Direct Line warns of system failure risk as RBS IT migration continues

Matthew Finnegan

Direct Line Group has warned that the ongoing separation of IT from the Royal Bank of Scotland presents a risk of systems failure.

The insurance provider announced a two-year project to segment off its IT systems from RBS in January 2013, with Capgemini awarded a £100 million contract to carry out the work.

In its full year results for 2013, Direct Line Group highlighted the risks as it migrates its core systems off RBS' infrastructure.

"In particular we have IT systems risk, including that we are highly dependent on the use of RBS Group's information technology, software, data and service providers," the insurer stated.

"Migrating IT systems away from RBS Group introduces different operational risks; there is increased likelihood of system failure at the point that functions are moved onto new infrastructure. "

It added that the IT migration "also introduces people risk, as management may be distracted away from day-to-day activities".

However Direct Line said that it has taken a number of steps to mitigate the threat of systems failures stating that the migration on to a new platform is being "continually monitored and managed by experienced personnel".

Migration from RBS' systems has created problems for others in the past. Customers of Tesco Bank were unable to access account information in 2011, following its move from RBS' infrastructure onto a Fiserv Signature bank platform.

Direct Line's migration project is expected to be complete by the end of 2014. The five year contract will cover the design and delivery of new IT infrastructure, as well as providing ongoing support to Direct Line.

The insurance provider has already separated its HR systems, using a cloud-based application from software as a service provider Workday.

In its financial result statement Direct Line also highlighted its investment in customer facing systems, with the introduction of a new digital content platform and enhanced web tool analytics.

The insurer also started the roll-out of new smartphone and tablet optimised websites, aimed at "improving the customer 'quote and buy' journey".