Legacy Systems: Avoiding the Scrap Heap

Many insurers are faced with aging policy and claims systems. Well over half of policy and casualty systems in place are in excess of 25 years old and use aging programming languages.

At the same time, over the past several years, there have been tremendous advances in the computing capacity of non-mainframe server hardware and network bandwidth. There has also been a change in business drivers, including the need to create customer-centric product offerings and business functionality; faster time to market for new product offerings; new, higher levels of customer service; and robust online connected presence.

Aging legacy systems offer little but resistance and friction in the development of these new products and services. It is no wonder a hot topic for discussion among IT leaders is the need to rip out and tear down these older systems and replace them with new, modern solutions.

However, undertaking a project of legacy replacement heavily impacts the core operational systems. This represents not just systems and technology, but the very heart of what you do and how your insurance operations function. Therefore, it comes fraught with risk and uncertainty. Stories of failures are common. Everyone has heard about cost overruns, system functionality not delivering as promised, implementation schedules blown out of the water and careers suffering.

Perhaps that’s why these hot-topic discussions are increasingly including the terms augment, supplement and adapt in relation to legacy systems instead of rip-and-replace as part of effective legacy modernizations strategy.

To help you decide what legacy modernization really means for your enterprise, it’s helpful to review the rich possibilities of what can be done without undertaking a major system replacement, as well as discuss those few scenarios that will require total system replacement.

WHEN TO AUGMENT AND ADAPT

Each system varies, but certain areas of your policy system and the underwriting process are better suited to modernization in both technology and functionality and are well served by vendors in the insurance market. In general, deficiencies tied to functionality and user presentation are well handled by add-ons that enhance, not replace your legacy applications.

Web site functionality

These types of add-ons facilitate access to the system via portals for underwriters, independent agents and consumers. Service Oriented Architecture (SOA) component products and frameworks are available that allow adding or changes to functionality, business logic and system operation, overall look and feel, and user access.

Legacy systems were built to be used by internal resources, be it claims or underwriting workflows. A level of expertise is required not only in insurance processes, but also in company-specific processes. This does not fit a broker workplace, as it is a sales-and-service office. And it certainly does not fit an on-line consumer home setting.

As a result, legacy modernization is often dependent on turning legacy data into a user-friendly, Web-accessed portal from which brokers and consumers can generate quotes, bind business and issue policies. There is no need to replace a legacy system to secure such functionality given the number of comprehensive, user-friendly, proven solutions available as legacy add-ons.

Technologies can be put in place that create, configure and customize portals for agents or consumers to handle all personal lines — auto and property — and many small commercial lines simultaneously. Consumers can collect accurate meaningful quotes. Third party records can be collected for areas such as motor vehicle reports.

System implementation times are quick and successes are achieved immediately. Web enablement can be staged and compartmentalized so that products can be added or modified as required. Further, the information gathered from cross-silo portals can be analyzed for a variety of purposes (broker management, key productivity indicator analysis and many other internal purposes).

Transforming existing legacy business processes

You can transform existing legacy business processes into new efficient processes to match business needs. Limitations in legacy applications that prevented change can be overcome and refreshed. SOA component products exist that can separate rating, underwriting rules and product configuration functions; in many cases, they can migrate functions to an agent office, thereby gaining significant improvements in underwriting efficiency.

Straight-through processing

SOA component products are available that can automate data capture, qualification, rating, quote management, binding and policy issuance. Although this can include simple “instant” policy issues for cherry-picking the best risks, it is broader than this. It represents a sophisticated software application that integrates all new business-processing functions into a seamless electronic workflow that works with current legacy applications. In this way, the legacy system is used for data capture and record maintenance, but its core functions are pushed to the Web and automated.

Product development

A prime driver in searching for a new system is to introduce innovative and potentially complex products more quickly, with the flexibility to create a wide variety of custom products and services. System add-ons will accommodate this via add-on configurators.

Broker Communications and Connectivity

Research studies indicate brokers overwhelmingly will direct business to carriers for which “it is easy to do business.” Well in excess of 90% of those polled indicate automating broker access is at the heart of ease of doing business.

Delivering this functionality does not require a legacy system replacement. It is best handled via an add-on product implementation. Incremental costs are soon recovered through new business growth, underwriting efficiency goals, underwriting consistency and broker loyalty. Customer service levels are often significantly raised, while cost savings are generated.

Real-time integration can be put in place to link transactions from the broker management system to the carrier legacy system. Third-party reports and records can be accessed and verify the information. Gaps in the information are identified immediately and fixed on the spot. Brokers can address all of their customer’s questions in their office with no need for callbacks or follow ups, and with no need to wait for batch submissions or the need to revise and update quotes.

From a consumer perspective, customers can go on-line and submit information to obtain services when and how they want them. A user-friendly consumer portal can be used to overcome the legacy system’s limitations. Furthermore, the customer’s experience is improved because the portal is organized around that experience, not around the pre-existing silo of a given line of business or a step in a policy lifecycle. This allows the development of customer-centric applications and other innovative products that span multiple legacy silos.

WHEN TO REPLACE AGING LEGACY SYSTEMS.

Some variables point towards a major replacement. Among them:

* hardware is no longer available or no longer supported, and migration to new technology is not available;

* current system programming is not available. The classic case is the aging of programmers familiar with a certain code base. New expertise is not available, and the risk of unsupported system failure increases;

* add-ons, wrappings and modifications to current policy admin systems reach a stage that renders them incoherent, unmanageable and untestable. In this case, broken code remains a high possibility, one that will threaten the business.

Phased replacement program

When the system and/or platform just has to go, and your career depends on a successful replacement and roll-out of a new system, here a re some tips to help the process:

Adopt an iterative approach

An all-or-nothing process most often results in failure. Newer systems are built using components that address a specific functional need. They can be rolled out incrementally and deliver a small-scale “win.” Costs are spread out, motivation is improved (since results are achieved faster) and risk is reduced.

Consider the use of legacy enhancements while a larger-scale replacement program is in development

This is especially valuable if the program is multi-year. It builds upon the concept of generating smaller successes that meet ever changing business needs, without waiting for one huge all-or-nothing replacement. Take one legacy system and implement a wrapper to make it present as a web-service. When it is later replaced, the change and the cutover is seamless timely and low cost.

Select an SOA system from a vendor specializing in the insurance sector.

Horizontal vendors that provide generic tools to numerous business sectors have a poor record of success in the insurance sector.

Only the largest IT shops can handle such tools. They are very resource heavy and require expertise in not only the business areas and in software development, but also in integration, data management and software testing. In this area, each implementation is unique; it is very common to double or triple the time and costs to implement.

ADAPTATION OR REPLACEMENT?

Legacy system modernization is complex. No one answer fits everyone. Choices are varied. Actions can range from augmenting, supplementing and adapting your current systems with SOA components to rip out and replace. The result can be costs ranging from tens of thousands of dollars to millions of dollars, and implementations that can be weeks in duration or years in duration.