How many insurance carriers are ready to make a substantial capital investment in a new policy administration system? That noise you hear is the sound of thousands of hearts pounding faster in the executive offices of virtually every insurance company in the countrythe prospect of such an investment is frightening for most carriers. A policy administration system is the motor that drives the insurance operation, and carriers cant afford to let the policy administration system break down. Neither can they afford in these times to run out and buy a new system.

Some carriers dont have a choice, though. You can patch things together only so long before the care and feeding of a sick or unwieldy system becomes prohibitive. OneBeacon Insurance Group, a property/casualty insurer formed through mergers and acquisitions, had nine different systems managing policies for its commercial lines. A single system was inevitable. It allowed us to bring some of the newer technologies to bear and enabled us to do things we were incapable of doing before, says Arne Herenstein, vice president application development for OneBeacon.

John Goldwater, executive vice president of GE CyberComp, a division of GE Commercial Insurance, knows hard choices have to be made. I look at policy administration systems, and they traditionally require a substantial capital investment, he says. Depending upon the size of a carriers business, that may or may not be a worthwhile investment for it to make.