In 2009, Thomas Noth, CIO of Talanx, Germany’s third-largest insurance group, had some ambitious goals: Integrate two subsidiaries, catch up on neglected IT investment, and set up an IT services provider. As he believed the best way to achieve these goals would be to implement standard software, he needed a partner. Enter SAP. The companies worked together to develop standard software for insurance companies, with SAP providing the products and consulting, and Accenture taking care of system integration.
Here are just some of the project’s milestones: It was decided to migrate the personal liability insurance business first – that is over 500,000 existing policies. At the same time, Talanx implemented a new SAP collections and disbursements system. Third on the list was the enhancement of software for labor management, scanning, indexing, and claims management.
A Pioneer in a Conservative Industry
The mega project to replace legacy systems and implement new software will be completed by the end of 2012. Noth is satisfied with progress so far. He is a pioneer in an industry known for being conservative – when it comes to IT German insurers aren’t exactly early adopters. Noth wouldn’t mind either if the industry learns from his experience. It no doubt will: In a study of trends in IT strategy, Ali Sunyaev, assistant professor of business information technology at the University of Cologne, Germany, identified that German insurance companies are slowly but surely moving towards standard software.
Maybe Noth’s work will bring some momentum to the industry. “Insurance companies are becoming much more willing to deploy standard software. We see this when we present the results of the Talanx project to the CIOs of other insurance companies,” says Bernhard Graf, business development director for insurance, Germany, at SAP Germany, who was also involved in the project. Regarding the industry as whole, Graf believes that those who will drive the deployment of standard software are “as diverse as the insurance companies themselves.”
According to both Graf and Noth, the typical insurance company has a large number of inhouse, and often archaic, systems with a lot of interfaces. This type of infrastructure is costly, and keeping it all running ties up a lot of resources. “This is often a business risk, and it prevents companies from bringing about innovation in their products and processes as fast as they would like, and in the way they would like,” says Graf. “But implementing flexible standard software like the SAP for Insurance solution portfolio can help them free up resources for innovation.”
The Logical Next Step: The Insurance Industry
Standard solutions for insurers. The idea may sound strange at first. Ruediger Spies, independent vice president for enterprise applications at IDC Central Europe, does not find it strange at all given SAP’s long tradition of working with financial service providers at least in the banking sector. For instance, in 2003 German retail bank Postbank implemented SAP account management software, and at the end of 2010 it migrated to the new core banking system; at the start of 2010 Deutsche Bank announced that it had chosen SAP for its new core banking system. Spies says: “That’s why moving into the insurance industry was a logical next step.”
Spies acknowledges that SAP does not yet reign supreme in this sector, and adds: “Since a number of insurers already run SAP, if not in their core insurance business, but for asset management, purchasing, or human resources, for example, entering this segment certainly makes sense.”
SAP Germany manager Graf says: “We can assume that the positive results of the Talanx project can be applied at least to the nonlife insurance market. Midsize companies, and smaller companies too, now have a serious alternative to inhouse software and to industry solutions for smaller insurers.”
A Challenge to the Entire IT Market
Talanx CIO Thomas Noth sees this primarily as a challenge to the entire IT market: “What matters to smaller and midsize companies is whether the suppliers – and I mean not just SAP but integration and deployment partners – are able to offer more comprehensive migration, implementation, and deployment models. An attractive business case is not enough for SMEs.”