Insurance technology is highly complex. Buyers of technologyneed to be aware of any technology they are acquiring, includingits originally intended uses, what applications it will be usedfor, and how good a fit it is with existing core systems.

From the advent of the earliest insurance systems to modernstate-of-the-art application suites, the one constant is that theinsurance business has continued to move through financial cycles,business cycles, changes in our culture, demographics, regulations,work processes and products. Many of these changes require theacquisition of new technology or systems.

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In the area of insurance technology, one that stands out is theoverall need for technology to be flexible, adaptable and designedfor an unknown future. Insurance companies have been engaged in adecades-long quest to retire and replace their legacy systems andapplications, and it hasn't been easy. Carriers found that no onereally knew the old programming languages, or how the rules thatwere in the system actually worked. Some firms brought retireesback to work to help on these projects because they held theinstitutional memory. Some companies "wrapped" their old systemswith new applications to extend the life of their legacysystem.

Information/data flow improvements

For insurance carriers in the process of automating theirsystems, it may make sense to consider an application suite thatsolves more than one need. The key advantage of an applicationsuite is that it is designed to address the business process, orthe workflow of a specific business process. For example, today'sbusiness process is made up of automating a number of steps, suchas entering all information required by underwriting to provide aquote—and if the quote is accepted, moving that information to thepolicy administration system, where that data can move into thebilling system, the commission system, the accounting system andthe reporting system. A well-designed application suite allowsinformation/data flow to other applications that make up theoverall suite.

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With distribution management, several distinct businessprocesses require applications to synchronize data to manage theoverall process. Distribution begins with agent or advisorrecruitment and onboarding—including getting the new agent oragency contracted, vetted for compliance and appointed to writebusiness. Once the onboarding process is complete, that new agent'sor advisor's data moves into a different application designed tomanage the agent's lifecycle, including compliance. All agent datais available for yet another step in the process: compensation.Each of these steps are performed with a modular application suitethat allows a carrier to use some, but not all of the functionalityof the overall distribution application. This gives the insurancecarrier the flexibility to add a complete application suite from avendor, or add only one application, and have that plug into otherexisting applications. This is the essence of "best of breed"application use for insurance companies.

Application suites that aren't

Many major insurance software and technology vendors have, overthe years, acquired smaller software companies that had a pointsolution they could incorporate into their overall system. Inaddition, many insurance-technology companies have been acquired byinvestment bankers, and very often, they try to meld severalsolutions into one package and rebrand it as a new application orsuite. The danger of many of these "suites" is that they are asuite in name only, for marketing purposes. Most large softwarevendors have acquired various systems and applications and havesimply put their label or brand on them. These repackagedapplication clusters never were designed to operate together, andit takes a lot of effort and cost to make them work as a singlesystem.

Related: Beyond big data: Inside the technological evolutionof property & casualty insurance

But time marches on, and companies are now at the cliff's edge:They must move out of the legacy environment. The obvious questionthen is, "With what do I replace the old legacy applications?" Theshort answer is that there are many applications on the market,including some that are fairly well vetted by analysts andcustomers, and others that may be more compelling because theyaddress emerging business issues. But the overall issue to consideris the combination of applications that will solve theproblem. In many cases, the application suite, especially whenmodular in design, will deliver better overall long-term benefitsthan a combination of unrelated applications. The suite life,indeed.

John Sarich is VP of Strategyat VUESoftware. He is a senior solutions architect,strategic consultant and business advisor with over 25 years ofinsurance industry experience. John can be reached atJohn.Sarich@VUE Software.com.