System Standardization in Insurance: The Complexity of Simplification

by Nicolas Michellod, April 21, 2015
Industry Trends
Global

Abstract

Insurance companies are notorious for running complex core system landscapes. However, insurers over the last few decades have been trying to improve their situation to better serve their business needs and reduce license and maintenance costs.

In the report System Standardization in Insurance: The Complexity of Simplification, Celent provides findings of a survey launched in the fourth quarter of 2014. The survey’s objective was to understand what insurance companies have been doing in terms of IT standardization.

“Business considerations are the most important factors that drive system segmentation decisions,” says Nicolas Michellod, a senior analyst with Celent’s Insurance practice and author of the report. “Insurers want to focus on process automation (straight-through processing) where possible, which is the main reason they consider when standardizing their systems.”

This report looks at application standardization, principles used by insurers to standardize their systems, and what they plan to do in the future. Celent also offers descriptions and recommendations of analysis tools that can be used as a framework to help them simplify and standardize their system landscape.

This report contains 14 figures.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Survey Methodology

2

 

Survey Structure

2

 

Panel of Participants

2

Application Standardization

5

 

Standardizing Applications by Line of Business

5

 

The Single Component Approach

6

Segmentation Principles

8

 

Policy Administration System Segmentation Approach

8

 

Reasons Influencing Segmentation Decisions

8

 

Ranking Business Reasons

10

 

Evolution of Business Considerations Impacting Standardization Decisions

11

The Future Evolution of Core System Standardization

12

 

Desired Segmentation Going Forward

12

 

Recent Evolution, or The Insurer’s “I Had a Dream” Moment

13

Conclusion and Celent Recommendations

14

 

The Market Entry System Identification Framework

14

 

Identifying Business Component Similarities

15

Leveraging Celent’s Expertise

17

 

Support for Financial Institutions

17

 

Support for Vendors

17

Related Celent Research

18

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