THE 1980S

A Computer on Every Desk

The PC revolutionised how we work. Though life insurance was happy to embrace the new technology, they struggled over compatibility with their legacy IT systems.

Although the first computers in the 1950s were delivered without software, companies like IBM soon began bundling basic software packages with their installations. The first attempt at a standardised insurance software package was the IBM 62 CFO, which was created for its smaller 1401 machine. This was based on the consolidated functions approach developed by the American Society of Actuaries 10 years earlier (CFO stood for Consolidated Functions System for Ordinary Life Insurance). However, this set of programs was not intended for the larger firms. It was the general thinking at the time that each insurance company had its own unique needs that were best served by developing their own highly individualised systems.

In 1970 IBM unbundled its software from its machines. This opened up an opportunity for a burgeoning new sector of independent software vendors. Simultaneously computer microchip technology was rapidly advancing. By 1980 the personal computer revolution with its new model of distributed computing was underway.

However, insurance companies had difficulty integrating the new technology. Their early adoption of information technology and their own in-house development teams had locked them into legacy core systems.

Another contributing factor to the dilemma facing insurance was the productivity paradox, an observation first attributed to economist Robert Solow. This referred to the discrepancy between a company’s large investment in cutting edge computer technology and the lagging productivity that resulted from it. While many possible reasons have been given for this, certainly the high cost of IT implementation and maintenance during that time played a big role.

Enter Professor Dr. Manfred Feilmeier. In 1980, together with his colleague Michael Junker, founded the company with the amazingly long name Prof. Dr. Feilmeier, Junker & Co., Institut für Wirtschafts- und Versicherungsmathematik GmbH, otherwise known as FJA. As a mathematician and insurance expert who had done extensive research on parallel computing, Dr. Feilmeier had the vision and competence to take insurance IT to the next level.

By 1980 the personal computer revolution with its new model of distributed computing was underway.

By separating products and mathematic functions into separate layers, it would be possible to create a software that all insurance companies could use and build upon.

He understood that insurance companies distinguish themselves in how they define their products and services. The underlying mathematics are universal. By separating the products and mathematic functions into separate layers, it would be possible to create a software that all insurance companies could use and build upon. The mathematic layer would remain constant while the product layer could be customised. It would no longer be necessary for each company to develop their IT structures from scratch as they had been doing. This would enable them to benefit from scaling efficiencies which in turn would ease the migration to next-generation computer systems.

Based on this principle, Prof. Feilmeier created a company that combined a deep understanding of both actuary science and IT. By 1987, with the launch of VWS Life, FJA was able to offer a standard software for the life insurance industry. As a result, FJA expanded rapidly. The company that Feilmeier started has today become msg life, one of the leading international software specialists for life insurance. With its nearly 1200 employees divided more or less equally between actuaries, IT developers and industry experts, msg life still adheres to the basic philosophy that was established 40 years ago and continues to make it unique.

By the end of the 1980s, the insurance industry was starting to enjoy the benefits of the new model of computer-automated process integration. However, around the corner, brand new challenges and opportunities were waiting.

Next: The 1990s and Globalisation

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Manfred Feilmeier