Service Oriented Architecture (SOA) Insurance

Insurance & Technology -May 03, 2006

Many insurance companies rely on disparate technology solutions to quickly bring products to market, process claims and service customers. But the homegrown and customized legacy systems on which many companies have built their businesses often are not flexible enough to quickly address market demands. By adopting service-oriented architecture, insurance companies are successfully distributing existing systems across the enterprise in a more cost-effective manner.

Since customized legacy solutions tend to be hard-coded and operate independently among departments, they create silos of information. To make matters worse, a single insurance carrier has invested in multiple independent solutions to conduct billing, claims, even underwriting processes. "Insurance companies are constantly trying to mine data to see where the customers' needs are, bundle products and service their policyholders,"

says Shane Tulloch, CEO, SEEC. The Pittsburgh-based company provides service-oriented business applications for insurance and financial services. "IT needs to be the backbone of these operations. If existing solutions cannot be adapted to support this business, insurance carriers have a serious problem," he says.

A New Solution

As competition across the North American insurance industry heats up, companies realize they need to reengineer their processes and expand solutions across the organization if they want to compete. Thus, carriers are looking for solutions that will break down silos, reuse data and business logic, and deliver "one view of the customer," says Vijay Chavan, worldwide head of insurance and financial services at insurance technology solutions vendor Majesco Mastek (Edison, N.J.).

While costly, cumbersome point-to-point integrations were historically the only option, Web services are emerging as a favorable alternative. According to Boston-based research firm Celent, through standard, platform-independent protocols, text-based messaging and data transfer formats, Web-based services actually expose an application or data on one computer to requests from other applications on another computer.

Web services are gaining more attention thanks to growing interest in service-oriented architecture (SOA): a collection of self-contained services that communicate with each other and perform business processes through defined description languages or standards. This architectural strategy is a services layer, or interface, that enables companies to leverage data and transaction capabilities of existing systems across an enterprise. "Legacy systems are historically built to be batch-oriented," says Prasad Kunchakarra, chief architect for consulting firm Primus Solutions (Clarksville, Md.). "As companies wrap [SOA-based] interfaces around legacy systems, they can remodernize their legacy systems" and allow users to access data on existing back ends with Web-based front ends.

And the benefits are plentiful. "SOA automates the functionality of legacy systems without disrupting the depth of the core application," says SEEC's Tulloch. "It is a fast, flexible way to connect business components and create automation." Open, Web-based interfaces are also speeding up implementation time. On average, implementations take roughly 30 days. Once SOA platforms automate historically manual processes, "companies can reduce their costs by 25 percent," says Majesco Mastek's Vijay Chavan.

While Web services and SOA are being slowly adopted across the insurance industry, "a majority of carriers already use it somewhere in their IT infrastructure," says Matthew Josefowicz, manager of insurance group, Celent.

For example, SOA is helping one unnamed insurance carrier to interconnect the disparate systems it collects through mergers and acquisitions. "We were burdened with our own legacy systems as well as those we inherited. Now we need integration among those systems," says a company executive who requested anonymity. "To de-commit to these applications is an expensive proposition," since a significant amount of capital was invested into these systems over the past 30 years, he adds.

After exploring how SOA could be an effective and cost-efficient means of systems integration, the company began evaluating where to begin. E-business operations became a top priority.

Information Sharing

The carrier historically ran its portals through mainframe, Intel and Unix servers. By adding a Web-based tool set that accesses and delivers these legacy applications to users, "we gained an integrated architecture," the executive explains. "Users across the enterprise can mine data from legacy systems and make data available through our Web-based portals," he adds. "From a service and revenue-generating perspective, it is an opportunity for us to get information out to our sales force."

Similarly, Western & Southern Financial Group (Cincinnati; $37 billion in total assets) uses SOA for its CDI (Customer Data Integration) initiative. "Relying upon identity management standards, Web services and auditing ability, we can deliver a unified picture of the customer over multiple channels," says Doug Ross, the carrier's vice president and CTO.

By taking advantage of SOA, "we are standardizing and reusing" existing applications, he explains. "Rather than hard wire an interface to retrieve legacy data, services broker the requests and perform the heavy lifting. The application owner no longer has to reinvent the wheel time after time."

Maturing Standards

While SOA is unofficially called the "next generation" of systems integration, this concept would not be possible without the maturity of open standards. "The need to connect different sources of information located in various applications on various platforms throughout the organization is driving standards-based architecture," such as SOA, says Sandy Carter, vice president, WebSphere and SOA, at Armonk, N.Y.-based IBM. "A standards-based approach enables these different sources to freely 'talk' to each other without requiring additional coding or extensive, additional investments in technology or resources."

More specifically, some experts believe "the rapid acceptance of horizontal standards such as SOAP and SAML has spurred widespread vendor support and more interest in the industry," says Western & Southern Financial Group's Ross.

For example, SOAP (Simple Object Access Protocol) specifies how to encode an HTTP header and an XML file so that information can be passed among separate computers. Similarly, SAML (Security Assertions Markup Language) is a framework for exchanging authentication and authorization information.

Both have allowed vertical standards such as ACORD to gain momentum, Ross adds. A recent XML standard for the insurance industry, ACORD XML consists of nearly 600 standard messaging formats in XML that execute transactions and exchange policy information across property/casualty, life and reinsurance. "This is helping companies achieve interoperability not on a binary level, but on Web services," says Todd Breyman, chief architect for iWORKS, a division of SunGard. The Atlanta-based company provides IT products for the insurance industry.

Advances in standards will continue to ease the SOA integration process. Meanwhile, advances in technology, such as VoIP, will accelerate the business need for an SOA, IBM's Carter says. Clearly, the future remains uncertain, and obviously, "it is difficult to plan for specific future changes," concludes Celent's Josefowicz. "However, only an architectural shift can support a carrier's reaction to these changes."

MajescoMastek executives are available for interviews

Ashish Jha
ashishmj@majescomastek.com
Tel-732.590.6442