Richard West implores reinsurers to plan beyond e-commerce.
Pick up a magazine for virtually any market sector and one finds the same conclusion. All companies will need to offer some sort of e-commerce capability to compete successfully and survive. E-commerce, in some form or other, is the latest market buzz.
Many reinsurance companies will struggle to provide such facilities because their existing technical infrastructure cannot support it, or because the cost of development is prohibitively high. Some companies will be prevented from adopting new trading channels as quickly as the business demands because the appropriate technical architecture is lacking. Most will probably achieve some level of service, but often these will be based on fancy new veneers over old legacy systems.
This appears to work fine as a short-term expedient, but comes with a fairly significant disadvantage. Despite the new appearance, there is still a reliance on old systems and old technologies to underpin the business. This not only perpetuates the expense of maintaining old systems, but the inflexibility of old systems also restricts the speed with which future changes can be brought to bear.
To use a car analogy, a Porsche body shell on a Mini Metro engine will still race along like a Mini Metro.
The problem with this “outside in” approach is that sooner or later a new body shell will simply not be enough, and the whole thing will have to be replaced, including the engine.
How then can reinsurance companies ensure that future trading channels can be launched quickly enough to provide competitive advantage, at an acceptable cost? One possible answer is to build systems from inside out rather than outside in. Reinsurance companies thus focus their IT expenditure on areas that are protected from the vagaries of consumer trends or leaps in technology.
They should look to protect investment in the business rules and data within their computer systems, but allow new, alternative trading channels to be quickly deployed. This would point towards systems that are engineered in a true multi-layer architecture.
Here, both the data and its associated entry/retrieval routines exist in their own discrete layers while the user interface is handled separately.The real investment must be made in placing the business rules within the layer that controls all access to the data. This becomes the engine at the heart of the overall solution. Provided it is openly accessible and highly flexible, then the chosen user interface is of minor importance. As new trading channels are invented (that is, after all, what e-commerce is) the company's engine stays the same while one simply replaces the layer containing the user interface.
Today a browser; tomorrow who knows? But one can be confident that a business will adapt very quickly without expensive data conversion or system development. So in the car analogy one can rapidly replace the body for something sleeker and still have the performance under the bonnet.There, however, the analogy ends. In a properly engineered system one can have any number of interface layers with a common engine. In today's technology that means, for example, client/server interfaces, EDI routines and browser applications sharing the same data repository and, critically, the same business rules - ensuring consistency across the various media.
A well designed engine will also enable an organisation to develop its own interface using the most appropriate tools without danger of corruption to the core. Everyday desktop facilities, such as word processors and spreadsheets, become powerful data entry and reporting tools in the hands of real business users without risk. A change in business rules needs to be made only once. This must happen once in the engine and then simultaneously applied across all interfaces.Another advantage offered by a properly engineered core is a strategy of “best of breed” applications that carry out specialist functions and together provide a total business solution. A reinsurance company might select a risk processing engine from one vendor, a claim processing engine from another, and so on. Provided each engine is properly built to the same high standard, then all should happily co-exist. As before, the company can then apply any choice of interface methods to suit the particular business needs.
So while e-commerce is the flavour of the month, one would be well advised to think carefully when considering an immediate response. Look beyond the outer layer with its shiny chrome and metallic finish, and carefully inspect what is really under the bonnet. Because if this does not happen, one may well be changing models again sooner then anticipated.
Richard West is sales and marketing director of Eurobase Systems Ltd.
Tel: +44 (0)1245 496706.