Technology Blueprint

To respond to fast-changing market and regulatory demands, an insurance company must have a flexible, robust technology infrastructure. Often, an aging infrastructure results in siloed applications and functions, inefficient distribution and transaction processing, and compliance headaches. But not everyone defines infrastructure in the same ways, complicating efforts to make the business case for architecture-related investments and initiatives. Meanwhile, evolving delivery models and development methodologies - such as service-oriented architecture, cloud computing, software as a service and virtualization - provide carriers with more options for their computing environments. What are the key concepts, practices and technologies insurers should embrace in order to build the most effective infrastructure? What role do standards play in developing a modern technology architecture?

Plan and Govern

Kim Root
CTO, Hartford Life, a subsidiary of The Hartford Financial Services Group
(Hartford)

Most companies in the insurance industry have a portfolio of systems and infrastructure that has been built out over decades, consisting of a wide range of architecture styles and technology platforms. This evolution has resulted in a degree of redundancy, inefficient resource consumption and operational complexity. To increase the effectiveness of infrastructure while responding to the dynamic business demands, companies must simplify their portfolios while increasing agility through the selective deployment of new technical capabilities and architecture styles.

A rigorous enterprise planning process is the foundation for driving both infrastructure simplification and strategic enablement. Through a repeatable cycle of analysis and planning, opportunities to standardize and consolidate are balanced with emerging business demands for new capability. Business cases are then developed and fed into the company's annual investment planning process. Through this approach, the thoughtful introduction of new paradigms, such as infrastructure virtualization and "plug-and-play" B2B integration capabilities, are balanced with technology rationalization and system retirement objectives.

However, planning alone does not get the job done. Both an ongoing investment in simplification and technology refresh, combined with strong architecture governance, must be in place to achieve the benefits of technology plans. IT executives must communicate the business value of an ongoing technology refresh program in terms of bottom- and top-line improvements, just as any other business plan must be justified. Typically, this plan will contain both quick wins as well as longer-term and larger impact work.

Architecture governance is critical. Through governance, the introduction of exceptions to technical standards is reviewed carefully for business justification, while use of obsolete technologies is curtailed.

Core Strength

Stephen J. Byrne
VP – Agency and Field Automation Technology, Harleysville Insurance
(Harleysville, Pa.)

Insurers need to segregate the core applications and technologies that support their business models from the non-core utility applications and technologies typically required to support the operation of the business but not necessary to enhance the performance of the business. At Harleysville, we take this approach in order to most effectively position our resources and investments to drive innovation and differentiation.

For these non-core utility applications, software as a service (SaaS) has become a compelling alternative. SaaS allows an enterprise to conduct vital business functions without the concern for the support, upgrades and personnel associated with non-core functions. Rather, much like the utilities we use in our homes, the insurer simply can count on the fact that they work, they're maintained and service is available when needed. But insurers should not stop there.

Beyond SaaS are the emerging "platform/infrastructure as a service" (PaaS/IaaS) models, which provide the technologies and platforms required for running the business operations and building and running custom Web applications. The significance of these models is that they eliminate the need to acquire the expensive and underutilized infrastructure components that are necessary to build, test and operate business applications. This means that desktop support, servers, databases, security and application framework build outs are no longer needed within the enterprise. Rather, they are available over the Web, and consumers pay only for what they consume - nothing more.

Leveraging these models undoubtedly makes the need for standards in the enterprise essential. Imagine if none of the appliances you bought had standard plugs and adapters. How useful would it be when you got one home and tried to hook it up with the utilities in your home?

Virtual Advantage

Sue Ericksen
CTO, New York Life
(New York)

The foundational infrastructure concepts that any company needs to follow are:

- Creating and adhering to a set of guiding principles that emphasize what is most important to an enterprise. These principles include things such as keeping the technology environment simple; making sure the appropriate focus is on security and compliance; buying and configuring, versus building or customizing; having a tight coupling with business needs; reuse versus replication; and having a strategic plan and employing tactical solutions only when required, and then only when they do not preclude the successful implementation of enterprise strategies.

- Building a reference architecture and process that enable implementation of technologies within that reference model, ensuring a match between industry business models and solution patterns. The reference architecture should be a living document. Review the reference architecture, taking advantage of new technologies and techniques on a regular basis.

- Establishing governance groups, such as standards, security and architecture review boards.

- Following lean and agile development life cycles and project processes. Automate as much as possible, reuse when you can and implement relevant support tools.

In addition, every insurer needs to embrace virtualization technologies in order to increase flexibility, speed and cost conservation. There is a cost to dedicated resources. In the current regulatory environment, unplanned demands are generating huge increases in base cost related to storage, networking and compute power on top of the necessary costs for business resilience. Harnessing virtualization technologies from storage, networking, computer and software providers is a must in moving to a shared-resource, lower-base-cost model.

Pieces of the Puzzle

Shane McCullough
Senior Architect, ACORD
(Pearl River, N.Y.)

A critical best practice for building an effective infrastructure is to use enterprise architecture as the foundation. That foundation serves as a blueprint for new development and as a map of existing functionality.

But not every company has the same concept of what its enterprise architecture is or how it is developed. With a rapidly changing insurance landscape, in which adaptability is essential for survival, developing this architecture is critical for the success of the modern insurer.

ACORD and its members have begun work on the development of an ACORD Framework that provides many key pieces for the development of members' own architectures. The framework contains different pieces of the overall pie: a business dictionary with standard terms and definitions, a capability model with a common set of abilities and activities, an information model that gives a comprehensive view of all insurance concepts, a component model that provides the building blocks for application development and integration, and a data model for data modeling and validation. Used independently or collectively, these pieces can give companies valuable input to jump-start building an effective infrastructure.

As the insurance industry reacts to the complexities of data management, system integration, regulatory compliance and multiple-channel distribution, standards are invaluable in the development of a sound enterprise architecture.

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