Insurers Hold On To The PastInsurers Hold On To The Past

When the field staff of Kansas City Life Insurance Co. began asking for more access to data, the provider of life, annuity, and group-product insurance realized it needed to upgrade services for its 1,400 agents. "We wanted to build a system where the field force could obtain data from the administration system, but we didn't want to rebuild the entire infrastructure," chief technology officer Leslie Freund says.

The decision to extend the life of the legacy system wasn't purely to avoid cost and complexity. The 25-year-old system still does a good job of administering products. "To replace the entire system would have required us to map all of the knowledge in the system and how the data is stored," Freund says.

To extend access from its mainframes to its agents, Kansas City Life turned to ClientBuilder from ClientSoft Inc. Although it won't reduce the legacy operating costs, the technology has met its goals. "The funding for the project was based on improving performance and increasing the number of users," Freund says. "We were able to triple the number of users."

The question about the future of mainframe legacy systems is a perennial favorite. These systems hang on as the core of many insurance operations, housing years of valuable customer, sales, and financial data. But as customers require more immediate access to information and services, many insurance companies are adapting legacy systems to today's business needs to avoid losing customers.

Many insurers would like nothing more than to scrap their older systems and bring in new, lower-cost Web-based applications. But in today's budget climate, few can even consider such a project. So insurance companies are turning to XML, Web services, middleware, and component-based development technologies to extend the life of their legacy systems and enhance functionality to meet business demands.

Many insurance companies are taking the same gradual approach as Kansas City Life. Aside from being cost-prohibitive, replacing a legacy system can take well over a year. "There's a laser focus on short-term return on investment," says Cecil Bordages, VP of property and casualty strategy and architecture at outsourcer Computer Sciences Corp. "We no longer see IT getting approval for projects that are longer than 18 months. A rip-and-replace project takes three or four years at most insurers."

To take advantage of existing legacy systems and gradually extend functionality to users, insurers need to do a number of things: prioritize the limitations of legacy systems and the problems they create; get support for change from senior management; and decide which legacy systems have run out of value. "Sometimes, the business pain is so great and the code is so old that there's no choice" but to retire a system, Bordages says.

Unitrin Multi Lines Insurance, the property and casualty division of Unitrin Inc., needed to extend access to its legacy systems in order to let its more than 2,000 independent agents rate, quote, and eventually endorse policies over the Internet. To provide the functionality, Unitrin MLI considered replacing the administrative systems, but the magnitude of the work proved too much. "We focus on what matters to the agents, and they don't care what our back offices look like, as long as they have the functionality," VP of IT Roger Buss says.

Unitrin turned to CSC, which had provided the existing 20-year-old Series 2 policy-administrative system. CSC's iSolutions is a Web front end that interfaces with Unitrin's administrative systems. Unitrin added its own features to iSolutions and renamed the system XSellARate. To date, return on investment has exceeded expectations, with more than 90% of new agent submissions coming through the system, Buss says.

The biggest challenge Unitrin encountered was scalability. "We're one of the bigger customers for iSolutions, and at first we had some stability issues," Buss says. "We've solved those problems, and today we have over 3,000 quotes per day and the volume continues to grow." But Unitrin is still swallowing the same maintenance expense for its legacy systems.

Liberty Insurance Services Corp., the third-party administrator division of RBC Liberty Insurance, is gradually retiring its legacy apps. "Because we had acquired a lot of technology on a case-by-case basis, applications dominated everything, but a central infrastructure wasn't there," says David Meehan, chief technology architect at RBC Liberty. "We also had high costs to support the applications." The company uses Microsoft's BizTalk server as its integration server.

Liberty Insurance Services' "unified environment" strategy has a difficult long-term goal: one application per business function. "The core of the strategy is to move from seven legacy systems to one," says Steven Bryzeal, strategic application architect at RBC Liberty. Liberty Insurance Services' technology architecture steering committee, a panel of IT and business executives, approves all decisions on architecture and spending. Moving to one system will cut RBC Liberty's system-support costs by 30%, Meehan says. And the company is aiming to retire its mainframes in the next three to five years. "We can't live with the sins of the past," Meehan says.

If they want to remain competitive, neither can most insurance companies.