Case Study Highlight: Core Systems Replacement at CSAA

Chuck Ruzicka

As we approach the announcement of the Novarica Impact Awards in the fall, we will be highlighting one Impact Award nominee each week on our blog. The Novarica Impact Awards are voted on by over 300 members of the Novarica Insurance Technology Research Council, making them the only purely peer-reviewed awards program in insurance technology.

Many of the 2016 Impact Awards nominees cited cross-functional teams, with resources familiar with multiple business areas, and the use of Agile methodology as keys to a quick and successful delivery. Many projects focused on systems consolidation and speed, combining disparate core systems to improve product development and time to market.

This week, we look at a CSAA core systems replacement initiative.

Multiple acquisitions and expanded partnerships among AAA regional clubs left CSAA with a large, complicated integration architecture that spanned multiple legacy core systems. CSAA needed to replace and consolidate these systems in order to improve infrastructure and policy service, as well as cut costs while laying the groundwork for growth. The project required over fifty internal and external integrations of the organization’s six PAS and three billing systems. While this was a substantial organizational challenge, the company ultimately credits success to its prioritization of the project and use of top project management. Moving program analysts into sustaining operations roles and establishing support and advisory were also key factors. Ultimately, the replacement initiative reduced time-to-market for new products by 50% and decreased underwriting expense ratio by 1%. CSAA also reported a savings of $26 million as a result of retiring two legacy systems, and its DPW increased from $2.6 billion to $3.2 billion.

For more detail on this project and more than 30 others, including cases from MetLife, AIG, Michigan Millers, and Aflac, see Novarica’s Best Practices Case Study Compendium 2016.

Case Study Highlight: Rapid Product Launch at Legal and General

Tom Benton

As we approach the announcement of the Novarica Impact Awards in the fall, we will be highlighting one Impact Award nominee each week on our blog. The Novarica Impact Awards are voted on by over 300 members of the Novarica Insurance Technology Research Council, making them the only purely peer-reviewed awards program in insurance technology.

2016 Impact Awards nominees consistently cited cross-functional teams, resources familiar with multiple business areas, and the use of Agile methodology as keys to a quick and successful delivery. Many projects focused on systems consolidation and speed, combining disparate core systems to improve product development and time to market.

This week, we look at a Legal and General initiative to enable rapid product launch.

Legal and General sought to expand the reach and market presence of its pension risk transfer product within the United States. Legal and General updated existing systems to include 90% of the most common retirement and annuity products in just 100 days. Agile methodology and program structure created a common team understanding of the initiative, and both were critical to the rapid delivery of the project. The team also notes that internal communication was always open, frequent, and responsive, and that executive support from the project sponsor was consistently supportive. Subject matter experts that provided user feedback were also valuable assets to the project. The finished project includes improved payment processing, new business onboarding, and product build-out. Despite its short timeline, the project remained on budget at $1 million and also changed 80 COBOL and 150 Delphi programs. Since its delivery, the new system has allowed for the addition of over $500 million in new business within six months.

For more detail on this project and more than 30 others, including cases from Aflac, Heritage, Michigan Millers, and Trustmark, see Novarica’s Best Practices Case Study Compendium 2016.

Insurers Need to Focus on Time to Value for Core System Replacements

Jeff Goldberg

Insurance core systems are not going to last thirty years anymore. That’s one of Novarica’s key messages about core system replacement. The pace of change, as always, is increasing, and a system an insurer puts in place today will have a lifespan of about ten years. Sometimes systems stick around longer than their actual lifespan–as a platform for legacy data or as a system that’s been offloaded to a BPO–but the new policies and claims will be flowing elsewhere.

At the same time, the time to implement new core systems has been increasing. Modern core systems have made huge improvements: they are configurable, have open architectures, accessible data, and help drive best practices at an organization. Unfortunately, insurers are spending years putting them into production. On average, mid-size insurers take 2-4 years (if not longer) for a complete implementation of all lines and states. These long timelines are partially driven by insurers looking to take a slow rollout approach to minimize risk. It’s also because insurers take too much advantage of the flexibility in configurable modern solutions.

Whatever the reason for these long timelines, it’s made more alarming when one considers the lifespan of the system. A system that will last ten years takes 4 years to implement? That means an insurer spends almost half the system’s lifespan putting it into production! This is not a sustainable trend.

What should an insurer looking to replace a core system do about this?

  1. Focus on reducing implementation timelines with the vendor. Push them for reasonable but aggressive milestones, but remain skeptical unless they’ve proven those timelines with other clients.
  2. Look at time-to-value. Understand the difference between getting everything into production and getting something of value. Even if there’s a longer timeline for the whole project, an insurer should be live and seeing real results early on in the implementation.
  3. Accept the system’s built-in best practices. Any time the team considers configuring the system away from its out-of-the-box behavior, someone should be pushing back and asking whether that change is really necessary.

There is some good news. When an insurer chooses a new core system, the goal isn’t just to find the best system for today but the best system going forward. A vendor will continue to improve and expand their offering, so understanding the product roadmap is just as important as understanding the current feature set. It’s the insurer’s job to work with the vendor to take frequent upgrades and keep the system up-to-date.

If an insurer follows the upgrade path, putting the time and resources into continual modernization, that means in ten years’ time the system they put in place today will hopefully have evolved and grown into a new system that reflects the latest trends and technology. So a ten-year lifespan doesn’t necessarily mean that an insurer will need to start a brand new vendor selection and replacement project. The new system in ten years might be with the same vendor they started. On the other hand, if the insurers hasn’t kept up-to-date, then they will find themselves running the next legacy system. The cost of upgrade will have grown so expensive that it’s as expensive as bringing on a brand new system. So either the insurer puts the time and resources into upgrading all along or they put that into another system replacement project in ten years.

This means an insurer looking to replace a core system should follow one more rule:

    4.Talk to the vendor about their upgrades and how to start on the right upgrade path early and often. If the overall implementation timeline is more than a year, then the insurer should go through at least one upgrade before that initial project is even complete.

As an industry we need to focus on getting a faster time to value for core system replacement projects. But we should also be making sure the systems we put in place today don’t become legacy before the system is even live.

Adapt or Die? Not Really.

Matthew Josefowicz

There’s a lot of hype along the lines of “adapt or die” when it comes to legacy systems replacement for insurers. Unfortunately, the urgency in this statement is misleading. Legacy systems are not a Y2K problem – there’s no ticking time bomb. And legacy systems or not, it takes an insurance company a long time to die. Policies are sticky. Renewal rates are high as long as you don’t raise premiums or stop paying claims.

A more accurate, but maybe less catchy, slogan might be “Adapt or Decline.” Without digital channels, effective data analytics, and agile core systems, insurers will face declines. Their agents and customers will first tolerate and then resent their poor communications capabilities. Their actuaries, underwriters, and claims adjusters will start to under-perform the market for lack of data and analytical capabilities. Their product freshness will grow stale compared to more agile peers as core systems inhibit speed-to-market.

Legacy replacement is not about avoiding death – it’s about making the hard decision to arrest the decline sooner rather than later.

Related Research:

The 13 “Don’ts” of Core Systems Implementations

Chuck Ruzicka

Implementing a new core system is always a learning process for an organization. While every insurance company is different, all of their system implementations tend to encounter the same sorts of difficulties. In my most recent executive brief, I outline the following 13 common mistakes to avoid in core systems implementations. Keeping these 13 “Don’ts” in mind will help to reduce the risk associated with these challenging transformational projects.

  1. Don’t Expect Too Much from Solution Providers and SIs. While they have experience, neither the solution provider nor the SI should be asked to lead or manage the entire project. Carriers must maintain overall ownership of the project.
  2. Don’t Ignore Solution Provider Recommendations. Solution providers are the experts in what their system can and cannot do. Respect their expertise. Carriers should explore configuration approaches exhaustively before thinking about asking for system changes.
  3. Don’t Create Win/Lose Situations. Micro-managing solution provider staffing, costs, and actions can be counterproductive. Instead, insurers should manage outcomes and agree on work processes and how transparency will be created. The end goal of a successful implementation should be a strategic partnership.
  4. Don’t Be Afraid to Create a Backlog. It is better to go live faster with a base system and learn from it than to go live later with a feature rich system that may be underutilized. Insurers should communicate this clearly to business users, assuring them that the initial release is not the final product, and that backlog items will get delivered.
  5. Don’t Ask to Change the System until You Understand It. Insurers should examine configuration options extensively—most modern systems can meet most needs through configuration rather than customization. Insurers should be open and understand suggested alternatives.
  6. Don’t Over-Engineer Your Workflows. Too many carriers build multiple business rules and notifications only to take them out in their second releases. Insurers should understand work queues and query capabilities, and ask whether business users would prefer query and queue tools or rules and notifications.
  7. Don’t Build Unnecessary Control Reports. Many companies have hundreds of reports that modern systems make obsolete. Modern systems accomplish all these with filters and views within work queues.
  8. Don’t Perpetuate Legacy Master Data. Legacy systems with poor data structures or configurability often made it easier to embed payment types, LOBs, and other business data into fields meant to do something else. Insurers should clean up these tangled data structures rather than perpetuate them.
  9. Don’t Convert Data When You Don’t Have To. Carriers should understand the cost for converting historical policy data and detailed transaction data before committing to expensive conversion projects. Data warehouses, document management systems and legacy inquiry environments can often be viable and much cheaper sources of the required data.
  10. Don’t Treat This as a Part-Time Job for Senior Leaders. Insurers need to free up their best people and backfill for them to get these projects done fast and right. Full-time project managers, adequate-skilled BAs and adequate testing resources must be assigned to complement the development team and solution provider resources.
  11. Don’t Skimp on Environments. Having too few environments can create artificial constraints that delay the development effort and limit the productivity of a carrier’s most expensive resources.
  12. Don’t Be Afraid of Risks, Manage Them Instead. Carriers can manage implementation risks by resourcing teams adequately, investing in quality assurance, creating transparency, and having the end users review deliverables from each sprint. The financial risk of cost overruns must also be managed. Successful carriers assign portions of the overall program budget to each project and work stream in advance.
  13. Don’t Expect the Organization to Change on Its Own. Many individuals within an organization will be apprehensive about the impact of the changes that implementation projects will trigger. Carriers should align the organization by communicating the need for change and the benefits to be achieved. The end goal is a culture that embraces and contributes to change.

Implementation projects are often painful and downright ugly. Ironically, carriers typically end up better prepared for the project after they complete it than before they start it. Avoiding these 13 “don’ts” can help insurers avoid pitfalls sooner rather than later.

Novarica Council Gathers Insurer CIOs to Address The First Year of the Future

Matthew Josefowicz

Nearly 70 IT leaders from more than 50 insurers gathered last week at the 9th Annual Novarica Insurance Technology Research Council Meeting to participate in panels and workshop sessions with their peers, get insights from Novarica’s senior team, and attend keynote sessions from outside experts on operational transparency and cyber-security.

The First Year of the Future

We dubbed last year “The Year the Future Arrived” for insurance, when nascent trends like wearables, Internet of Things, consumer internet giants’ interest in the sector, and a growth of direct sales beyond personal lines became a reality. This year, the clock is no longer counting down, but counting forward.

Keynote: Nine Trends and Issues…


My keynote focused on our Novarica Nine for 2016 and Beyond, looking how these and other trends are shaping the industry, as well as what kinds of technology strategies insurers are taking to address these trends, and how they are managing their IT organizations to deliver these capabilities.

…100 Technology-Enabled Capabilities


We also reviewed our expanded “Benchmarking the New Normal” framework, which we will publish this summer, looking at deployment rates for 100 key technology-enabled capabilities across functional areas like product, marketing, distribution, customer engagement, billing, claims, and finance/operations and technology areas like data, digital, and core.

CIO Panel: Core, Agile, Evolving Customer and Employee Dynamics

Our CIO Panel, which included Kate Miller of Unum, Scott McClintock of OneBeacon, and Paul Brady of Arbellla, addressed strategic issues ranging from core systems replacement to embracing agile development to redesigning their organizations to make insurance IT an attractive career option for millennials.

Operational Transparency for External and Internal Customers

Our guest keynote, associate professor Ryan Buell of Harvard Business School, presented his research on operational transparency and its impact on customer service to a tremendously responsive and engaged group. We’d invited Dr. Buell to join us because his research is so applicable not just to the insurance customer experience, but to the relationship between IT and other business units. See this recent post for more on this session

Novarica Research on Core Transformation, Data, Digital

On the second day, the Novarica panel of Rob McIsaac, Martina Conlon, Mitch Wein, and Jeff Goldberg from our team discussed some of their recent research and customer projects in areas like core systems selection, transformation project assurance, data strategy, meeting agents’ digital needs, and a wide range of other trends and best practices.

Discussion Groups of CIO Members Focus on Their Key Issues

Special interest group discussions for group voluntary benefits, individual annuities, individual life, personal lines, specialty, commercial lines, and workers comp explored recent research relevant to each sector. In discussions co-led by a Novarica expert and a CIO chairperson, these groups addressed topics like enrollment standards, impact of the DOL fiduciary ruling, market dynamic changes, ISO rating, and core systems vendors.

Cyber-Security Threat Evolution and Preparation

Distinguished professor and Department of State cyber-security adviser Dr. John Savage gave a closing keynote on the cyber-security, emphasizing the importance of managing security beyond perimeter protection and staying engaged with industry groups to monitor the evolution of new threats globally.

Knowledge-Sharing and Networking

novarica-councilCouncil members valued the opportunity to network and learn from each other in a private, vendor-free environment, and many of the special interest groups have already made plans to meet again later this year. We’ll be publishing a report summarizing the discussions and panels next month, and the 10th Annual meeting will occur in late April, 2017.

For more information on joining the Council, senior insurer IT executives are invited to visit and request membership. Membership is free and has no obligations.

Policy Admin, Corporate Governance, and Disrupted Distribution

Matthew Josefowicz

Policy administration system replacement and evaluation activity is at an all-time high across the industry. Across both life/annuity and property/casualty, policy administration systems vendors are offering suites that include not just traditional policy and rating functions, but billing, claims, portals, documents, and business intelligence capabilities.

Yesterday, we published our 2016 Novarica Market Navigator on P/C PAS solutions (complementing the LHA edition published last month). This report covers more than 50 vendor solutions, with individual profiles averaging more 10 pages, providing detailed information on the functionality of all of the sub-components on the system. These reports also include single-page executive summaries for each vendor.

Together, they provide more than 900 pages of research on these important vendors. Jeff Goldberg and Tom Benton will review and discuss this research in a webinar on Wednesday at noon.

Large strategic projects like policy administration system replacement highlight the importance of corporate governance when it comes to technology strategy. According to our recent research, 89% of insurer CIOs say their board members don’t know the right questions to ask about technology, and end up overfocusing on risks rather than opportunities. Frank Petersmark and I will discuss this on a webinar on March 28.

Life and retirement board members will have a lot to think about as the new DOL regulations take effect, requiring sellers of retirement products to act as buyer fiduciaries, and completely disrupting distribution in this marketplace. Several large insurers have cited this change as the reason for divesting their distribution arms, and more change is afoot. Rob McIsaac has been discussing this with our annuity and retirement Council members, and shares his thoughts in a new executive brief.

Policy Administration Systems: A Gateway to the Future

Rob McIsaac

With a rapidly changing and fragmenting market place for insurance, core replacement is becoming increasingly essential the L/H/A space.  Updating of legacy systems is important for capabilities like customer experience, BI/analytics, and product innovation which become key differentiators in an increasingly competitive, and transparent, world.

In response, vendors for L/H/A policy administration systems are offering more options for implementation to lower risk and cost. However, so many options can make the selection process seem daunting.  Our most recent Novarica Market Navigator report provides an unparalleled 284 pages of detail about the current market and the vendors in it.

When selecting a solutions provider for a policy administration system, there are a number of factors that carriers need to consider. A well-developed system should integrate downstream and back office systems. It can support either single or multiple lines of business, and it may also interface with single or multiple distribution channels. The system may also offer a suite of capabilities, and if it doesn’t, it should be designed to interface with solutions providing those other mission critical capabilities.

The future has arrived, and L/H/A carriers have renewed their focus on policy administration system replacement in 2016.  Although there are many factors and options to consider the reality is that carriers across most lines of business now are recognizing that the technical platforms that have served them well in the past simply lack the flexibility or capacity to deal with an evolving economic environment.  This new Market Navigator report can be a “must read” for those developing strategic plans for the future.

Related Reports

  • Life/Health/Annuity Policy Administration Systems 2016
  • Consider the Future when Evaluating Today’s Insurance Systems

    Chuck Ruzicka

    Over the past few years, I’ve worked with many insurers on core policy administration vendor selection, and I’m excited to have joined a team with so much existing experience in this area.

    While most selection processes focus heavily on features, configuration tools, architecture and implementation methodology, it is equally important to understand the vendor’s upgrade process and history. Since business needs and technology continue to change rapidly, a key selection factor for a vendor partner is their ability to evolve to support tomorrow’s needs, and not just today’s.

    One predictor of the future is the vendor’s record for helping customers migrate to newer versions of their software. The decision to upgrade can be impacted by factors outside the control of the solution provider such as:

    • Business priorities like entering new states, deploying new products or an acquisition
    • Budget constraints due to poor underwriting results
    • Complexity of multi-year implementation of business transformation projects

    Regardless of these external factors, upgrades are most likely to be dependent on the vendor itself. In Novarica’s most recent Property/Casualty PAS Market Navigator report, one key difference that emerged between solution providers was the percentage of current clients on versions of systems that were three years old or older. The reasons for these vendor solution differences should be investigated and assessed as part of the software evaluation process. Prospective clients should consider the following:

    1. Value of roadmap items. Does the vendor’s solution roadmap suggest enough new capabilities or improvements with each upgrade to warrant implementation? Well-architected and mature systems may have much of the desired functionality and integration capabilities such that upgrading becomes less important. Even if this is the case, this difference is still relevant due to changes in infrastructure components and the risk of technological obsolescence. Ease in upgrading is more critical if a vendor is catching up or building out new competitive capabilities.
    2. Solution provider release strategy. Some solution providers incorporate all minor releases into the scope of their implementation projects. Others hold back release updates until the system is fully implemented. What is the impact of delaying the incorporation of new functionality during the implementation? Competitors who have already implemented a new system may be leveraging those new roadmap features before you complete your initial implementation.
    3. Velocity of change. Frequent and material releases will drive a higher need for related regression testing capabilities and possible infrastructure upgrades. How will your organization respond to those demands? How will your QA organization manage release (regression) testing along with functionality testing?
    4. Upgrade accelerators. Does the solution provider offer adequate guidance regarding how to configure and manage the system to facilitate future upgrades? Do they have the tools and a proven methodology to make this process easier and less painful?
    5. Upgrade barriers. Potential clients should ask longer term clients either why they haven’t upgraded versions in several years or conversely, what did it take to implement the most recent upgrade. Project team size, duration, challenges and available assistance should be understood. While it is always useful to talk to new clients about methodology, new features and configuration tools, existing clients should also be contacted.
    6. Impact of configuration upgrades. If solution providers have improvements to their configuration tools in their roadmaps, be sure to ask if products implemented in prior versions will automatically roll forward or if a conversion effort is required. You may be surprised by the answer.
    7. Value of more frequent upgrades in a managed service agreement. An additional consideration is whether or not you will get earlier benefits realization from a managed service agreement. SaaS installations tend to be on more current versions of the software. If your organization does not have a disciplined program for upgrading software components, you may benefit from a SaaS implementation.
    8. Selection criteria weights. Given all that you learned by considering the prior seven items, should your selection criteria weighting be altered? Does it give enough weight to differences in upgradeability?

    No one wants to be buying a system that will become out of date and require a large scale replacement project in the near future. One way to avoid this is to purchase a system from a solution provider that invests in the future and has a clear and cost effective methodology for managing software upgrades.

    Please don’t hesitate to contact me at to learn more about our policy administration and other core system vendor selection services. You can also check out:

    Top Technology Priorities for Personal Lines Carriers

    Jeff Goldberg

    Today’s personal lines marketplace is more competitive than ever due to slow growth, intense price competition and customer acquisition costs rising.

    Personal Lines insurers have always been a leader in insurance technology innovation and conversations with CIOs and research in the space shows that trend will continue, with technology playing an ever-larger role in insurers’ ability to attract, retain, and profitably serve clients. Across the industry, insurers continue to make investments across the Novarica Insurance Core Systems Map.

    Novarica Insurance Core Systems Map: Personal Lines

    Novarica Insurance Core Systems Map: Personal Lines

    In a market with very competitive conditions and intense profitability pressures, personal lines carriers are focusing on growth strategies, expense reduction, and improving underwriting results. Below I have listed four technology priorities CIOs and business executives should consider to remain competitive.

    Business Intelligence
    A data quality initiative, which examines data warehousing, operational data stores, and appropriate data marts, is key before undertaking more advanced business analytics initiatives. Once data quality is ensured, carriers can then overlay business intelligence tools. Predictive analytics tools for carriers with sufficient data are becoming more popular. Small carriers should look at working with an organization that can provide pooled data and insights. All carriers can use models to improve underwriting insights, to more consistently apply pricing, and to improve claims activities. In addition, third party big-data sources are going to become more and more prevalent for personal lines insurers. Companies who take advantage of this first will have an edge in pricing and retaining business.

    Policy Administration Systems
    Upgrades to policy admin systems will help carriers gain operational efficiencies and flexibility in the ability to add data. Using business rules to manage workflow and predictive analytics to build pricing models can improve risk selection, risk pricing, and reduce operating expenses. Carriers should look for highly configurable solutions with product configurators, simple rules, and tools for launching new rating algorithms. They should also look for the ability for business units to make their own modifications, though practical experience with configurable systems reveals IT often still ends up managing most changes. As long as the time and cost of such work for IT is reduced, that’s still a big value.

    Agent Connectivity
    Extending functionality to the agents continues to rise in importance. It’s less and less about differentiation and more and more simply the price to pay to be in the game. At this point in time, most personal lines insurers have built an agent portal, and are often quite proud of the results. As a next step, both agents and carriers would prefer to receive and provide information electronically and process that information with as little human touch as possible, eliminating double entry. Real-time upload, download, and data translation deliver tangible benefits including reduced costs of handling, improved data quality, and improved turnaround time.

    Claims Management
    Streamlining claims management by automating processes improves customer service by speeding up claims service, providing consistent and fair best practices to all customers, and delivering personal service. On top of these customer benefits, insurers who have implemented modern claims systems report tangible speed-to-market benefits. If a carrier hasn’t already begun to upgrade their claims administration system, now is the time to start. Carriers who are using modern systems are rapidly gaining competitive advantages by improved efficiencies in claims handling and improved data leading to better outcome management. In addition, better claims processing has become a significant part of how personal lines insurers market themselves to consumers and how consumers select an insurer.

    These technology priorities are based on the expertise of Novarica’s staff, conversations with members of the Novarica Insurance Technology Research Council, and a review of secondary published resources. For more information, download a free preview of our new Business and Technology Trends: Personal Lines report at: or email me to set up a complimentary 30 minute consultation.

    Related Reports