Ovum Decision Matrix: Selecting a Life Insurance Core Administration Platform for Use in Europe Catalyst Ovum view As European life insurers face the challenges of weak market growth, increasingly intrusive and complex regulation, volatile investment returns, and the uncertainties of the eurozone crisis, the ability of core insurance platforms to support product introduction, regional expansion, and process optimization will be critical. However, given that the choice of core administration platform can play a pivotal role in an insurer's business effectiveness for 10 to 20 years, platform replacement is probably one of the most crucial technology decisions an insurer can make. While the selection of a core platform must support an insurer's specific needs and strategic goals, this report looks to assist life insurers in shortlisting the leading vendors serving the European life insurance sector. Life insurers in Europe are responding to the urgent need to bring about significant and sustained operational cost reductions, while also becoming more responsive and agile to changing customer and market needs. Ovum therefore expects the demand for core platform transformation, and, as part of this, core platform replacement, to increase during the next three years. Ovum believes that the leading vendors' solutions have reached a level of functional and technological maturity which means that choosing to "buy," rather than "build," is the most effective approach for the vast majority of life insurers. We also believe that vendors have a vital role to play in supporting insurers as they respond to the changes in platform architecture and process-centric design that have occurred in the last decade. Page 1
Key findings The wider system functionality of a life insurance platform is an increasingly critical consideration Configurability and business process control are key considerations in vendor assessment Technology architecture has become a key criterion in core platform selection Platform architecture is more critical than a vendor's presence in a local market Core renewal is increasingly moving toward adoption of a comprehensive life insurance platform There will be a modest increase in platform renewal projects among European life insurers during the next 36 months Ovum decision matrix: Selecting a life insurance core administration platform for use in Europe In this report, Ovum takes a close look at the competitive landscape of life insurance core administration platforms for use by insurers operating in the European market. The report gives a quantitative and qualitative representation of Ovum's view of the competitive market environment within the European life insurance sector. Ovum believes the 10 vendors and their solutions considered in this report, while not intended to be exhaustive, is representative and offers readers an in-depth analysis of the leading vendors of life insurance core administration platforms for use in the European life insurance sector. Ovum provides guidance for institutions looking to deploy life insurance core administration platforms, and advises whether they should shortlist, consider, or explore solutions from the vendors assessed in this report. Ovum defines each of these recommendations as follows: Market leaders: This category represents the leading solutions that we believe are worthy of a place on most technology selection shortlists. Vendors in this category have established a commanding market position with a complete or near-complete offering that addresses overall market requirements with a strong technology capability. Market challengers: Vendors in this category have good market positioning and a wide breadth of business functionality and technology capability. They should be considered as part of the technology selection process, particularly if their offerings address specific project scope requirements or if the vendor has a strong position in a local market. Market followers: Vendors in this category have strong potential but have not yet reached full maturity in terms of breadth of functionality, technology development, or market impact. However, depending on an institution's particular technology and Page 2
business vision or requirements, these could be worth exploring for their future potential. From the overall assessment scores, Ovum has identified three platform vendors that should, for most insurers operating in the European life insurance sector, be included on a shortlist as part of a core system selection process. These vendors provide offerings that combine strong technology architecture with a broad range of functionality, and they have established leading positions within the European life insurance market. Recommendation: is a market leader The ALIS platform, originally developed by UK-based FIS and acquired by in 2011, is a mature product that was first launched over 20 years ago. As a result, it has a strong European installed base, particularly of complex multi-entity deployments. increased investment and focus since acquisition has driven very strong growth for the ALIS platform, and it added new clients in both Europe and North America during 2012. The consistently high scores for across market impact, technology assessment, and core system functionality, together with ongoing developments that are likely to strengthen the position of ALIS in 2013, mean that it is a market leader and should be considered for most shortlists Page 3
Vendor Analysis is an insurance sector-focused software developer, founded in 1982 and headquartered in Tel Aviv, Israel, with a direct presence in the UK, the US, France, Belgium, Australia, and Canada. ' life insurance core administration focus was significantly increased with the acquisition of UK-based FIS Software in August 2011. FIS Software owned and developed the ALIS platform, which has become ' core offering in the life insurance core administration market. The ALIS platform was originally launched in 1988. has a workforce of 800 staff, of which approximately 350 are focused on developing and supporting the ALIS platform. Figure 25: : market impact Market Impact Market presence 10 8 Support capability 6 4 2 0 Market growth Industry focus Partner network Geographic reach Average Source: Ovum is a leading vendor in the market impact category. Although relatively small in terms of revenues when compared to some of the global vendors assessed, ' scores are driven by its significant European installed base, strong focus on the insurance industry, and has the highest Page 4
growth rating of all of the vendors assessed adding new clients both in Europe and North America during 2012. Figure 26: : core system functionality Core System Functionality Platform roadmap 10 8 6 Market Coverage 4 2 0 Product Functionality Business flexibility Platform Functionality Average Source Ovum The ALIS platform achieves an average or above-average score on most of the core system functionality sub-criteria. Its business flexibility score is particularly high as a result of its product configuration approach. Product configuration is achieved by linking a number of components addressing specific aspects, such as premium calculation, cover types, underwriting parameters, and bonus calculation. This approach does not require any product-specific logic to be defined, but instead uses configuration of metadata parameters to implement a product. Product functionality is below average due to the current lack of support for annuity products, although this functionality will be added in 2013. Most variation occurs within the market coverage sub-criteria, chiefly reflecting the difference in the number of multi-country, multi-entity deployments across the vendors. Not surprisingly for a mature platform with a significant European installed bases, ALIS achieves high market coverage scores Page 5
Figure 27: : technology assessment Technology Assessment Architecture design 10 Ongoing management Configuration 8 6 4 2 0 Business process control Integration approach Deployment Scalability Average Source: Ovum The ALIS platform is an n-tier architecture comprising presentation, business logic, document, interface, and storage layers. Users access services of the presentation layer either as a browser-based thin client (for a typical user) or PowerBuilder-based thick client (typically for platform administrators). A web-based configuration engine replacing the PowerBuilder version will introduced in the first half of 2013. Integration to third-party and legacy systems at both the business and presentation layer is through a range of means, including WebSphere MQ, COM+, and web services interfaces. Business flows also align with the ACORD data model to simplify integration with external systems and enterprise process management systems. does not currently offer ALIS as a SaaS deployment and, despite a significant and growing European installed base, most ALIS deployments have tended to be smaller in the number of policies managed than the average for the group. This has resulted in a below-average deployment score. However, there will be a large-scale deployment of ALIS during 2013, not included in this evaluation, which will enhance this score.. Page 6