As more insurance IT leaders consider the fate of their company's policy administration system, the question arises: tools based or code based? There is no right or wrong answer, only a need to examine the strengths of your IT department and how each system might best fit your company's needs.
BY ROBERT REGIS HYLE
The debate continues over the benefits of a tools-based vs. a code-based policy administration system, but Celent Communications senior analyst Chad Hersh feels selecting one over the other sometimes can be confusing. If you look at the market for policy administration systems, with a few exceptions, most of the tools-based solutions still require some work in the code and most of the code-based solutions have some tools to work with, he says. That being said, its getting to be close to an even split between tools-based and code-based systems.
The reason for the split is because there are two types of IT camps, Hersh believes. One view is for IT to offload some of the menial tasks involved with operating a policy administration system to the business users in hopes of removing bottlenecks. The other view has IT as the gatekeeper, unwilling to trust important tasks to business users. Some IT departments would rather have the responsibility both from a job-security perspective and from a weve been doing this for 30 years perspective, says Hersh. Depending on the type of IT department youve got and the type of business user youve got, either one could be a slam dunk, or for that matter, either could be a difficult call.
When Concord Insurance Group went looking for a new policy administration system to replace an older legacy system, Mike Capozza, vice president information systems, felt his option was to buy code. I was looking for an integrated solution beyond just policy administration, he says. Part of the process was to learn first there wasnt something appropriate for us that was an integrated solution. Then we had to face the challenge of knowing what Plan B was.
Concord analyzed what tasks it wanted to be able to do with whatever system it bought. Capozza says the carrier found flexibility, speed to market, and the ability to enter new states quickly were key factors needed in a new system. As we looked at what was available, we chose the Duck Creek product, he says, which is a tools-based solution.
By contrast, Integrity Life Insurance uses a code-based policy administration system. According to Denise Sparks, vice president information services, one reason for successful use of the system is the talents of the IT staff in conjunction with the talents of the carriers business analysts who interpret the business rules through the table-driven system.
Code Based
Most older policy administration systems are code based, according to Hersh. Youll find there is no such thing as an insurance IT group that is used to maintaining its legacy systems in a tools-based environment, he says. In order to move from a code-based to a tools-based solution, Hersh believes the business side must be willing and able to take on the increased responsibility of maintaining the rate tables and setting up workflow. They must not only be able to take that responsibility, but they have to want to, otherwise that stuff falls by the wayside, and thats far worse than having an IT bottleneck, he says.
Integrity has decided if there are any significant changes to the system, it will allow the vendor to make them, which permits the carrier to take advantage of ongoing changes to improve or enhance the system. Maintenance varies, but I know you substantially can reduce it in a very short period of time, says Sparks. We own the source code here, so we could make changes to it if we choose. We have brought up our products on the same platform as another one of Western & Southerns subsidiaries that sells fixed and variable annuities, so we also are leveraging product design across the two business units. Integrity is a subsidiary of Western & Southern Financial Group. Western-Southern Life Insurance, the groups flagship carrier, chose the LIDP Consulting Groups Administrator product for variable annuity processing.
The platform, being mainframe, requires COBOL and CICS knowledge. In many cases, those are not the most glamorous languages to work in, says Sparks. That probably is more of a challenge. Programming software in and of itself to me is a general skill set and a state of mindlogic, ability, learning new languages. Once you know one, it is [a matter of] how open you are to how the next language can broaden your skill set. COBOL and the mainframe often are considered legacy. Theyve been around a long time, and I dont see them going anywhere any time soon.
Tools Based
Tool sets theoretically were designed for business users to maintain, but in reality, they can be difficult to use, points out Hersh. A vendor will say you need an extra savvy business user, meaning someone who is either a closet geek or an IT person in a past life, he says. In reality, what it means is it requires fewer IT people, but the work still is going to reside in IT.
Often what vendors offer will be either exclusively a code-based offering or a tools-based offering. However, in a lot of cases the vendor will call it one or the other, and there will be some of both, according to Hersh. If Im vendor X and Im offering a tools-based solution, there probably are a fair number of things that have to be changed in the code, he says. You as a carrier never may touch that code, but realistically it has not gotten to the point where you never touch the code unless you are trying to customize. To say they are not both probably is inaccurate, but nobody I know of has the option of picking a tool set or not using a tool set. The tools are there for a purpose, so you have to use them.
Many carriers have constrained IT resources but need to take on major projects such as policy administration system replacement. Hersh believes some vendors tell carriers their product can alleviate the burden on IT by allowing business users to do some of the functions.
Capozza discovered for what was important to Concordinsurance product developmenta tools-based system was more flexible. He claims flexibility rated very close to the top of the carriers needs along with speed to market. Were an agency-based company, and were always trying to respond to what the agents are asking us for in the product, so anything that helps us in that direction is a good thing, he says.
It takes a lot of soul searching on the part of a CIO to decide whether the IT department is ready for a major change on a piece of software. Just from a pure power perspective, its giving up a lot, says Hersh. At the same time, in theory, if it doesnt affect the IT budget or overall resources, [giving away power] can free [IT] for more strategic work, which tends to be more interesting and more exciting.
Other Options
Capozza believes with any system there is some basic functionality he would put in the code-based category. The stuff that knows what an endorsement is and what to do when you ask for one, when its time to renew, or when the price is changing are examples, according to Capozza. That to me is all part of code. The functionality that builds your homeowners program is done with the tools.
Concord also purchased what Capozza says is a coded billing solution. Were not going to touch or modify [the billing solution] in any way, and thats installed into our deployment, he says. Theres some core insurance functionalitybuild a policy, rate the policy, endorse the policyI think you buy code to do those things.
For Concord, there were just two choices: buy some code or buy some tools. Writing your own code is not even an option for anybody but the very largest companies, Capozza says. I didnt even consider that an option casually.
Outsourcing didnt offer Concord the kind of flexibility Capozza felt was needed in the business. The issue I had was giving over something that is the core of your business, he says. If there was some function we needed to buy or outsource, thats one thing. But to put the whole thing out is not something we thought too seriously about.
Looking for Help
When Integrity was determining the scalability and the ability to make future updates of its current administration system, it went to look at Administrator because the product already existed within the umbrella of the enterprise. It provided the functionality that was needed, says Sparks. It was scalable to allow significant growth in assets under management and contracts housed on the system. It also allowed us to leverage the knowledge base in Cincinnati [Western-Southerns headquarters]. When you are converting to a new administration system, not only do you have to pay the money to purchase it, but you also have to grow the knowledge of the system. We were able to leverage considerably the knowledge that existed in Cincinnati from an IT standpoint as well as from a business analyst standpoint about the system.
The other hurdle for a tools-based system is sometimes code based is a better choice for a carrier. When youve got a carrier with significantly constrained IT resources across the board, a lot of times with code-based solutions the vendors prefer to maintain [the solutions] themselves through a service agreement, says Hersh. If you have a vendor that is stable and reliable and has a reasonable cost structure for making those changes, oftentimes a code-based system makes more sense for a resource-constrained carrier.
Speed to market always is a factor for life insurance carriers, Sparks asserts, but in making this decision, it was not the top criteria. With leveraging the resources of the Western-Southern campus, we have the potential to use those resources to help us with installation, she says. Theoretically, we could be doing more in any given time period for an installation. Its an advantage we can have, not so much because of the system, but because of the ability to leverage a broader knowledge base.
The systems ability to scale for the future plans of the companyacquisitions, mergers, future growth as it looks into new markets for salesis the biggest reason for selecting the system, Sparks believes. She also cites scalability as a significant issue as well as the platform it operates on. The mainframe is the platform for this system, says Sparks. While we could have chosen a client/server type platform, this offers a more stable platform. With the VA business, obviously we have SEC and insurance compliance regulations that have to be taken into consideration.
Training the IT staff on the new system was one of the first steps for Concord. In our case, we knew we were going to have to retool [staff members] because we knew we were going to change everything about the technology, says Capozza. We had a pretty good idea of the direction we were going to go in. We set up what I called boot camps to retrain them in .NET technology for the integration of the various products we bought. That got them savvy in the changes we were going to go through.
As a regional carrier, the expense of maintaining or implementing a new system with a small staff is daunting. Concord felt it needed to go in the direction where it was acquiring as much of the solution as possible, and the challenge was more about configuration than anything else.
Whatever Works
Capozza reports one interesting evaluation of installing a new system has been comparing how Concords legacy main- frame system would handle some of the issues involved with the project. We had the learning curve in front of us of all these new products we had laid out and all the work we needed to do to knit them together, he says. The fact is, as we wrote up the learning curve, it has been so much easier for us to make progress. If I tried to do some of these things on the legacy system, it would have taken a zillion hours. The early signs for us are there is a lot of productivity gain when you do this type of project.
The majority of carriers purchasing a tools-based solution stick to the traditional process of IT making the changes, according to Hersh. As the business users grow more comfortable with the tool set, they tend to become more empowered and start to take on that responsibility. I cant imagine there are a whole lot of IT folks out there who sit around hoping what they are going to do tomorrow is make yet another rate change, says Hersh. There also are a lot of business users out there who are wondering if IT has enough time to make a rate change tomorrow. It takes some getting used to on both sides, but there are a lot of carriers that are using tools-based solutions successfully with a lot of the functionality in the hands of the business users.
Tech Guide: Policy Administration
Accenture
Murray Hill, N.J.
267-216-1049
www.accenture.com
AdminServer, Inc.
Chester, Pa.
610-619-3100
www.adminserver.com
AGO Insurance Software
Mt. Arlington, N.J.
973-770-3200
www.agois.com
AIG Technologies
Livingston, N.J.
973-533-3200
www.aigtechnologies.com
Allenbrook
Brunswick, Maine
877-764-6452
www.allenbrook.com
Amerillium Systems
Raleigh, N.C.
800-330-3097
www.amerillium.com
Apex Data Systems
Tucson, Ariz.
520-298-1991
www.apexdatasystems.com
Applied Systems
University Park, Ill.
800-999-5368
www.appliedsystems.com
AQS
Hartland, Wis.
262-369-7500
www.aqssys.com
AscendantOne
Nashua, N.H.
603-598-5427
www.ascendantone.com
Blue Frog Solutions
Pompano Beach, Fla.
800-861-8908
www.bluefrogsolutions.com
BML Istisharat
Glen Arbor, Mich.
312-961-1233
www.istisharat.com
Camilion Solutions Inc.
Thornhill, Ont.
416-346-3713
www.camilion.com
Castek
Toronto, Ont.
866-922-7835
www.castek.com
CGI Group
Montreal, Quebec
541-841-3200
www.cgi.com
Consis International
Weston, Fla.
954-217-3035
www.consisint.com
COSS Development Corp.
Mequon, Wis.
262-241-8989
www.cossdev.com
Covansys
Farmington Hills, Mich.
248-488-2088
www.covansys.com
Cover-All Technologies
Fair Lawn, N.J.
201-794-5586
www.cover-all.com
CSC
Austin, Tex.
800-3454-7672
www.csc-fs.com
CS Stars
Amarillo, Tex.
800-858-4351
www.csedge.com
Decision Research Corp.
Honolulu, Hawaii
800-836-6057
www.decisionresearch.com
Delphi Technology, Inc.
Cambridge, Mass.
617-494-8361
www.delphi-tech.com
Document Sciences Corp.
Carlsbad, Calif.
760-602-1400
www.docscience.com
DSPA Software
Mississauga, Ont.
905-279-9993
www.dspasoftware.com
Duck Creek Technologies
Bolivar, Mo.
866-382-5832
www.duckcreektech.com
DWL Inc.
Atlanta, Ga.
770-325-4000
www.dwl.com
Ebix, Inc.
Atlanta, Ga.
678-281-2023
www.ebix.com
Edgewater Technology
Wakefield, Mass.
781-246-3343
www.edgewater.com
ePolicy Solutions
Torrance, Calif.
310-819-3210
www.epolicysolutions.com
E-Z Data
Pasadena, Calif.
800-777-9188
www.ez-data.com
FileNet
Costa Mesa, Calif.
704-875-1934
www.filenet.com
FINEOS
South Portland, Maine
207-879-0400
www.fineos.com
FirstApex Technologies
Flower Mound, Tex.
404-626-4679
www.firstapex.com
First Notice Systems, Inc.
Boston, Mass.
800-310-4367
www.firstnotice.com
Fiserv Insurance Solutions
Cedar Rapids, Iowa
800-943-2851
www.fiservinsurance.com
Garvin-Allen Solutions Limited
Halifax, Nova Scotia
877-325-9062
www.garvin-allen.com
Genelco Software Solutions
St. Louis, Mo.
800-983-8114
www.genelco.com
@Global
Golden, Colo.
800-419-4449
www.atglobal.com
Guidewire Software, Inc.
San Mateo, Calif.
650-357-9100
www.guidewire.com
IDMI
Warner Robbins, Ga.
888-856-6388
www.idminc.com
IDP
Wyncote, Pa.
267-620-2388
www.idpnet.com
iGATE Global
Bangalore, India
918051040000
www.igate.com
Infinity Systems Consulting
New York, N.Y.
212-541-7602
www.infinity-consulting.com
The Innovation Group
Danbury, Conn.
203-448-2301
www.tigplc.com
Innovative Software Solutions
Charlotte, N.C.
800-837-2187
www.webpgmr.com
Input 1
Woodland Hills, Calif.
800-229-9822
www.input1.com
INSTEC
Naperville, Ill.
630-955-9200
www.instec-corp.com
Insurance Solutions & Technology
Cayce, S.C.
877-675-0708
www.the-ist.com
InsureWorx
Emeryville, Calif.
800-785-4526
www.insureworx.com
Insurity
Hartford, Conn.
860-616-7452
www.insurity.com
InsurSys
San Francisco, Calif.
415-495-7335
www.insursys.com
InSystems
Markham, Ont.
905-513-1400
www.insystems.com
ISCS
San Jose, Calif.
888-901-4727
www.iscsinc.com
ISO
Jersey City, N.J.
210-469-2389
www.iso.com
LIDP Consulting Services
Woodridge, Ill.
630-829-7100
www.lidp.com
Management Data
Birmingham, Ala.
205-991-7511
www.mgtdata.com
McCamish Systems
Atlanta, Ga.
800-366-0819
www.mccamish.com
Metaserver, Inc.
New Haven, Conn.
203-492-3371
www.metaserver.com
National Con-Serv, Inc.
Rockville, Md.
800-368-7720
www.accessflood.com
NaviSys
Edison, N.J.
800-701-2912
www.navisys.com
OAS Software Corp.
St. Charles, Ill.
800-546-2990
www.oasvas.com
OneShield, Inc.
Woburn, Mass.
888-663-2565
www.oneshield.com
OpenFlex Insurance Solutions
Los Angeles, Calif.
213-252-2332
www.openflex.com
P&C Insurance Systems, Inc.
New York, N.Y.
212-425-9200
www.pandcis.com
PDMA
Indianapolis, Ind.
317-844-7750
www.pdmagain.com
Peak Performance Solutions, Inc.
Hoboken, N.J.
201-792-7743
www.peakpsi.com
Pegasystems Inc.
Cambridge, Mass.
617-374-9600
www.pegasystems.com
Policy Administration Solutions
Whitestone, N.Y.
888-727-7658
www.pasolutions.com
PremiumWare
Arlington, Tex.
817-784-9599
www.premiumware.com
Property & Casualty
Management Systems, Inc.
Dallas, Tex.
972-855-3515
www.pcms.info
QualCorp
Valencia, Calif.
888-367-6775
www.qualcorp.com
Ravello Solutions
Atlanta, Ga.
770-508-1480
www.ravellosolutions.com
Results International Systems, Inc.
Dublin, Ohio
800-875-2126
www.resultscorp.com
Sapiens
Cary, N.C.
919-405-1500
www.sapiens.com
SeaTech Consulting Group
Torrance, Calif.
310-328-8119
www.seatech.com
SimpleSolve Inc.
Princeton, N.J.
609-452-2323
www.simplesolve.com
Sirius Financial Systems
Englewood, Colo.
303-209-5900
www.sirius-inc.com
SOLCORP
Mississauga, Ont.
905-672-9444
www.solcorp.com
Soulware, Ltd.
West Hartford, Conn.
860-794-7806
www.sentwood.com
SpeedBuilder Systems, LLC
Columbia, S.C.
803-647-9532
www.speedbuildersystems.com
Steel Card
Santa Barbara, Calif.
800-553-9961
www.steelcard.com
SunGard Insurance Systems
Miami, Fla.
305-858-8200
www.insurance.sungard.com
Systems Task Group, Intl.
New York, N.Y.
646-674-1391
www.stgil.com
TAI
Orland Park, Ill.
708-403-7775
www.taireinsurance.com
Tata Consultancy Services
Naperville, Ill.
630-717-4235
www.tcs.com
Trumbull Services
Windsor, Conn.
877-285-2174
www.trumbull-services.com
United Systems & Software, Inc.
Lake Mary, Fla.
800-522-8774
www.ussincorp.com
Vector Technologies
Indianapolis, Ind.
317-613-2400
www.vectortech.com
Wildnet Group
New York, N.Y.
917-320-4511
www.wild.net
Xactware, Inc.
Orem, Utah
800-424-9228
www.xactware.com
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.