Proof of Capability

More and more insurers are recognizing the need to migrate from their legacy policy administration systems to more modern, flexible systems, and interest is forecast to grow in the coming year. According to industry analyst firm Novarica, "the most common top project for 2010 is policy administration, even for large life insurers, who have traditionally put off investments in this area." (Novarica, US Insurers IT Budgets and Projects for 2010, December 2009)

Yet, despite the advantages to be gained in migrating to an adaptive policy administration system, there is also considerable risk. Proofs of concept are often undertaken to mitigate the risks of such projects, and offer the opportunity to test a vendor's claims prior to implementation. Policy administration systems are central to a carrier's operations, and replacing them carries more risk than perhaps any other IT project. In light of this, it may be prudent for carriers to go beyond the traditional proof of concept and undertake a "proof of capability."

One insurance company I've worked with has done just this, using the POC as an opportunity to prove the capabilities it required from its software vendor (Oracle) and its system integrator (Capgemini). Not only did the carrier require a POC to prove the technology, it wanted proof that it had the right team in place to do the job.

During its evaluation process, the company not only examined the technology available, but the "soft" skills that set the vendors and system integrators apart. It looked at cultures, roles and responsibilities, and weighed which team could best help with implementing the proposed solution. The combined skills of Oracle and Capgemini were put to the test during the POC; it was a collaborative effort between IT and the business. The carrier's objectives were to validate that the technology could meet business needs, and that the team it had assembled could configure the software to meet those needs.

Other carriers can adopt this idea of a "proof of capability" in their own policy administration migration projects. This proven process reduces the risk of the migration project, and ultimately helps create overall buy-in across the organization. Since policy administration system migrations often go to the C-level and even the board of directors for approval, this "proof of capability" can be crucial to achieving support from all parties. It is the final validation of all the research and decision-making the carrier has done to date.

To read more about the idea of a "proof of capability," please download Proof-of-Concept" Done Right: Mitigating the Risk of Policy Administration System Migrations, a joint strategy brief from Oracle Insurance and Capgemini.

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