Solution Partner Views
Old Data Shouldn't Keep Life Insurers from Modernizing
Insurers looking to make improvements often focus on innovative new core systems, but they cannot significantly lower their costs without eliminating their legacy policy administration systems.
New admin systems have more robust functionality, are easier to use, and cheaper to maintain, which enables insurers to introduce products rapidly, improve customer service, add distribution channels with ease, and lower their total cost of ownership.
By focusing too intently on a new administration system`s merits, insurers often miss out on the cost savings that can be unlocked by retiring legacy platforms and consolidating.
Why does this oversight occur even in cases where retirement and consolidation were key to the original business justification? Oftentimes insurers do not know how to effectively handle the data residing on the legacy systems that the new systems are intended to replace.
Some carriers take the path of least resistance and only implement the new technology for new lines of business. This approach avoids the admittedly unglamorous and grinding work of data migration.
The Costs of Running Parallel Systems
Running legacy systems in parallel to modern systems gives rise to numerous concerns, such as cost. Sourcing and maintaining antiquated technology is expensive, but the real cost driver is finding and keeping the human capital necessary to maintain the legacy system. The workforce familiar with mainframes and legacy languages, such as COBOL and Assembler, is simultaneously graying and in high demand.
As companies migrate off of mainframes they tend to spread costs over the remaining business units that rely upon the hardware. As more business units in the company migrate off the mainframe, there are fewer internal customers to share the cost, ultimately saddling the few remaining business units with the bill. The cost of “just keeping the lights on” for a legacy system can be burdensome from an accounting perspective.
Additionally, possessing a single line of business, or a single product administered on two or more platforms affects customer service, because customer service representatives do not know exactly where a given policy is stored.
The good news is that while data migration is difficult and repetitive work, it doesn`t have to be drudgery for carriers who plan correctly.
Resource Management and Timing
Resource management is a primary consideration when planning a data migration. While modern tools have made data conversion easier, it is important to remember that this is not a purely technical endeavor. While technical acumen and tools are necessary to perform the conversion, insurers often fail to recognize the inherent burden it places on critical, yet finite, human resources.
Simply put, the people assigned to a data conversion project need to work on it fulltime for the duration of the project. You shouldn`t expect the person running your book of business to also manage the conversion.
Also, the range of people needed for the conversion may be wider than just IT personnel and the relevant business units. For example, compliance officers in the company should be made aware of the conversion and it`s a good idea to include them early on. You may need to forge a broader consensus when constructing a plan to manage reconciliations.
Another key to taking the pain out of data conversion is timing. Often companies will wait until the new policy admin system is live before the planning stage of the data conversion. The reality is that those companies are doing themselves a tremendous disservice if they wait. You don't have to finalize the design and configuration of your new policy admin system, which would delay the return on investment of the overall project, before you begin evaluating how good your data is and what you need to do to extract it.
A proper data hygiene protocol, which systematically evaluates the cleanliness, quality and accuracy of your data and scrubs off duplicate and inaccurate data, is an essential prerequisite of data migration. An added bonus of performing a data hygiene protocol before you select a new administration system is that this new, more complete picture of your data emerging from it will help determine which new system best fits your needs.
A second aspect of timing is knowing when to convert (and how much). While a “Big Bang” approach, where all data is converted prior to the system going into production, does have some benefits, a phased, incremental approach is often preferable. One of the concerns with a Big Bang conversion is that it can be so overwhelming that carriers don't know where to start. By beginning with your most critical data, you can rack up some easy wins and use the lessons learned to ease the conversions of other data sets.
No matter how careful you are, as soon as you put a new administration system into production, you are going to have some additional considerations. For instance, you should assume that once your users start accessing the new system, they are going to want a few changes. It`s best to make these changes—and others like them—when policy volumes are low. Once you`ve made the adjustments and have the new system locked down, then you can begin to bring over additional converted business. No doubt each block of business moved will present some new challenges of their own.
While you don't want your employees spending a year bouncing between the legacy and new systems, you do want to allow enough time for a measured and orderly migration process. Giving yourself enough cushion to account for the inevitable hiccups you will face is essential.
There are also some tactical considerations that can ease data migration. While conversions were once done manually through laborious data-mapping and spreadsheets, new tools offer alternatives to this type of table-to-table conversions. Now, you can take a more entity- or rules-based approach by defining what you are looking for through rules and then building your conversion around those guidelines. This flexible approach means that data that matches certain, defined criteria is converted with minimal effort.
By planning ahead and taking a thoughtful approach, you can help take the sting out of data migration and conversion. With all your data finally converted and consolidated in one place, you can then fully reap the rewards of system modernization.
Sapiens, is a global provider of insurance software solutions for the life and annuities, property and casualty, retirement services and reinsurance markets.