If, like me, you are tired of reading (or in my case writing) articles on core systems replacement, you may have to rethink your attitude about what is going on in the insurance industry, particularly with policy administration systems.

In an interview with Deb Smallwood, founder of Strategy Meets Action, she made some interesting points on the core systems market and what insurers are doing with their legacy systems.

First off, Smallwood points out there are thousands of property & casualty insurance companies in this country, but the number of core system software deals annually is in the 100-plus range. At that pace, it will take over a decade to replace all the old systems in use.

"The next thing you know, the replacement systems are 15 years old and the cycle starts again," she says.

Smallwood reports she has worked with an insurer that has been working on a policy administration implementation for over a decade. The insurer started, stopped, and re-started.

This particular insurer has multiple lines of business and operates throughout the U.S. It may have taken them a while to reach the conclusion, but by the time they are finished they figure it will be time to start all over again.

If that sounds depressing, it should, but the technology of a decade ago is not as good as what is being utilized today. It doesn't take a quantum leap to believe that the technology available in another 10 years will be even better.

Compare technology to the human body. The agility that new technology provides carriers won't seem as agile in five years, just as our ability to do things with our body has changed greatly in the last five to 10 years. Have you checked your vertical leap lately?

Insurers held on to their policy systems for too long before lining up to replace their legacy policy systems. It would be nice to believe that this generation of policy systems would last a quarter century or more, but that's not going to happen.

This makes finding the right solution a huge deal. As one insurer told me recently, "We can't afford to get this wrong."

Special Reports /

Start All Over Again: Policy Admin in the 21st Century

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