Short of going through a merger or an acquisition, the biggest challenge hanging over business units and a CIO's desk is policy administration. So, making the right decisions in this "once in a career" project is imperative not only for the company but for the professional well-being of the CIOs and other technology leaders in charge of the selection. The policy administration system is the heart of the insurance company. These systems contain all of a carrier's knowledge. "It shouldn't be a surprise it is [a carrier's] biggest investment and the biggest priority for the company," says Kimberly Harris-Ferrante, research vice president in the insurance practice at Gartner.

There are two categories of potential issues insurers face with older administration systems, according to Mark Cyphert, principal with Deloitte Consulting. One is the legacy concept of having undocumented business rules and logic and ineffectual code constructs in data stores. So, going through any sort of change–even something as simple as adding a new product–becomes inefficient and cost prohibitive. The other consideration is the overall complexity of the carrier's environment and the risks that accompany that environment.

One driver for policy administration system replacement is consolidation. "Companies that have acquired but not necessarily integrated blocks of business have an ongoing cost to maintain the systems or perhaps pay a license fee as well as maintain a skill set across multiple systems," says Cyphert.