Keeping your system abreast of technological advances is more complicated than it might seem. Christine Seib gets some advice from the experts.
Taking your system into the new millennium is much more than just knowing which programme to buy. It's about staff, external consultants, service standards, dealing with the possibility of a merger and deciding where you want to take your whole business.
CMG Admiral and Cincom Systems are experts in system development, integration, call centre technology and document solutions, working with insurance companies' systems on a regular basis.
CMG's insurance division associate director Mike Woods and Cincom's solutions director Najib Hasnain say there are a number of issues, apart from nuts-and-bolts infrastructure and applications, that can affect the success of system development.
They both agree that it is vital for insurance companies to ensure they are working with the right supplier.
"Technology moves at a very fast pace, so you have to contract yourself to the right supplier," Hasnain says. "You're putting all your eggs in one basket and you can't afford to be let down."
He offers this piece of advice to avoid disasters down the track: "Ask them for future development plans. If they don't give them to you, forget it and go somewhere else."
Staffing makes up another of the key factors in moving technologically forward. Hasnain says: "Look after your staff. You invest a lot of money in the business and the system, so make sure they get trained in the new technology - invest in your people through refresher courses and updated training."
And no matter what system is used, your staff need the right skills to keep the business current and moving forward.
Before buying anything or bringing in the experts, companies need to first work out the direction in which they wish to take their business, because that will decide the technology required.
Woods says: "They've got to decide how they're going to meet their future needs. Technology's moving very fast and there's no easy answer to how you do it."
Hasnain also warns that you should never let your system get so out of date that it can't be replaced without difficulty, or you may have trouble moving your system forward smoothly.
"One worry is that the infrastructure gets so old that it can't migrate. An insurance company I worked with allowed its mainframe to get so old that they had to scrap it rather than transfer. It's a nightmare of retraining and cost."
Woods says the emphasis on the kind of system used will also need to change. "The biggest dilemma I see for the insurance industry is that many companies have legacy systems, which are stable, functionally rich and meet a lot of their business needs, but the key drivers now are flexibility and speed to the market. How do you get your legacy system to deliver these new needs?"
Mergers, so common in the industry, also put a strain on system development. According to Hasnain, companies don't often check which systems they had and their compatibility until well after the merger.
"You need to understand how the systems work and what products the company's selling, because the system supports the products," he adds. "Some applications have gone bust, so check supplies for the system are still around."
Failures to properly prepare for merging systems can cost dearly in terms of lost business while the restructuring, retraining and, if necessary, re-hiring is being done.
And says Hasnain, these are the biggest costs and the biggest risks.
Tips from the top
IT experts from some of the UK's biggest insurers reveal how they keep up with technological development
Norwich Union Insurance's technology services head Gordon Dunst:
"The big central servers are `do it yourself' but we currently outsource our network and telephony services.
"The majority of insurance applications are packages that we buy - we adapt our business process and package to suit our requirements. Specialised stuff we typically do in partnership with a provider - we bring the business model and they bring the technical model.
"In the mainstream business processes, we look for [applications that are] safe and secure, not leading edge. For the more innovative work, we may have to go closer to leading edge. It will be trialled, proved, double-checked before it becomes part of the mainstream system.
"There'll always be technological challenges but, from an insurance perspective, it's how can we get more value for money out of the investment."
Zurich Financial Services' chief information officer Ian Marshall:
"To date, like everyone else, we've used companies and consultants to keep our systems up to date. Now we're looking at the potential of outsourcing a lot of maintenance to IBM. It would release a lot of resources and intellectual effort. We want to access a wider and deeper pool of skills to get solutions quicker, better and at a different cost level.
"In the desktop area, like everyone else, we keep up with the versions as they come out. Some applications we keep up with and others we've customised so much that they're almost homegrown and a lot of energy goes into their maintenance.
"Increasingly, they age, they get out of shape with where the business is going and you're faced with the dilemma of how to move forward.
"We're trying to move things increasingly to the front end, to better distribute our primary intelligence. We're working with the BBC's technology unit to give more depth to whatever we offer to the customer."
Allianz Cornhill's IT director John Knowles:
"Updating is a continuous process. There's a great deal of functionality in our applications that we need to preserve but, at the same time, we're looking to add new products, services and facilities for brokers or the customer, which may involve new technology. The name of the game is how to blend these with the existing technology.
"How do we do it? Carefully and thoughtfully! You need a recipe that will endure as well as give you time to get payback on your outlay.
"We don't aim to have in-house expertise for everything but we do aim to have it in the core technologies we're using. We use consultants in new areas or to validate approaches we've come up with.
"Refreshing the systems is a relentless process because they're made up of many layers - each one has many components and each component has its own lifecycle.
"We focus on areas that are most important. Some areas are key but sometimes we have to limit the range we're involved in so we're not spreading ourselves too thinly."
Royal & Sunalliance's infrastructure services business leader Kevin White:
"Infrastructure has changed over the years to support the change in applications. In the good old days, everything was mainframe, so it wasn't an issue, but we've moved onto PC applications, so everything is intranets and internets. The view is that token-ring technology, which supports applications, will be out of date in 18 months' time, so everyone's moving over to the ethernet.
"Our mainframe and services are outsourced to IBM and we do rely fairly heavily on them to make sure we upgrade. Our wide area network is outsourced to BT.
"We look after our local area network, inside the building, the hubs and switches. Everything is moving to IT, so we're looking at how we need to upgrade our local area as well as our wide area so we can exploit what technology will allow to happen.
"We have a UK deliverable e-transformation programme, so we've just restructured our information services area."