Steve Forte, director insurance strategy and alliances, OneShield, Inc.
It seems one cannot help but rehash debate in the insurance industry. I suppose we are not that unique but certainly fixated on issues that long seemed resolved, akin to best of breed. Legend has it that only the largest (and financially capable) insurers would embark on a journey of replacing core insurance applications (for example, policy administration) from numerous vendors.
However, as we have witnessed, this was the norm. Insurers with fewer resources (people, skill, money) than their bigger brother, tended to purchase a suite of products (policy, billing, and claims--the trilogy) from a single vendor for a multitude of reasons, including but not limited to:
? Reduced complexity of integration
? Central location of data
? Vendor management
While the above reasons appeared sound, the reality is much different. Insurers that licensed the trilogy from a single vendor discovered the three products were developed in silos and thus did not have a central location of critical data to query, nor did this ease the complexity of integration, especially if new and/or proprietary languages were introduced into the architecture of the insurer.
Some suite solutions cannot be sold as separate components. If an insurer wanted to only replace policy administration and look down the road to claims and billing, they would have to license all three even if they never installed the other components.
The most impactful tradeoffs with the suite approach are the loss of business functionality within one or all components, and insurance specific content (e.g. rules, workflow). Insurers ideally would want/need to replace these systems every 15 - 20 years.
Modern solutions are architected to provide separation between presentation, business logic and persistence. Some vendors have developed adapters for nearly all commonly utilized insurance integration point and provide implementation patterns and designs to reduce the complexity of integration.
When making this kind of investment that will impact your business for years to come, why is there an argument that best of breed is only for the big boys?
Steve Forte can be reached via email at [email protected].
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