Duck Creek Blog
Blog Post

The Evolution of Core Systems: from Mainframes to SaaS

In providing mission-critical functionality for running the central operational functions of P&C carriers – from product development to underwriting, rating, billing, claims, and beyond – core systems are critical to enabling carriers’ success. From personal lines to commercial and specialty, whether a carrier’s primary objective is on creating highly differentiated products, enhancing customer experience, innovating new business models, or simply trying to become more operationally efficient, core systems are a key enabler of being able to execute on strategy. It’s been widely acknowledged how P&C insurance is changing faster than ever before, but how have core systems specifically evolved over time? In this post, let’s take a simplified look at how core systems have transformed from a technology perspective, from legacy mainframes to software-as-a-service (SaaS).

See Also: Download our eBook on 7 questions to ask a Vendor in the SaaS Core Systems RFP

Generation 1: Legacy Mainframe Solutions

After years of relying on pen and paper as the sole system of record for insurance, the rise of computing brought the mainframe as the first major generation of technology that carriers adopted. Dating back to the 1960s, these mainframe systems often relied on the COBOL programming language for developing homegrown insurance software and presented information to end users on green screen terminals. An innovation at the time, mainframes brought processing power and storage directly to carriers. However, these systems proved inflexible and costly to maintain on-site, requiring lots of re-coding projects in order to make simple changes and integrate with them. Mainframes gave carriers a path forward, albeit a very slow-moving, one-dimensional one.

As the world began to adapt more modern programming languages such as Javascript in the late 1990s and original IT staff retired, finding people with the knowledge to maintain and support these antiquated mainframe hardware and software systems became a challenge in its own right.

Generation 2: Modern On-Premises Systems

Right around the turn of the millennium, we saw the continued expansion of the internet and the arrival of web-based insurance core systems that were deployed at carriers’ physical locations. IT teams at carriers no longer had to start from scratch and create insurance-specific software in-house, as technology providers had picked up the task of creating purpose-built software for the industry. This freed up IT resources somewhat, but the task of managing the system’s day-to-day was a drain on resources. While the early functionality of these systems gave carriers a foundation which they could run their businesses on, they still required large custom coding projects in order to modify them to actually meet their needs and differentiate themselves from their competitors.

As with mainframes, the challenge of the initial investment hurdle of setting up the physical infrastructure and storage and hardware that goes along with it remained. But once overcome, the true challenge that manifested itself was software upgrades. Some carriers had minimal degrees of success in being able to stay somewhat current and reap the benefits of new features and performance enhancements, while many fell years behind the latest releases from their vendors and effectively ended up having de facto legacy systems. These challenges forced IT resources into maintaining the status quo and untangling the technical debt that had arisen due to unnecessary customizations just to get through a painful upgrade project every couple of years.

Generation 3: Low-Code SaaS

Later in the 2000s brought the rise of greater adoption of cloud computing, and most notably SaaS. Over time, carriers began testing out self-managing or having third parties host their core systems in the cloud. While this initial move to the cloud helped carriers overcome initial hurdles of physical infrastructure and servers, and providing high availability and scalability, they were still faced with overcoming the challenges of upgrades, maintenance, and systems support. It became clear that simply getting rid of your on-premises infrastructure and rebuilding it in the cloud was simply the recipe for what effectively would become a “modern” legacy system.

2013 saw the early adopters of SaaS in the insurance industry, but it wasn’t until 2018 that the industry saw an inflection point in embracing SaaS. By Q1 of 2020, leading vendors reported demand for cloud-based policy administration systems to be in the 80-90% range, with many of these systems delivered via SaaS. Today, these dynamic, low-code SaaS solutions provide carriers with systems that are highly configurable and flexible, always kept up to date, and provide a broad number of integrations to the greater insurance ecosystem, which continues to be open and is becoming even more accessible for new insurtechs to join than before. These features of SaaS give carriers increased speed and operational agility, lower total cost of ownership, move IT into the position of being a true partner to the business in being able to focus on innovation initiatives, and ensure that carriers no longer have to miss out on pursuing a market opportunity.

The Future of Core Systems

Until the next disruptive technology trend comes along, SaaS appears to be the delivery model that is here to stay. What’s great about SaaS is that it enables carriers to take advantage of incremental improvements made both to the software, as well as the services (the second “S” in SaaS) that impact the overall carrier SaaS experience. For instance, some of the enhancements we’re bringing to our SaaS solution at Duck Creek are oriented around providing carriers with more control and visibility into their environments, while providing functionality that will further enhance carrier DevOps.

With low-code SaaS core systems bringing the business and IT sides of the house closer together than ever before, it’s clear that a new era of innovation is well underway.

Watch the OnDemand Control Hub Webinar to learn about forthcoming enhancements to our SaaS solution
Watch Now
Rob Savitsky
Rob Savitsky is a Senior Manager of Product Marketing at Duck Creek Technologies, where he develops marketing strategies, messaging, and positioning for Duck Creek OnDemand and various Duck Creek products. Previously, Rob worked at AIR Worldwide, a Verisk business unit, where he led product marketing for the company’s reinsurance catastrophe modeling application, cyber risk modeling application, and oversaw marketing for Analyze Re (acquired by Verisk on behalf of AIR). Before then, Rob worked in various digital marketing roles at several entertainment, media, and technology companies. Rob holds a B.A. in psychology from the University of Pennsylvania and an MBA from Babson College.