Core System Vendors Offer Configuration Capabilities to Growth-Hungry Specialty Insurers

Xuber and Instec take different routes to provide specialty carriers with capabilities supporting product speed-to-market.

(Photo credit: Ralf Roletschek.)

Specialty insurers seeking profitable growth need better product development capabilities than their legacy core systems typically have. To answer that demand, vendors are providing greater product configuration capabilities so that carriers can get new product offerings to market quicker to meet emerging demand.

Carriers hungry for growth may look to expand into new territories or differentiate through product innovation, both of which tactics require the ability to rapidly add new products, according to Karlyn Carnahan, research director, Celent. “They also require the ability to easily change products – to modify pricing, underwriting rules, forms, etc. – to increase profitability,” she notes. “For many carriers, their old systems simply don’t permit this kind of easy, agile change, which is part of why so many carriers have been transforming their core systems over the last few years.”

Prioritizing Speed-to-Market

Karlyn Carnahan, Research Director, Celent.

Karlyn Carnahan, Research Director, Celent.

Given the limitations of their legacy systems, insurers will prioritize product speed-to-market as a component in their evaluation of replacement system candidates, Carnahan says. “They generally look for a starting point for each line of business – ISO or not – and highly configurable tools so that they can continue to modify and maintain their products.”

Xuber, the insurance software business of Xchanging plc (London) is addressing carrier demand for such capabilities through the announcement last month of built-in, market-specific configuration packs tailored for U.S. specialty, non-admitted lines of business. The vendor describes the configuration packs as designed to streamline data entry and manage sophisticated requirements within specialty business, such as program structures, including aggregate tracking, ceded reinsurance calculations, premium recognition and earning pattern variances.

Earlier this month, Instec announced the delivery of what it calls smart, self-service configuration capabilities within its Quicksolver policy administration system. The added functionality gives users the ability to create and customize new insurance products and programs, using embedded bureau-based and company-specific content, thereby increasing speed-to-market and reducing their overall invewstment in new product development, according to a vendor statement.

The two vendors are moving toward the same place through opposite paths, observes Jeff Haner, principal research analyst, Gartner. “Xuber had configuration tools, but not much content; Instec had content but very limited configuration tools,” he says. “With these announcements they’re now both claiming that they offer ‘out-of-the-box’ content with configuration tools that insurers can use to tweak the content for their specific needs.”

Jeff Haner, Principal Research Analyst, Gartner.

Jeff Haner, Principal Research Analyst, Gartner.

The offerings correspond to a trend Haner has observed of insurers requiring a full set of configuration tools but also showing more interest in vendors that provide pre-built content. Insurers are also demonstrating greater willingness to change business processes to conform to vendors’ systems, according to Haner.

Commoditized Core System Functionality

“There’s a growing recognition that much of core system functionality has been commoditized, and insurers gain little competitive advantage by reinventing core processing,” Haner says. “While modern core systems are still a critical foundation, they’re becoming a means to an end – insurers want to move through core system implementations as quickly and simply as possible so that they can begin to incorporate emerging technologies and capabilities – data, mobile, social, etc. – that will have a more direct impact on their competitiveness over the next five to 10 years.”

The bottom line is that the business is looking for product speed-to-market, both for new products and for flexibility in modifying existing ones, Celent’s Carnahan stresses. “IT is looking for all of that plus templates for the products they write, tools to easily modify and configure the products going forward, with minimal functionality gaps.”

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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