The past 12 months have been difficult for North American life insurers. They have been forced to shrink budgets, delay projects and put off new purchases. But to remain viable, life insurers must prepare for a more competitive future environment. They must improve their business flexibility, go to market faster with innovative products, improve their ability to cross-sell multiple products based on customer needs, and improve Web-based self-service capabilities for customers and distributors, as well as revamp operational, compliance and risk management processes. Legacy policy administration systems — those with outdated technology and functionality, whether vendor-built or insurer-built — obstruct these efforts. These systems are often too complex and inflexible, and they do not provide real-time data to adjacent systems.

Additionally, North American life insurers typically have multiple policy administration systems from mergers and acquisitions, niche products, and processing requirements — all of which require regular upgrades, enhancements and interface improvements. Upgrading or replacing aging core policy administration systems has become an important requirement for increasing business, and many insurance companies are pursuing a strategy of minimizing the number of policy administration software systems or, if possible, deploying a single enterprise solution. Furthermore, insurers see considerable risk with their legacy platforms due to older technology, poor documentation, functional limitations and lack of knowledgeable resources.

Despite economic challenges, interest in policy administration solutions among North American life insurers, for both group and individual writers, is high.

The 11 vendors (12 systems) included in this research reported at least 15 new contracts signed among Tier 1 and Tier 2 life insurers (those with at least $5 billion in assets) in North America for policy administration systems during the 2009 calendar year. These were primarily for individual business and reflect a significant increase from the nine new deals last year and nearly matches the 16 new deals done in 2007.

Insurers continue to move toward vendor-provided packages and away from homegrown solutions. CSC's CyberLife did four new deals in 2009, which was the most from any single vendor, but it was followed closely by MDI with three deals and SunGard with two new deals. Neither MajescoMastek's Vector system nor HP's Ingenium product was selected for a new relationship. The other vendors in this report each entered into one new relationship, and Oracle did not report its wins.

Gartner expects continued interest in new policy administration systems as economic conditions improve, because there are still significant numbers of legacy platforms that life insurers are anxious to replace. Insurers' concerns about the risks and difficulty to maintain these platforms, along with the need to increase business flexibility, will continue to drive interest in new policy administration platforms. As the North American economy continues to improve, the number of deals is expected to keep rising over the next several years. Our conversations with reference companies confirm further that Tier 1 insurers will continue to maintain multiple platforms, although they will strive to consolidate and retire older systems.

Competitive pressures will increase as the North American economy improves, which will demand innovative products, improved services and access to policy administration data for business intelligence delivery to distributors, and which will drive a need for more-flexible and modern policy administration solutions. Tier 3 insurers are more likely to successfully move to a single policy administration platform, as their business typically consists of fewer product lines, making a single solution possible. Tier 2 insurers will reflect characteristics of both Tier 1 and Tier 3 insurers, with some insurers moving to a single platform despite the difficulty. It should be noted that, while interest in system consolidation is strong, the consolidation does not typically cross business lines. Most policy administration systems are not yet able to support multiple lines, such as life and property and casualty (P&C) insurance.

Additionally, Gartner has been tracking some major trends, which should be considered when creating the policy administration road map. These are:

• An ongoing movement toward a base system — Insurers continue to move toward vendor base system deployments when implementing policy administration systems instead of creating numerous enhancements to the policy administration platform. This requires greater flexibility and configurability in these platforms to support all of the necessary functionality.
• Isolation of the policy administration engine — The role of the policy administration system is changing. The future policy administration system will continue to be an essential part of the insurance company landscape, but it will evolve in ways related to access to data, ease of product introduction and tracking policy information. Other essential functions such as incentive compensation, claims handling and call center support will be facilitated by specialized software.
• Increased interest in policy data and customer data for reporting and business intelligence — As insurers find ways to leverage customer and policy data, they will want real-time access to this information. Some policy administration platforms do not serve this data effectively and will require data marts to stage the data for later use.

The process of selecting a new policy administration system is one that focuses much more than simply on functionality. The wide distribution of deals across vendors is evidence that insurers are not tasked to find the best system, but rather the best system for them. This can vary greatly, based on the strategic factors mentioned above, the product line or lines, the surrounding systems, integration points, existing workflows and procedures, the hardware platform, and development technologies. Vendors, then, are put in a tough spot to compete successfully. Most have opted to focus their efforts on adding as many products and product lines as they can, along with adding as much functionality and flexibility as possible. They have not, however, focused strongly on transformational elements such as social media, or the improved use of data to fundamentally change how policy administration is done. These innovations have occurred outside policy administration systems, driving policy administration further into the back office.

In addition, vendors with rich functional capabilities that are built in mainframe languages such as COBOL are gradually upgrading their core functions to Java and other languages. More importantly, these vendors are also adding product configuration capabilities that let actuaries or other end users have centralized, easy-to-understand user interfaces for making product, calculation, rate and other rule changes when updating existing products or introducing new ones. These vendors rarely require insurers to build insurance products from scratch. By offering extensive product feature and calculation libraries, and defining the typical relationships among the features and calculations, vendor offerings can support the development and management of insurance products efficiently. To improve implementation, most vendors have crafted conversion and consolidation methodologies. The ability to deliver conversion services will become even more critical during the next three years. Life insurers are focusing on reducing the number of core systems to free IT budgets for IT investments in areas such as new-business processing, which can directly affect relationships with consumers and distributors and help drive revenue.

Some policy administration solutions — such as Oracle's Insurance Policy Administration and HP's Radience (formerly, EDS Solcorp) — provide systems that are completely configurable and rule-engine-driven. These applications have been built from the top down to be flexible and support unlimited amounts of product development and rule management. The configuration capabilities are appealing, because they greatly limit the need for invasive programming, enabling product designers or actuaries to build new products, including the identification of product features and calculations, and to define the relationships among the product features and calculations. Executing product development has required a strong working knowledge of JavaScript and XML, which requires some technical skills. This limits the solutions to the types of people who have skill sets to do this.

These vendors will make significant progress during the next three years by building out their feature and calculation libraries, and by making their product configuration interfaces easier to use by business users. Insurers should recognize that, while these configurable solutions are very adaptable and flexible, they are also very complex and require significant work to implement. Implementations are, on the whole, a few weeks shorter than more traditional administration platforms, but reference companies report that implementation time frames are not significantly reduced for these more flexible solutions.

When considering new life insurance and annuity policy administration solutions, insurers should think about several key issues that will help them determine which vendor is right for them. Beyond simply evaluating functionality and technology, insurers also need to make sure they evaluate the importance of other factors related to how they plan to use the administration system. These factors include, but are not limited to, the ease of adding or configuring new products; the risk of vendor consolidation; scalability requirements; scope of the offering; conversion expertise; system flexibility; and reliance on the vendor for custom enhancements, support or hosting.

Life insurers have no perfect policy administration system choice. No single, proven policy administration system can support every life and annuity, long-term care, and individual and group product type out of the box, but the systems do continue to provide strong functional support to life insurers. This MarketScope provides a comparative evaluation of 12 life policy management systems in North America. These vendors address Tier 1 and Tier 2 life insurers' policy administration needs.

The functional focus for each year's MarketScope continues to narrow as it is governed by the market. While historically, policy administration included everything from new business to claims, the focus today is much more on the core policy administration functions — namely, tracking policy values and information, adding new products, and serving data to other systems, along with display screens for call centers, and transaction and often workflow capabilities for service representatives. Hence, the evaluation of the systems in this year's MarketScope focused on these characteristics.

To assist in the evaluation of policy administration vendors, we summarize the key attributes and capabilities that a policy administration system should offer in the individual and group life insurance product areas to address life insurers' strategic requirements.

For Individual Life and Annuity Products

The age and support requirements of individual life products present special challenges to upgrading or replacing policy administration systems. In most cases, insurers must anticipate administering these products for more than 100 years. Even within the past 40 years of insurance products being administered on computers, the precise definitions of old policies' business rules have been hard-coded into old policy administration systems and have been lost or forgotten. The absence of such definitions greatly increases the cost of migration and makes risk management and compliance reporting challenging. Similarly, active policies will eventually become closed books and require different processes to maintain profitability. Few vendors offer viable services that address these challenges. Most vendors focus their innovation on product configurability and industry-standards-based integration. While most have multiyear development road maps to fulfill these goals, good policy administration systems should include:

• Product engines that support product design and development for the major life and annuity products, as well as group benefit offerings that are easy to understand and use
• Business rule engines that enable end users to define and modify operating environments, such as income tax rules, regulatory requirements, actuarial guidelines, underwriting policies, claims adjudication, distribution channel characteristics, and financial reporting rules that are easy to understand and use
• Reporting, inquiry and export capabilities for call centers and distribution channels; interfaces to external accounting systems; compliance systems; product filing; marketing and new-product evaluations; and actuarial evaluations
• Workflow, with role-based access controls and interfaces to external business process management functions, including good claims workflow capabilities
• Data mapping and conversion capabilities to facilitate integration with systems based on industry standards (such as ACORD's XMLife)

For Group (Employee Benefits) Products

The availability of comprehensive policy administration systems for group products remains limited to SunGard, Wyde and MDI. Several of the other vendors have added basic group-specific functionality, such as support for work site distribution or survey data import facilities. Each of these solutions can also support individual business, and they are a good fit for companies that wish to consolidate group and individual products to a single platform:

• Bidding, renewing and contracting process support that provides underwriting modeling, bid generation, customized quotes for large cases, data uploads and the automation of information flow with agencies, sponsors (usually HR benefits managers), and contract implementation
• Customer service facilities that support agency inquiries, sponsors' HR benefits management, a prompt update of certificate data, employee self-service and interfaces with customers' flexible benefits systems
• Work site sales functionality that supports:
  • Upselling and cross-selling of related life, savings and specialty products
  • Interfaces with product, marketing and sales support systems
  • Flexible payroll deduction and collection capabilities

In addition to these products, many insurers are seeking solutions to support health-related products, such as disability, critical illness, long-term care and medical supplement insurance. Not all solutions support these products out of the box, which may cause problems for some insurers wanting to run these products from a single solution.

This MarketScope focuses on the policy administration vendor alternatives for Tier 1 and Tier 2 life insurers in North America. North American Tier 1 insurers have assets of more than $12 billion, while Tier 2 insurers have assets of more than $5 billion and less than $12 billion. Differences in the products supported, technologies and hosting options are noted. Separate components, such as incentive compensation, claims or correspondence, are not included as part of the policy administration offering for this MarketScope.

Policy administration vendors must have noted the functional range for group and individual business and have a deep understanding of the technology to create innovative ways to meet broadly defined functional and product requirements. Vendors must demonstrate through their implementations an understanding of insurance workflows, insurance products, tax law, regulatory requirements and user behaviors. They must deliver their solutions in an environment filled with old technology, legacy policy administration systems and users who are reluctant to change.

Policy administration vendors gain these competencies by successfully selling and deploying solutions to many diverse customers. As vendors meet the needs of their insurance customers, they gain increasing proficiency that is necessary to deliver successful solutions. The importance of live customer deployments is reflected in the inclusion criteria for this year's MarketScope. It is not enough that vendors can provide a key set of functional data; they must also have experience with many insurance companies to expose their range of the requirements that exist in the life insurance marketplace. No new vendor systems were added into this year's MarketScope, and no vendor solutions were removed.

Inclusion Criteria

The vendors included in this MarketScope must demonstrate clearly identified multiple-function applications and/or corresponding modules to serve a diverse market of life insurance and annuities for core policy administration. This is the management and maintenance of policy values, customers and transactions. They must offer their clients differentiating value in price, flexibility, services or demonstrated expertise. Included in this year's MarketScope are only vendors with six or more production customers, three of which must be Tier 1 or Tier 2 customers in North America.

Overall Market Rating: Positive

Interest in policy administration solutions remains high among life insurers and annuity providers. Insurers still have more consolidation requirements, and they continue to move away from homegrown alternatives and need flexible and function-rich administration solutions. The wide distribution of deals across the available vendor alternatives reflects that insurers have unique characteristics that can be filled through various vendor systems, and no single solution is the dominant choice for new deals (see Table 1).

Life insurers have identified several key drivers as the reasons to purchase new policy administration platforms. They are:

• Products — Product innovation and product complexity are both identified as key reasons why new administration systems are needed. As the economy continues to improve, there will likely be a resurgence of new product innovation and complexity.
• Consolidation of platforms — As noted earlier, there is continued consolidation work to a smaller number of policy administration platforms. Given the large number of legacy systems still in the marketplace, it stands to reason that this business driver will remain a key driver over the next several years.
• New regulation — While nothing on the scale of Solvency II (the European regulation) has hit North America, life insurers should expect increased regulatory requirements.
• New technologies, tools and business practices — Business intelligence, common customer files, new Windows versions, predictive analytics, social media and other technologies will cause insurers to enhance their existing platforms to improve sales and service.
• Business expansion into new channels and markets — Several forces such as a high percentage of retiring agents and failure of agents to effectively reach the lower middle of the market will open the door to new innovative distribution. Life insurers will begin to experiment with innovative distribution channels, which will in turn demand new products and services provided by policy administration systems.

Given the strength of these business drivers, Gartner anticipates a robust policy administration market in North America over the next decade.

Accenture Life Insurance Platform (ALIP)

Created by NaviSys and then acquired by Accenture in 2006, ALIP was the first to offer a separate rule engine to the marketplace. Rules could be written once and applied to new business processing, illustrations, electronic forms and policy administration. This continues to be true in the platform, and Accenture continues to move the vision forward. Perhaps the most forward-thinking of all the policy administration vendors, Accenture is looking at ways to simplify processes using Web 2.0, increased configurability and out-of-the-box integrations. It has also invested in group capabilities and has one customer using the platform for its group business.

Strengths:

• Accenture has had steady growth and has added another client in 2009.
• ALIP has a business-rule-driven, componentized architecture that is n-tiered and uses Java Platform, Enterprise Edition (Java EE).
• ALIP integrates with Accenture Front Office for Life Insurance, one of the most widely adopted new business-processing systems in the North American market.
• Accenture can deliver all aspects of administration upgrade options (rearchitecting existing systems and replacing and consolidating existing systems), full business process outsourcing (BPO), and offshore development teams that can be used as needed.
• The rule architecture in ALIP has matured to the point where Accenture has added tools to improve the testing efficiency of product and business rules.
• Accenture started a separate business unit (Accenture Software) to handle software strategy, sales and delivery in late 2009, hoping to focus on the ongoing viability of software solutions such as ALIP in a more traditional "software vendor" model.
• Accenture has added additional capabilities to ALIP that increase the flexibility of product configuration.

Cautions:

• Some insurers perceive Accenture as using software as a vehicle to maximizing consulting revenue, which causes frustration with companies that simply want a software solution. Accenture is taking active steps as noted above to change how it relates to the policy administration market.
• Many of Accenture's customers are Tier 1 companies that have done substantial configuration to the system. Tier 2 customers should take a cautious approach, as the platform is expensive and complex.
• Life insurance customers report that the system is more difficult to implement than originally scoped, particularly in situations where new products, distribution channels or functions have not previously been implemented. This situation has added significant cost and time to implementation projects.

Accenture has a strong vision for its systems and continues to make investments in the core platforms. It is investing in R&D to make it better-suited for additional product lines in North America, adding new functional enhancements and readying the platform for entry in other regions, especially Asia/Pacific. While most of its customers have fewer than 1 million policies being administered on the system, it has tested the system to operate with more than 10 million active policies. Accenture needs to continue to successfully integrate Accenture and the NaviSys team, sharpen its marketing message, continue to successfully deliver for its customers, and deliver on its vision. If it fails to execute on these core elements, it will struggle to retain its current position in the market. ALIP is a good fit for Tier 1 companies that want the flexibility of a rule-based solution, in combination with over a decade of functionality improvements.

Rating: Positive

CyberLife

CyberLife provides support for a wide range of insurance products, including both life and annuities, fixed and variable life insurance, and limited group life insurance. Operating on a mainframe platform, CyberLife was rearchitected in 2004 to improve access to policy data and calculations, while its code was streamlined.

CSC received consistently high marks regarding its conversion team as well as its offshore team from reference customers. It has spent several years developing these teams and leveraging its experience across the company to create repeatable and successful processes and procedures. It has honed its ability to perform well in complex environments, making it a particularly good fit for companies looking to convert from legacy system platforms.

Strengths:

• CyberLife has 40 live customers in North America, with an estimated 19 million covered lives.
• CyberLife's n-tier service-oriented architecture (SOA) is built using Java EE standards. Legacy functionality is written in COBOL.
• CyberLife has deep functional support for individual life insurance products, with many existing product implementations.
• CSC has proven experience and expertise in executing complex system conversion projects, using already-built conversion tools and offshore facilities in South Africa and India as needed.
• CSC has many customers administering large blocks of business and has approximately 4 million contracts on CyberLife in its outsourcing facilities.
• CSC has experience in health-related products, such as disability and long-term care.
• CyberLife integrates with all of CSC's Accelerator components, including new business, customer service, incentive compensation management and claims management.

Cautions:

• CyberLife requires development to support completely new activities, such as unexpected types of riders or product features, that aren't already supported in the system. These types of changes often require changes to the base code, creating a need for retrofits to accommodate future upgrades.
• CyberLife has a complex architecture, which will make it somewhat more expensive to support in the long term.

CyberLife improved its position from Promising to Positive this year because of insurer feedback of the consistent performance of its conversion and offshore teams. CyberLife will remain a dominant platform due to its sizable installed base, the continued investment that CSC is making for upgrades, system enhancements, and the new architectural vision of CSC to be more open and flexible. CyberLife is a trusted and established system; however, it lacks some of the technological innovation and flexibility seen in some other systems.

Rating: Positive

Wealth Management Accelerator

The architecture and architectural strategies for Wealth Management Accelerator are similar to those of CyberLife. CSC announced in June 2010 its plans to move Wealth Management Accelerator to a Java code base. Wealth Management Accelerator replaces both Vantage-One and Repetitive Payment System with a single platform and can be deployed on a mainframe or on a midtier platform. CSC has migrated two customers from Vantage-One to Wealth Management Accelerator; four more were new installations, which are now in production; and it has licensed another six customers on Wealth Management Accelerator. In addition, CSC has licensed Vantage-One with 19 customers, which have received some of the Wealth Management Accelerator functionality as part of their Vantage-One upgrades.

As noted in the section on CyberLife, CSC has consistently received high marks from reference customers regarding its conversion team as well as its offshore team. It has spent several years developing these teams and leveraging its experience across the company to create repeatable and successful processes and procedures. It has honed its ability to perform well in complex environments, making it a particularly good fit for companies looking to convert from legacy system platforms.

Strengths:

• Wealth Management Accelerator has comprehensive payout capabilities that will allow insurers to use annuitization strategies for a variety of product types. This functionality will also allow the blending of annuitization characteristics during the accumulation phase of the product.
• Vantage-One and Wealth Management Accelerator combined have an estimated 21 million covered lives.
• Wealth Management Accelerator's n-tier SOA is built on Java and Java EE standards.
• CSC has proven experience and expertise in executing complex system conversion projects, using already-built conversion tools and offshore facilities in South Africa and India, as needed.
• Wealth Management Accelerator integrates with CSC's Accelerator components for new business, customer service and incentive compensation management.
• Wealth Management Accelerator is a good fit for insurers that want BPO for life insurance, payout and annuity products. CSC can run the software and perform the business processing at its BPO facilities.

Cautions:

• Wealth Management Accelerator is perceived by customers to not be as flexible and easy to use as alternatives that were designed from the top down to be rule-based.
• Wealth Management Accelerator has a complex system architecture that will make it somewhat more expensive to support in the long term.

CSC's Wealth Management Accelerator product has been upgraded from Promising to Positive in this year's MarketScope. Customers reported high satisfaction with conversion and offshore capabilities, along with the ongoing investment in the solution. These are the main considerations for why this report upgraded Wealth Management Accelerator. CSC's further investment in the system, along with the likely migration of existing Vantage-One and Repetitive Payment System customers to the system, makes it a strong contender in the marketplace.

Rating: Positive

LifePRO

EXL, a full-service outsourcing firm with 26 insurance clients, acquired PDMA and the policy administration system LifePRO in May 2010. LifePRO has served the insurance industry since 1984 with client/server policy administration solutions. It is written using Microsoft technologies, including .NET, and supports a range of life, annuity and health products. With over 40 insurance clients (mostly Tier 2 and Tier 3), the LifePRO system is a contender for insurers seeking a flexible modern technology, with functionalities that range from new business and claims, to commission management.

Strengths:

• EXL and PDMA have complementary expertise related to policy conversion, best practices and policy administration.
• EXL offers offshore BPO resources for life insurance clients.
• PDMA has worked to provide strong access to the underlying data for third-party applications, using an SOA.
• LifePRO provides the typical flexibility of newer platforms, such as product cloning and an external rule engine.

Cautions:

• While EXL has extensive BPO experience, it has not had experience with running a software company, although it is currently committed to keeping the existing management in place to support its existing and future PDMA customers.
• The Microsoft platform will make it more difficult to obtain Tier 1 clients, as many of the larger insurers have a bias toward Java EE as their development platform.

EXL (LifePRO) receives a Promising rating again this year. While the acquisition could be very beneficial for both EXL and PDMA, they need to create and begin to execute a common strategy over the next several months. Their joint capabilities could be very beneficial to Tier 2 and Tier 3 companies as well as Tier 1 firms by combining policy administration software sales, with BPO services. Life insurers should take a look at the capabilities to determine if it is the right fit for them.

Rating: Promising

Ingenium

HP (formerly, EDS Solcorp) offers its Ingenium product to the life insurance market. This system remains flexible enough to meet the requirements for individual life insurance products and to act as the target platform in consolidation projects. Its strength is deployments with multinational insurers, rather than single-country installations in North America. Since the introduction of Radience, HP has targeted Ingenium at Tier 2 and Tier 3 insurers and Radience as its Tier 1 solution.

The Radience system is a policy administration system built for life insurers that want a more modern platform. This new system has customers in North America, Asia/Pacific and Europe, but it does not have a sufficient customer base to meet the inclusion criteria for this MarketScope.

Strengths:

• Ingenium has a sizable customer base — 70 clients globally, 50 of them in North America.
• Ingenium has been rearchitected during the past several years to be mostly service-oriented and rule-driven for COBOL functions, and it remains a very complex platform. It also has developed a Java front end.
• Ingenium is integrated with ProductXpress to support product configuration and is offered as an optional component outside of Ingenium (for example, feeding an illustration system).
• Ingenium has deep support for individual life insurance products and has extensive Canadian product experience.
• HP policy administration customers have often chosen to upgrade and expand their use of Ingenium over the past several years.
• HP's team to support Ingenium and Radience has experience in executing complex system conversion projects.
• HP's team to support Ingenium and Radience has proven international capabilities, providing options for large, global insurers that want a single solution to be used in multiple regions.
• Though not a part of this analysis, HP's Radience system gained a North American customer, which will help it in the North American market.

Cautions:

• HP has not generated a new Ingenium sale in North America for the past four years.
• Ingenium has a reputation for having a high total cost of ownership (TCO), as it is a complex system with lots of flexibility.
• While EDS was a solid and financially stable parent company, the merger/acquisition with HP leaves considerable uncertainty about the future of these solutions. The HP acquisition was more focused on complementary services rather than on industry verticals or software, and it remains to be seen whether HP will sell the company, invest further or leave things as they are. Each year that this issue goes unresolved, it creates greater concern in the marketplace.
• HP must balance investment between Radience and Ingenium, as well as create a viable strategy for the two systems.

HP receives a Caution rating because of its lack of sales success in North America for Ingenium and the uncertainty about the recent acquisition of EDS Solcorp. HP has extensive experience with conversions and has developed tools to assist with conversion efforts. It has positioned Ingenium and Radience to different-size insurers (Radience to Tier 1, and Ingenium to Tier 2 and Tier 3) and has not had significant numbers of its existing Ingenium customers migrate to Radience. While its customer base is strong for Ingenium, it has not generated new sales with the Ingenium product.

Rating: Caution

The Administrator

The Administrator has been serving life insurers for policy administration capabilities since its initial launch date in 1981. For the past 28 years, LIDP has created new releases that have added functionality and technology upgrades for its existing clients. Focused on individual business, The Administrator is a proven platform, with knowledgeable staff.

Strengths:

• LIDP has a solid understanding of the insurance market and continues to release upgrades each year for additional functionality and technology upgrades.
• The Administrator runs on a 100% real-time 24/7 environment, which eliminates the need for batch processing.
• The Administrator has proven itself effective with Tier 2 and Tier 3 individual life providers. Scalability tests with 1 million policies show good results.
• LIDP comes in at a lower cost and offers more pricing options than many of its competitors.
• LIDP continues to improve access to the rules and data within the system using Web services and has recently added service capabilities to every function in the system. This enhancement was released last year, and several customers have installed this release.
• LIDP is converting its incentive compensation system to be released in 2010 as the first components written in Java EE.

Cautions:

• LIDP's small customer base (14 production customers) is a significant concern for the vendor and its existing customers.
• LIDP's customers are dependent on its staff of 30 development and support personnel to provide them with enhancements, patches and upgrades.
• The Administrator's user interface is cumbersome and does not deliver processing efficiencies as more modern systems do.

LIDP improved its position from last year and received a Promising rating for its addition and deployment of Web service improvements throughout the system and the addition of a new customer. Its small company size and small customer base still make it more vulnerable to resource risks than vendors with more staff. The system itself has proven its worth for individual business over the past 28 years, but it still lacks some of the modern elements provided by other policy administration solutions, such as a configurable rule engine and a user interface that makes the operation more efficient. Some customers feel an urgency to migrate from the platform in order to reduce their risk of being dependent on this vendor.

Rating: Promising

Vector

MajescoMastek's Vector solution serves the individual life insurance and annuity market. It leverages COBOL functionality that was developed throughout the past 20 years and applies a Java front end to interact with users. The reporting capabilities enable users to query the production database, which can provide transparency in the policy records for managers to better understand the profile of the clients. MajescoMastek has a small team of 20 business analysts and project managers who coordinate additional U.S.-based resources and over 1,000 offshore resources for Vector projects. MajescoMastek intends to continue to improve Vector and enhance it to provide support for true group products and processing.

Strengths:

• MajescoMastek has a very knowledgeable resource team, with an onshore/offshore sourcing strategy that consistently achieves success with customers.
• MajescoMastek supports multiple pricing models to provide insurers with greater flexibility, little or no upfront costs, and in many cases, lower costs overall.
• MajescoMastek offers flexible server-based delivery models, including insurer-hosted and vendor-hosted delivery models. It can also leverage its extensive BPO operation and partnership with Genpact, which provides flexibility for insurers to explore new products, channels and markets.
• MajescoMastek provides conversion tools and experience to migrate blocks of business onto the Vector system.

Cautions:

• The Vector system is an older technology and does not contain the functional advantages for new-product development and system enhancements such as product development rule engines and updated screen designs that newer systems have.
• Customer references cite typical version control and testing issues, where upgrades and patches are not always tested as thoroughly as necessary, or they break other tested features.
• Vector's user interface mimics the functionality of the behind-the-scenes COBOL engine and does not offer the same flexibility as rule-based Java or .NET-native solutions.

While Vector is marketed more to Tier 2 and Tier 3 customers, Elixir, MajescoMastek's other policy administration package, which is also being released in North America, will serve Tier 1 insurers with administration capabilities. Elixir will be part of a broader offering and join the new business and compensation components already being sold in North America.

MajescoMastek's Vector receives a Promising rating again this year. Although Vector is an older platform, it has 17 licensees in North America and provides strong service to its customers with its domestic and offshore support. The system itself is functionally rich, but its user interface still requires a knowledge of the underlying codes and transactions operating behind the scenes in COBOL.

Rating: Promising

Fimmas

MDI has developed Fimmas since 1982 and launched with its first customer in 1984. In 1996, as part of its ongoing productizing of the offering, MDI separated Fimmas' code into base code, client-created custom code and vendor-created custom code libraries. This approach helps to keep the base code consistent across all customers and enables simpler upgrades. It has 13 customers, with four of them using the solution to support their group business. Its largest customer supports more than 2 million covered lives with the system.

Strengths:

• Fimmas enables the administration of individual life insurance as well as group life insurance business. Twenty-five percent of its customers run group as well as individual business; 25% run only individual business; and the remaining 50% run only group business.
• In 2008, MDI landed one top 10 global client as a customer, which is now seriously considering expanding its use of Fimmas extensively.
• In 2009, MDI added three more customers, two of which are using an application service provider (ASP) approach, and one with an on-site deployment.
• Fimmas delivers strong product design capabilities, is easier to upgrade than many other products, and can migrate between databases quickly and easily.
• Fimmas offers additional group life functionality such as census loading, automated underwriting and group maintenance functionality.
• Fimmas provides a wide range of functionality, from new business to claims with multilingual and multicurrency support.

Cautions:

• The 25-person company is small, but references cite good service, knowledgeable staff and a strong willingness to work together with its customers.
• MDI uses a proprietary development tool called APPX, which allows the system to operate on multiple database platforms, but it is also a language that insurers do not typically have expertise with.
• Scalability tests in 2006 with 1 million policies showed strong results, but insurers that need support for larger blocks of business should understand the system limitations.

Fimmas is a particularly good fit for Tier 2 or Tier 3 insurers with a need for a single platform for both their group and individual needs. Tier 1 companies that are looking to build out or experiment with a group product using a limited investment should consider Fimmas as well. Also, insurers interested in this solution should have the ability and willingness to augment vendor expertise with their own experts.

Rating: Promising

Oracle Insurance Policy Administration

Oracle takes an approach to policy administration solutions that is more modern than that of all the other vendors reviewed in this MarketScope. Delivering the most flexibility to insurers, the solution is composed of a strong XML rule engine that allows insurers to dramatically configure the system for their needs. While many of the other policy administration vendors maintain separate versions of their systems for their insurance customers, Oracle is working very hard to create a consistent base system framework that can meet the needs of its insurance customers without requiring changes to be made to the base system. This approach keeps the upgrade challenges to a minimum. However, it can create challenges for customers when they have an immediate need for base elements that have not yet been added to the base system. These challenges are occurring less and less as the application matures, but will likely continue to be problematic for future undeveloped product lines such as true group life insurance.

Strengths:

• The system is browser-based and business-rule-driven. Its componentized architecture supports the Java EE and Microsoft .NET development and deployment environments. Ongoing development will be 100% Java; however, Oracle will continue to support its .NET customers.
• The platform can rapidly configure complex types of annuity and life insurance products, while also enabling flexible screen designs and interfaces.
• The configurability of the system enables faster deployment time for new products. When insurers combine it with process improvements, they are deploying products on the Oracle platform in half the time it was taking them with their legacy platforms.
• Oracle has the financial strength and ability to invest in new functionality and global expansion.
• Oracle has introduced some important disciplines to the policy administration team, such as improved code management and change control, which have improved the quality and consistency of upgrades and enhancements.
• The Oracle Insurance Policy Administration platform enables insurers to operate without vendor involvement when configuring the system for new products, user interfaces, screens and product changes.
• Oracle is making solid inroads in internationalizing the system and adding features that would enable multinational insurers to leverage a single system for multiple countries.
• Oracle continues to make enhancements to make a new product chassis easier to add.

Cautions:

• Oracle has limited experience in executing complex system conversion projects for life insurance, although it does have experience within Oracle of converting and modernizing major legacy systems.
• Oracle has limited experience in group product lines other than group annuities, as well as limited experience in health-related products such as disability, long-term care or critical illness.
• While Oracle is improving its interface capabilities, insurers report that interfaces are difficult and time-consuming during the initial implementation.
• Life insurers looking toward Oracle's solution should be especially careful to ensure that Oracle's base system deployment direction is in line with their own IT road map as insurers do not have the flexibility to make system enhancements within the application.

While Oracle does not disclose customer counts, Gartner estimates that, by the end of 2009, Oracle had at least 20 production customers. There is continued interest in the Oracle solution on the part of life insurers, and Oracle regularly makes the shortlist, particularly for companies that seek maximum flexibility and configurability of their policy administration systems.

Rating: Positive

ID3

StoneRiver's ID3 is installed with 20 life insurers, with one additional customer added in 2009. The solid functional performance, product development efficiencies and breadth of product support have contributed to the success of several major insurers. StoneRiver has spent the past 16 months evaluating its current position and is still determining whether it will invest significantly in its stable of systems, which provides new-business workflow, illustrations, electronic applications, electronic underwriting and need analysis, in addition to policy administration functionality. Meanwhile, it is adding the functional enhancements that its clients are asking for.

Strengths:

• Even though ID3 was developed 13 years ago, the ability to quickly add, copy and change new products remains an essential part of ID3's value.
• Strong functional capabilities and knowledgeable staff at StoneRiver serve existing customers well.
• StoneRiver provides several different hosting and delivery options, such as ASP, licensing, codevelopment and client-hosted delivery.
• Even though investment has been limited over the past several years, the StoneRiver team has released a new version of the system each year and done a good job of creating flexibility in the user interface, making policy administration data available to other systems and adding product support features.

Cautions:

• StoneRiver has not developed a strategic road map for the system that provides its customers with guidance as to its next steps. The lack of a solid road map also contributes to the uncertainty regarding the future of the platform.
• ID3 does not support variable life or variable annuity products, or true group products.
• StoneRiver does not have any non-U.S. customers, limiting its ability to provide capabilities to multinational insurers.

StoneRiver receives a Caution rating again this year. It must create and execute a plan for ID3 that will move it forward technically, while retaining the expertise and functional capabilities in the system. It must create a migration path for its existing customers in order to successfully compete in the future.

Rating: Caution

iWorks Core Policy Solutions

SunGard's iWorks Core Policy Solutions is the policy administration solution within its life-insurance-focused products. It has been working to enhance its systems to create a common user interface across its illustration, policy administration and incentive compensation components. With more customers using its solution for group than for individual business, it has tens of millions of covered lives administered on the system.

Strengths:

• iWorks Core Policy Solutions is one of the most proven group benefits systems in North America.
• SunGard has added dashboards and analytics to help evaluate service performance, the mix of business and customer characteristics within the solution.
• In the mid-1990s, SunGard developed a client/server system, which has Java EE application programming interfaces, to support rule-based processing.
• iWorks Core Policy Solutions has wide-ranging product support across group and individual products, making the solution best-suited for high-volume companies with multiple lines of business and big books of group products.
• iWorks Core Policy Solutions supports Canadian investment, medical and retirement products in conjunction with life plans.
• SunGard has a strong international presence with iWorks Core Policy Solutions.
• SunGard has a 4,000-person-strong global service delivery organization to support policy administration and other insurance software offerings.

Cautions:

• iWorks Core Policy Solutions has a reputation of being only a group life benefits system. Additionally, there are functionality gaps for some types of individual life products. Some insurers use the solution tactically for individual life, work site and portability of group insurance to individual products.
• SunGard is having more traction in international markets than in North America, which may affect R&D in the future.
• SunGard lacks a focus on smaller insurers in the U.S., which is a growing market for these types of systems.
• SunGard expects its customers to upgrade at least every three years to keep its support agreement in place, which can impose on insurers' upgrade schedules.

iWorks Core Policy Solutions continues to be a leader in the group life market, supporting a wide diversity of products. It has a strong vision for its iWorks line, which includes incentive compensation, policy administration and illustrations. The new user interface reflects its interest in creating modular solutions for life insurers to improve functional areas, while leveraging legacy functionality. SunGard must continue to invest in R&D for the North American market and not overlook this market's needs as its international business grows at a much faster pace.

Rating: Promising

Wynsure

Wynsure provides functionality across a broad set of functional areas, including policy management, agency management, claims management and document management. It is a viable platform for insurers, particularly for those seeking current technology, broad functionality, and a strong separation between client code and the base system code. Supporting as many as 5 million lives, the system is structured as an SOA, using Microsoft's C++.

Strengths:

• Wynsure is the only system other than SunGard iWorks with proven high-volume support for non-health-group-benefits products, with five customers using these features within the system.
• The system supports claims management for disability and other products.
• The system has a good rule-based architecture and interface for adding or changing products and for making claims, service or other process changes.
• The Wynsure base solution supports individual life, annuity and group benefits products and allows its insurance customers to add code components without altering the base structure.
• Wynsure has an enhanced workflow and desktop for a better user interface.
• Wynsure is built using a pure object-oriented design and is structured as an SOA.

Cautions:

• Wyde is a small but growing company, with 95 of its 150 employees serving the North American market.
• The system lacks proven annuity and universal life capabilities in production with a client.
• Wynsure has a large breadth of focus to support life, health and P&C insurance products from a single platform. The product may have a larger solution footprint than is needed for insurers that are in only a single line of business or that desire a life-insurance-only system.

Wynsure improved its position from Promising to Positive this year. It is a strong fit for insurers that are willing to accept the risks of a smaller vendor and that have a need to administer both individual and group products. Wyde is well-positioned to continue to grow its customer base, with a well-architected system and knowledgeable project staff.

Rating: Positive