Life Support

Is the mainframe dead? There certainly are insurance companies that wish that statement was true, but the truth of the matter is mainframes are alive, well and living in an office next to a bunch of metal file cabinets.

Attendees at a symposium of insurers put on by the Ward Group were asked the mainframe question and nearly half (45 percent) stated that no, the mainframe is not dead.

Legacy systems and the mainframe always are hot topics for discussion, whether it involves technology leaders or those on the business side. The Ward symposium brought both sides together to discuss operational issues affecting their companies and to highlight trends of high-performance companies, according to Betty Cornelius, director of marketing and corporate services for Ward Group.

"We also discussed operational functions, best practices, and comparisons to high performers and provided real data for budgeting and strategic planning," said Cornelius. "We had a good response this year in particular."

Leah Hollstegge, a manager for Ward Group, explains the reason behind the polling question on mainframes relates to the continuing discussion of the elimination of mainframes. Like many industry observers, Hollstegge has not seen much success in eliminating them from the office inventory.

"We've seen success in eliminating them as the primary platform, but we wanted to get some perspective to see if it would go in that direction long term," she says.

Less than 20 percent of respondents indicated that mainframes have been completely eliminated; while 36 percent responded that their mainframe no longer is the primary technology platform.

Hollstegge believes there has been a change in perception about the older systems in recent years.

"If you asked this question five years ago, I think the 'no' response would have been smaller than it is today," she says. "That's a shift, given that carriers haven't had a lot of success in eliminating the mainframe."

Insurers have developed different strategies around the mainframe from a cost standpoint, according to Hollstegge.

"[Insurers] can leverage the distributed environment in some ways and use the mainframe for processing," she says. "They also can minimize the cost as well. They are looking at the overall cost of their operations and see the mainframe can still fit."

In addition, Ward Group asked attendees about their use of expert underwriting technology.

More than half believe such tools are improving, but 21 percent responded that a lack of technology was the reason their company trailed the rest of the industry while 15 percent blamed underwriting decisions.

"When we look at our research, we see the top quartile has about double the pass rate than the overall benchmark," says Hollstegge. "Companies are improving. The capabilities are there, but we see a lot of companies that elect not to use it."

Ward Group also asked attendees about proposed capital expenditures for 2012 and an impressive 92 percent responded that budgets will either be flat or increasing this year.

"We saw capital expenses peek in 2008 and some slowing in 2009 and 2010, but we are expecting a significant shift in 2012 in terms of expenditures heading back up," says Hollstegge. "The reason we believe it is significant is because over the same timeframe we haven't seen a lot of implementations. Companies are building a capital bubble Once the implementations occur in 2012 and 2013 we are going to see some large increases in spending as a result of that depreciation."

The subject of whether an insurance company can differentiate itself with technology also was raised and 81 percent of the attendees responded "yes."

"It' a high number, especially given the large number of finance and underwriting people we had in the audience," says Hollstegge. "We've talked for a while about how IT has elevated itself within the organization and the business is gaining more confidence in the technology. In general, executive teams have realized they need technology in order to compete in today's marketplace."