to choose a handful of changes commonlyrequested by business and see how they are handled in the system,then evaluate how the platform handles unique processes or productfeatures that give the insurer competitive advantage.

DISCIPLINE

Configuration requires discipline. Configuration providespowerful capability to make changes quickly and truly customize asystem to meet insurers' needs. Companies need to wield this powerwisely.

"Unchecked configuration, or configuration that exceeds thedesign of the platform, can actually restrict growth andflexibility." says James McCully, product marketing manager atGuidewire.

Harris-Ferrante stresses that carriers should be wary of thetemptation to create a "new-old" system.

"Process rationalization has to come before configuration," shesays. "Is a change to the base system truly needed for competitiveadvantage, or just because you've always done it that way? Ifyou're not getting to where you need to go it doesn't make sense toget there twice as fast."

In its implementation project, CFG has made a commitment tomodifying its internal workflow to match the ALIS system whereverpossible. "It's been a struggle," admits Rubin. "Everybody wantsthe workflow just the way it was."

Cypress Insurance has been making modifications to theMajescoMastek system based on an analysis of what agents,customers, and staff need, rather than on the way the insurer'sprevious systems administered business.

"We wanted to make sure that we kept it [the STG system] asvanilla as possible because it's easy to get scope creep and haveprojects take on a life of their own," Colarusso says. "We are onlymaking modifications that are absolutely necessary to service ourclients."

Scheduled for a May 2012 pilot, the STG Suite is pre-configuredwith standard insurance content for several lines of business.MajescoMastek's Insurance Content Manager (ICM) provides thetoolkit for Cypress to manage rates, rules, forms and otherconfigurable data within STG.

"Previously the business would come to IT with a regulatory,product or formchange request. It was analyzed, sent off to thevendor who would analyze it, figure out how long it was going totake and how much it would cost. The whole process was timeconsuming. Now we will be able to take control of our own destiny,"says Colarusso.

ALIGNMENT

Configuration requires alignment. Configuration can shift sometraditional IT responsibilities to the business side. Insurers needto understand that, rather than cutting IT out of the changeprocess, this shift makes alignment between IT and businessessential.

"Success in a configurable approach to policy administration ishighly dependent not just on understanding the capabilities of thetool set, but in creating a partnership between business and IT,"Colarusso says.

Harris-Ferrante stresses that alignment around configurationbegins with organizational readiness for configuration—includingwhether business understands and accepts a role in the process. Sherecalls working with an insurer that was implementing a newadministration system and attempted to involve the business side insystem configuration.

"They brought it to the business sponsor who said, 'That's IT'sjob.' The business had no interest in being involved," she says."Companies have to be careful because they can create divisionsbetween business and IT if the business feels IT is trying to pushtheir job off onto them."

She recommends a hybrid approach to policy administrationproject staffing. "A combination of business and IT is the beststrategy but, unfortunately, some companies are averse to themixing and mingling of those two areas," she says.

CFG has taken a hybrid approach in creating a new configurationteam. The eight-person group consists of business analysts, whowill primarily handle workflow configuration, actuaries, who areresponsible for rating engines and product definitions, anddevelopers.

Although the ultimate goal is for the team to handle the ALISsystem internally, Sapiens is currently performing the bulk of thesystem configuration while the CFG team completes system training.CFG plans on hiring a full-time resource from Sapiens for asignificant portion of this year to further facilitate thetransition to configuration self-sufficiency.

"It's realistic to rely on vendor expertise orknowledge experts who designed the system in [implementing] yourinitial lines of business so you don't go down paths you don't needto," says Tom Chesbrough, senior vice president of enterpriseproducts at StoneRiver.

Ideally, configuration will not only require alignment butfacilitate it as well.

"The objective is to enable the IT team to be much moreresponsive to business requests, and, in many cases, reduce the'translation' required to take a business concept and incorporateit into a system environment," says McCully. "A configurable policyadministration system should empower the IT group to effectivelymeet the demands of the business."

PROGRAMMING (OR NOT)

Configuration can still look a lot like programming. "Thebiggest 'aha' moment for some insurers is that vendors say abusiness analyst can do this, configuration is table based, but alot of the logic looks like you are writing source code. Or, theconfiguration interface has a 'programmer' look and feel versus a'business' look and feel," says Harris-Ferrante.

"Sometimes things that are called 'configuration' can becomplicated scripts that look like computer programs to the layman,or they can be convoluted business rules that look a little denseto the uninitiated," says Light. "If a vendor tells business usersin the sales process, 'you won't have to rely on IT anymore,' thatcould be an example of overpromising."

JEVCO came to this realization early in the implementation. "Theearly pitfalls [in implementation] were that everyone thought itwas extremely simple; anyone could do it. We found quite quickly ithad to be a little more than just anybody."

For now, JEVCO is keeping the configuration responsibilitywithin IT. "I know that some companies are pushing configurationout to end users, but we're under the belief that an IT person isbetter equipped to deal with today's configurable items," Harpersays. "There are some business people who are very technical, butpushing configuration out to them would take more training than itwill to keep it in IT for now."

Insurers also need to understand thatconfiguration still requires traditional IT governance and changemanagement.

"With so much control entrusted in their hands, the carrier willsoon realize that the content creation is just one part of thewhole puzzle," says Manoj Porwal, assistant vice president ofproduct architecture at MajescoMastek. "There are other criticaland important aspects like version control and configuration andrelease management that they have to deal with. We have seen lot ofcarriers struggle with these two aspects."

"Because configurability opens a Pandora's box of possibilities,it's important to have crisp decision making on how you want thesystem to work," says Bob Dale, director of the systemsimplementation group at STG, which provides technology services tothe Plymouth Rock Group of insurance companies. "There's a learningcurve with configurability—what it is, and what the ramificationsare when a decision is made."

SKILLS ASSESSMENT

Configuration requires a skills assessment. Ron Karam, head ofinsurance business solutions at Sapiens, says that basicconfiguration tasks—such as setting up user profiles, usersecurity, letters and other documents, and some workflow tasks—canusually be performed by business analysts. However, more complexconfigurations to support actuarial formulas, product rules, andaccounting require actuaries or senior system analysts—individualswith a thorough understanding of those subjects who also have bothstrong analytical and system skills.

"In between the simple and complex configurability, systemanalysts, with a good understanding of the business, product andsystems, are most often charged with the balance of theconfiguration activities such as updating rates, configuringunderwriting and reinsurance rules, setting up complex workflows,or configuring claims adjudication rules," he says.

Most insurance companies with an IT staff will find thetechnical skills they need for configuration, but business analystswith comparable technical expertise are harder to come by. "Withthe current crop of policy administration systems it is definitelybringing out a skill-set gap because people in charge ofconfiguration don't just need technical knowledge or businessknowledge, they need both, as well as familiarity with the processand culture of how to configure," Harris-Ferrante says.

Companies with a big skills gaps may find itdifficult to achieve the speed-to-market benefits promised bymodern administration platforms. "If they are learning to configureat the same time they are implementing, that is directly correlatedto the failure of projects to meet the original scope andtimeline," says Harris-Ferrante.

In its configuration team, CFG has carefully chosen people withan analytical background. "You don't need a programming background,but you do need to be able to understand why something has happenedand how to get it to work—people who can work through the logic ofconfiguration. Fortunately a lot of our business users have that,"says Rubin.

The greater challenge for CFG is going beyond the mechanics ofconfiguration and understanding the theory behind it. Thatunderstanding is necessary to make configuration most effective andreduce the duplication of effort. Smith illustrates the differencewith the decision-making process around configuring multipleproducts on the ALIS system.

"We need to understand whether it's better to set up one productand multiple versions so there is inheritance between them, orwhether to set up separate products so that changes to one productare not inherited by the others," he explains. "There aretheoretical aspects of it that would suggest you take one approachover another depending on your business goals, and that takes adeep analytical understanding."

Cypress faces the additional challenge of moving from a BPO atthe same time it implements a new administration system. "Our ITdepartment is changing from more of a traditional, heads-downcoding and implementation group to delivery management," Colarussosays. He believes IT has the skills necessary to make thattransition and that at the outset configuration will be handled bythe IT group.

"We will work through our business partners to understand whatwe want to do in terms of product, rate and regulatoryconfigurations and use the ICM tool to make those changes," saysColarusso. "For now, ICM will be a repository of the IT toolsetbecause we need to understand it, quality assure configurationchanges, and understand how to move those changes out to theproduction environment. But with that said, when we agree businesshas developed the experience, we will transfer some responsibilityto the business."

MANAGE CAREFULLY

Migrating to a more configurable policy administration platform"has definitely changed our IT world," says Harper. "We're alreadymuch more responsive than ever before."

Colarusso expects the continued evolution of policyadministration platforms will allow insurers to more easily controltheir own destiny and manage changes independent of outsideresources. But he issues an important caution for the businessside.

"Configuration isn't just pushing buttons. It still involvesanalysis, version control, and testing," he says. "The promises ofrapid configuration and fast speed to market are appealing, but thebusiness needs to understand what IT people have known for years—itneeds to still be a carefully managed process."