Hidden Costs in Modern Core Insurance Systems

Abstract

At first glance, a core systems replacement project may look like open heart surgery, with all of the associated risks. The information processed and distributed by these systems is the life-blood of any insurer.

A number of best practices are forming regarding core systems replacements. In a new report, Hidden Costs in Modern Core Insurance Systems, Celent examines how to ensure that the project sets off in the right direction and continues on course, and also looks at establishing the new organisation when the project lands.

One of the key issues in adopting a modern core system is ownership. A modern system may allow business users to undertake key changes, such as changing customer documents, the customer-facing portal, or even business rules. This report offers guidance against the pitfalls and false assumptions that can creep into a cost-benefit analysis for the project and ultimately undermine the benefit realisation.

“In some projects, a minority of tasks are ‘IT only,’ but the majority require a mix of IT and business ownership,” says Craig Beattie, Analyst with Celent’s Insurance Group and author of the report. “It is no wonder that initial estimates of cost and level of involvement can lead to confusion. Costs often fall into the gap between IT and business.”

This report examines some of the hidden IT and non-IT costs involved in executing a core systems replacement program. It will leave the reader better able to judge the true value of a core systems replacement.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

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