(Image source: Shutterstock.)
For the past few decades, insurers have been trying to modernize their policy administration systems. While some of them have been successful, large number of the insurers have suffered from multiple issues when migrating or installing new policy administration systems. In this article, we provide some insight into how to address the issue of migration of policy administration systems.
Leading PAS provide tremendous amount of capabilities when it comes to supporting the administration, billing, claims and analytics workflow. Furthermore, these systems are very flexible allowing endless customization for insurer. Quite a few times, this flexibility comes with complexity and contributes to challenges that many insurers face.
The key issues and challenges when migrating to a modern policy administration system have been three folds:
- Infrastructure Related: Often infrastructure related requirements trip the insurers as the flexible architecture requires multiple components to be installed in a complex environment. To further complicate the situation, technology has been evolving faster than insurers can execute installation of new policy administration systems. For example, the cloud-based infrastructure provides a lot of flexibility for the future, while many issuers are still debating about what cloud means to them. All this means, many insurers are not completely prepared to handle infrastructure requirements that vendors of modern policy administrations pose. For some insurers the journey started with an on-prem modern PAS implementation to consolidate their legacy (PAS). While continuing on the path, cloud become the primary technology agenda for the firm and the insurer need to course correct to completely transition into a cloud-based infrastructure. Product companies (vendors) are continually venturing into other areas such as digital transformation, Artificial Intelligence, Machine Learning, Internet of Things etc. which insurers have not even envisioned in their strategic roadmap.
- Data Related: Mostly, all PAS administrations are very flexible and allow for supporting any data model requirements that insurer’s business processes require. While this flexibility is great from vendor product standpoint, it requires tremendous amount of effort, knowledge from insurers to implement and support policy administration systems. For some insurers the legacy policy system is a custom application built on a variety of different technologies. To meet the target PAS data model need, one off development needs to be performed to build a middle layer (operational data store) for policy to feed into the new PAS.
- Integration Related: Insurers spend a lot of time integrating with modern PAS. Integrations means pulling and pushing administration related data from the system of record. The data is often used in automating workflow, reporting or advanced analytics. Integrating policy administration data is one of the most time-consuming activities that takes incredible amount of time and resources. In some of the PAS implementations, a database integration layer is built to feed in and extract out data from the PAS. This not only costs time and effort but also results in a redundant data layer.
What can be done to address these challenges? One way to address these challenges is to leverage accelerators. As the name would suggest these accelerators allow for jumpstart insurers development cycle because they are based on standards and leverage modern technology constructs. Below is a list of accelerators that can help insurers accelerate their policy administration systems:
- Infrastructure Accelerator: These accelerators allow infrastructure to be stood up in the cloud (public, private or hybrid) in a matter of weeks rather than months or even years. For example, the PAS cloud formation accelerator allows standing up for virtual private network, n-tier application, multiple environments like testing, development and production very quickly. The accelerators deploy standard components on standard cloud models. It is crucial to establish enterprise infrastructure strategy and adopt appropriate infrastructure accelerator to stay on the course with minimal disruption.
- Data Accelerator: These accelerators allow deployment of standard data models that are automated and can be quickly configured or customized as per insurers business processes. Data accelerators can save a lot of time and cost. Typical examples of the accelerators are reusable ETL code, database stored procedure etc. These accelerators are specifically designed to provide access to the data that is typically hard to get at within PAS.
- Integration Accelerator: Based on standard application programming interfaces (APIs), these accelerators can simplify integration of PAS data into rest of insurers technology ecosystem and reduce data redundancy. These accelerators are specifically designed to provide access to the data that can integrate with rest of the eco-system in generating key metrics that the business need.
Ultimately, these accelerators can save time, money and a lot of frustrations by helping insurer’s PAS implementation. Insurers want to focus on running their business and relying on key business-related metrics. These accelerators can directly or indirectly support generation of metrics and KPIs such as loss ratio, revenue per policy, average cost per claim, average time to settle claim, returns on surplus, severity, expense ratio, retention and average policy size.