Capitalizing on components: new, integrated component-based software helps insurers cut costs, bring products to market faster and support a customer-focused orientation. (Technology: Technology Insight).

In today's competitive marketplace, carriers are on a mission--to increase execution speed, minimize operational costs, reduce risks and boost profitability. Unfortunately, they often fall short of meeting these goals.

It takes too long and costs too much to develop new products. Multiple policy systems and processes running on different technology platforms slow down operations. Poor, inconsistent data quality across the organization hampers systems from supporting necessary customer, channel and product insight. These problems may be the result of aging and inflexible legacy systems; underperforming custom-built systems; or aggressive merger activity that leaves an insurer saddled with several incompatible systems.

Leading carriers understand that technology must further business goals. Some are embracing new integrated, component-based software that can achieve up to a five-to 10-point expense reduction, bring new products to market faster and support a customer-focused orientation. Nearly all of the components--already developed, tested and in production--are reusable, so carriers can respond more easily to regulatory, industry, strategic and operational changes.

Insurers are beginning to duplicate the success they've had with components in claims to other functions. New components cover core insurance functions, including product development, underwriting, policy administration, claims, rating, billing, financial reporting and customer-acquisition management. They can be implemented in phases, to give insurers flexibility to manage the costs and risks common with legacy replacements and major custom developments.

One multiline, international carrier found that, as a result of several mergers and acquisitions, it had inherited many disparate information systems, products and claims-processing methods. Each business unit used different software for various life and nonlife products, and customers often had to contact different units for separate types of insurance.

The carrier used integrated software components to develop standard applications that support and process all product lines and policy types with a single approach, including documentation management and security. Now all operations and data are stored on the central network so the branches, agents, brokers, and call centers can access customer policy information, create and manage policies, and process claims uniformly Any distribution channel can handle a customer's entire needs, resulting in improved service, greater customer satisfaction and higher retention rates.

Component technology also can help cut product development time by centralizing and standardizing product definition, rating and other activities. Typically, when using its legacy system to create a new product ,the carrier's business units defined the product's requirements and then relied on the information technology unit to modify the software accordingly and distribute the modifications to all the distribution channels. Now, by standardizing and automating processes at the desktop, business units define and update products with minimal IT support. Less reliance on the IT department means the carrier can respond more quickly to market changes. And the process of creating new products was slashed from six months to as little as two weeks.

For various lines of business, all products are supported and handled the same way. A user-friendly interface enables business units to define the product's characteristics by themselves. Additionally, the system's design and functionality are oriented to create and modify products in a quick and cost-effective manner. All defined elements, such as guarantees and calculation formulas, are reusable.

Another multiline carrier is implementing an integrated software-components program to consolidate more than 15 systems providing policy administration, rating, billing, claims and product development functions.

Costs savings from an integrated component-based solution may be derived by:

* centralizing and automating common processes such as claims processing, accounting and policy administration;

* enabling distribution channels to access complete customer profiles and ratings, which helps improve underwriting and lowers expense and loss ratios; and

* simplifying the integration of acquired businesses, which helps lower business-integration costs.

To obtain a competitive advantage in the market, carriers must transform technology into a strategic asset. By harnessing fully integrated software technology to deliver business value, they can achieve that leading edge.

RELATED ARTICLE: Beyond cost savings, integrated software components can also help carriers support other business goals:

* making the most rewarding products quickly available through all distribution channels;

* getting all business units to work from a single view of customers;

* getting technology platforms to work together to support growth and profitability; and

* supporting business decisions with timely, accurate data from the field.

David P. Hollander, a Best's Review columnist, is a partner in Accenture's Insurance Solution Group. He can be reached at [e-mail].