February 15, 2015
Policy Administration: Ripe for Modernizing
Fully 78% of insurers have begun the journey with policy administration systems, but configuration tools are posing a challenge.
Modern core systems are essential to an insurer’s ability to compete effectively in today’s increasingly complex and dynamic market. Policy administration systems (PAS), in particular, are ripe for modernization — policy administration is the heart of an insurer’s operations, and it provides the information that feeds other core systems as well as most of the secondary systems, like document management and agent portals. Insurers know that modernization is an inevitable step on the journey forward. The exciting news is that the industry as a whole has reached a tipping point where nearly two out of three insurers are engaged in some stage of PAS modernization, whether in the evaluation stage of a new solution or in the actual implementation.
SMA’s recent study, Policy Administration: P&C Plans and Priorities, reveals that all insurers know they must take the modernization journey and that most are already on the way, although in different phases and at their own pace. Fully 78% are planning to replace at least one core system (policy, billing or claims), and more than half are planning to replace all three. With so many insurers working toward the same goal, there are certain commonalities and lessons to be learned that can be used to make a company’s PAS modernization projects more efficient and effective.
One of the most alarming findings from the research is the substantial challenges that insurers are still experiencing as they work with their systems’ configuration tools. This is the number one feature insurers require in a new PAS, but it is also one of the top challenges they cite in working with the solutions on the market, including issues of handling the work internally. Our observation is twofold: Evolving PAS solutions are adding and enhancing configuration capabilities, but their usability aspects are still maturing. The second insight is that insurers are coming to realize they must reorganize to some degree to improve their maintenance processes. The skills and resources that a configuration specialist needs are often assumed to exist but are not always present. Resources that could be trained for this role are typically isolated in the business or IT organizations. There needs to be recognition that there are specialized skills to be learned for configuration and maintenance, and decisions to be made about where this work will be performed.
Core systems modernization is inevitable, and although PAS replacement, the biggest component of that process, demands significant investments of time, resources and money, most insurers have already begun their adoption of modern core systems. With so many companies engaged in PAS replacement, we can learn a lot about what makes these projects successful, both before and after implementation. There are challenges ahead, but they are not insurmountable, and the benefits of core systems modernization will be realized for years to come.