Trends and Bests Practices in the Policy Administration System Market

New hosting methods, updated user experience platform options, and growing M&A activity in the space have changed some aspects of the PAS selection process.

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Property/casualty insurers are continuing to replace core systems, including policy administration systems (PAS). But the landscape is shifting, and these shifts affect how carriers select the right system for their needs. Merger and acquisition activity in the space is consolidating many solutions into a group of larger players, and changing technology approaches such as cloud hosting, headless implementations, and DXPs are providing new methods of offering end users functionality. Partnering with a PAS vendor is not a simple undertaking, but preparing adequately for the impact of a transformation project across an organization can simplify the process.

Mergers, Acquisitions, and Restructuring Pervade the Market

The last several years have indicated that property/casualty insurers prefer full-suite solutions, rather than stand-alone components strung together. This trend has led to vendor consolidation, with most offerings providing at least policy, billing, and claims.

Acquisitions, such as Insurity purchasing Oceanwide and Tropics; Majesco acquiring Cover-All; and Sapiens acquiring Adaptik, StoneRiver, and Maximum Processing, have all led to larger organizations building out their core systems offerings. Some of these companies have maintained original solutions with new branding, while others have incorporated them into existing suites.

Another set of acquisitions have focused on building out specific offerings like agent or policyholder portals, such as Duck Creek acquiring AgencyPort, and business intelligence and data analytics, like Guidewire’s acquisition of EagleEye.

New Tech Trends

Early fears about cloud deployments are giving way, and an increasing number of carriers are moving to Software-as-a-Service (SaaS) hosting models. The cost of upgrading core systems is a driving factor behind this shift. Most vendors with SaaS models for PAS solutions offer a single-tenant model to assuage lingering security fears associated with cloud. Novarica’s prediction that, by 2020, 50 percent of insurers deploying a new PAS would choose some degree of cloud hosting seems to be coming true.

Another trend impacting the PAS market is the InsureTech boom in insurance hubs like Silicon Valley, Des Moines, and New York. While IT budgets at carriers remain primarily focused on replacing, modernizing, and maintaining core systems, some insurers are licensing or leveraging tech capabilities from InsureTech startups to complement their PAS solutions. These startup capabilities are more often than not focused on analytics or portal capabilities.

Some carriers are using headless implementations to build their own user interface on top of vended core systems, enabling insurers to use existing functionality while differentiating their user experience. Digital experience platforms (DXPs) are another way that insurers can offer a multi-channel experience while using a low-code (or no-code) vended system. These systems are often industry-agnostic, however, and require configuration to integrate with insurance systems—some solution providers are using microservices to achieve this end.

Selecting a Vendor Partner

Carriers have better policy administration system provider options than ever before. Sifting through this rich vendor market should not lead to a long, drawn-out process, though. The selection process should ideally be rapid and should include a market scan, an RFI phase, and directed demonstrations over 12-16 weeks. Getting stakeholders across the organization invested in the process can be difficult. A team composed of both business and IT representatives can ensure that it goes smoothly. According to Novarica research, two years is the typical time to deliver for a first release; it can take as long as five years for a full implementation to go into effect.

This time commitment can seem daunting at the beginning of a project (and these projects often exceed both their schedule and their budget), but there are proven benefits to core systems transformation projects. Carriers have reported faster time to market, more agile business and IT teams, and lower technical risk, among other benefits.

Preparing for a transformation project should involve steps categorized in three areas: business readiness, IT and technical readiness, and program readiness. Failure to plan ahead of time can lead to project swirl and interpersonal disagreement, ultimately costing the organization time and money. Unforeseen hurdles may still emerge over the course of a transformation project, but identifying the scope, approach, and processes ahead of time lower that risk significantly.

Carriers embarking on a core systems transformation project have a long road ahead of them. New hosting methods, updated user experience platform options, and growing M&A activity in the space have changed some aspects of the PAS selection process. No matter what platform a carrier selects, however, project readiness efforts can improve an insurer’s chances of a successful core systems  transformation project.

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Martina Conlon //

Martina Conlon is an Executive Vice President of Research and Consulting and practice leader for property/casualty at Novarica. She has expertise in IT strategy, organizational approaches, and technology architecture and is the primary author of numerous insurance technology reports. Martina has led dozens of vendor selection efforts, insurer peer benchmarking, IT organizational assessments, and enterprise architecture and roadmap development for leading US insurers. Prior to Novarica, Martina was a technology consultant and served as Director of Enterprise Technology for Arbella Insurance. She holds an MBA from Boston University and a BS in Electrical Engineering from Tufts University. She can be reached directly at mconlon@novarica.com.

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