Given the need to facilitate business processes in a highly competitive industry, insurance technologists could be forgiven for favoring tactical concerns over strategic ones. Yet, given the rapid changes sweeping through the information technology landscape, a broad view of how systems, application and business capabilities work best together is now well warranted. Accordingly, Insurance Networking News asked Deb Smallwood, founder of SMA Strategy Meets Action, a Boston-based strategic advisory firm, about the findings from their current research project "Modern Architecture."


INN: What are the tenets to modern application architecture?

DS: The purpose of a modern architecture is to create a framework showing how all the application components needed to support required business capabilities fit together. This framework serves as the blueprint for making IT investments and a guide for setting IT priorities.

The modern architecture goes beyond the policy administration and claims systems. It provides an integrated application foundation for features and function across all departments, all products, and all lines. It creates an environment for sharing and reuse of advanced application components, engines, rules and tools such as geospatial mapping and cat models across the enterprise. It also defines the requirements for various graphical user interfaces and customer communication and content tools such as voice, document management, scanning, and imaging. It points out where data services such as those used to provide business intelligence and data tools like those used for ensuring data quality are needed.

When the modern architecture (shaped by integrated core systems-the processing heart of the business) is in place, it is easy to integrate advanced application components. Doing so enables an insurer to capitalize not only on the core applications but also on the wealth of tools, engines, and technologies available in the marketplace that offer improved service, faster product development and implementation, more effective customer communication and insight for competitive advantage.


INN: What is the relationship between strategy and capability?

DS: This is an important question and one insures should spend time thinking about. Step one is to appreciate the correlation between specific business and technology capabilities that will enable the business to achieve its goals and expected outcomes. Linkage between the business strategy and functional capabilities required to achieve that strategy is essential in today's marketplace. The enabler for this linkage is the technology.

Imagine a business processing environment where workflows cut across the various departments, where external partners and channels are incorporated into the workflows, where processing is integrated across different systems, and where all players are talking to each other and using high-quality common data. Here, business processes and systems are easy to use and easy to change. This integrated world is the foundation for a responsive, dynamic business. At the core of this vision, where business processes connect throughout the organization as all stakeholders share the same information, is a modern architecture that enables integration for all applications, workflows, tools, services and data.


INN: What are commons mistakes carriers make when modernizing?

DS: The most common mistake insures make is thinking that with the implementation of a new, up-to-date policy or claims system, the modern architecture is complete. In reality, it is a start and provides a solid foundation, but there are many more components required to realize the full potential that a modern architecture can deliver to the enterprise.

The other mistake insurers commonly make is not recognizing the complexity of integration and failing to have a game plan that successfully addresses it. Insurers often find themselves in a position of only adding to their already tangled hairball of systems and ending up with point-to-point integration that yields a very complicated, inflexible environment.

The framework for a modern architecture, coupled with a clear picture of the current functional and IT environment, makes a great tool for both the business and IT to have a conversation around. It helps the company be realistic about where they are today, where they need to go and how big the gap is.


INN: Is the pendulum now swinging back toward enterprise solutions and away from best-of-breed?

DS: There is a swing, but it's landing right in the middle between best-of-breed and enterprise. Best-of-breed was all the buzz in the early 2000s and enterprise was the "bad word." At that time, best-of-breed was really the only option for moving toward a modern architecture.

The past enterprise solutions were typically based on older technologies and were proprietary/closed systems with no direct access to the data and business rules-full control was retained by the vendor.

After years of experience, the industry has proven that a best-of-breed approach requires skilled resources as well as time to integrate the many disparate piece parts together. Depending on the sophistication of the insurer's technical capabilities, it can be a significant challenge and a risk. On the flip side, the insurance solution provider community has invested significantly in the new age of enterprise solutions that incorporate a modern architecture-full feature, function and integration plus a common data model. Today, there are options. Determining the best fit depends on the insurer's required business and technology capabilities.


INN: Can insurers use a combination?

DS: Absolutely. This is a new emerging approach SMA is observing across the insurance industry. A hybrid approach is blending an enterprise solution for some or all of the core applications and a best-of-breed approach for other core application systems or application components. An enterprise solution provides the architecture and the common data model, and it enables easier integration throughout the organization. This foundation can then be supplemented with best-of-breed application components for an area or areas that are unique or of strategic importance, should the enterprise system not deliver equivalent strategic value in that area for the company as a whole.


The hybrid approach offers many advantages. A hybrid approach makes sense for most insurers. It is no longer possible for insurers to fund many significant technology investments only to discover their investments do not "add up" to what they really need: flexibility, agility and the ability to dynamically respond to changing market and company needs. Depending on the mix and number of vendors, the hybrid approach can offer an alternative that is quick to implement for an insurer needing a modern, integrated architecture-one that helps the business meet its strategic objectives and rapidly achieve expected outcomes.

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