(Overview graphic, Novarica Market Navigator for Property/Casualty Policy Administration Systems.)

Whatever COVID-19 has done to reorder insurers’ priorities, one thing it has failed to do is derail core system implementations. Core replacement activity has remained high for years, and Novarica (Boston) reports that currently over half of P&C insurers are in the middle of or about to start a policy administration system implementation. Given that level of activity the research and advisory firm’s annual Novarica Market Navigator for Property/Casualty Policy Administration Systems (PAS) remains highly relevant to insurers trying to shorten their selection list for core system replacement.

Novarica Market Navigator provides an overview of the PAS and core system suites for U.S. property/casualty insurers. The report includes profiles of 43 solutions, summarizes the vendor organizations, technology, differentiators, client base, lines of business supported, deployment options, implementation, upgrades/enhancements, and key functionality. The study is named for PAS because all the systems profiled can operate as a standalone policy admin system. However, it is very much a companion to insurers seeking to evaluate core systems suites. It also incorporates an understanding of insurance core systems’ evolution into a platform concept.

The study is designed to help insurers cope with a fragmented and potentially confusing marketplace for the typical carrier to approach and analyze effectively, according to the study’s co-author Martina Conlon, EVP, Research and Consulting and practice leader for property/casualty at Novarica. “It’s starting point for an insurer’s investigation and assessment of the PAS solutions,” she sassy. “We encourage those who download, buy and read the profiles and you can shorten their list of candidates from 43 to a dozen or so. We encourage them to have a conversation with us to provide further color and experience and maybe bring the list down to six or eight.”

Cloud Adoption and Obsolescence of On-Premise Systems

In addition to the profiles of systems, the report notes trends, such as the PAS market reaching a kind of tipping point with regard to the adoption of cloud-based core. Vendors have told Novarica that 80 to 90 percent of their carrier clients are interested in cloud solutions, according to co-author Martin Higgins, VP, Research and Consulting, Novarica. As a result of the market’s focus on cloud, vendors will be focusing their development efforts on cloud rather than on-premise versions. “carriers contemplating an on-premise implementation have to recognize that they’ll be on an island in terms of vendor focus,” Higgins comments. “Over the longer term, vendors will be working cloud native capabilities and integration with partner ecosystems that won’t be the same for the on-prem systems. Basically, the gap will be widening between the capabilities of on-prem and cloud-based versions.”

The market is also seeing a shift to a multitenancy cloud model, using a single application server or environment to support multiple carrier clients. “It’s a more sustainable path to growth,” Higgins observed. The benefit to carriers is they are able to move away from an upgrade cycle every 12 to 18 months—which slows down deployment of business capabilities.”

CIOs and Chief Information Security Officers have been leery about multitenancy in the past, in part because of data privacy and security concerns, and partly because of worries that other tenants with spiking usage could degrade system performance, according to Market Navigator co-author Jeff Goldberg, EVP, Research and Consulting, Novarica. “Many carriers have been running SaaS applications on a multitenancy basis for things like CRM, payroll and business intelligence,” he comments. “The fear factor is decreasing. Also, we’re seeing this from an application rather than a database perspective; as carriers continue to have physically separated databases, that mitigates concerns about data privacy and security. However, in the long term, we expect that concern to ease up also.”

The current Market Navigator for Property/Casualty Policy Administration Systems includes a new overview graphic categorizing systems by Dominant Providers, Contenders, Established Players and New Entrants. “Some in one slice of graphic may have different capabilities, technology, or level client satisfaction but they all share a similar presence in terms of client’s size, momentum and new sales,” Goldberg explains.

“We avoid subjective rankings because insurers have radically different needs—someone might want a vendor to manage all changes and be a really tight solution partner, and those have very different profiles than if the carrier wants to maintain more control,” Goldberg elaborates. It’s important to remember that the best fit solution for any carrier could be from any of those categories.”

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Higgins notes that a carrier might not find a good match in the “Dominant Providers” category, depending on a consideration such as line of business. “For example, workers’ compensation is not generic commercial lines, so you wouldn’t expect a vendor doing only that line to be dominant in the market as a whole,” he says. “It’s important to look at a high level, considering your unique needs.”

New Entrants Show Vibrancy of P&C PAS Market

Another trend the Market Navigator acknowledges is the continued arrival of new entrants.” This suggests that the market is still evolving and that there are places opportunities investors see to back new core system vendors,” Higgins says. “Some first appeared in our InsurTech report and have now moved to the PAS report—which is encouraging. It shows that there is continuing vibrancy and the market, where investors still see opportunity.”

Remarking on continued PAS and core systems work undertaken by carriers, Conlon notes that the time horizon of plans for such large projects far exceeds that of the COVID-19 crisis so far. “Any insurer thinking about modernizing core system has been planning for many months, has resourced budget and people who are now ready to go, so, we’re not seeing a slowdown,” she says. “We would need to see multiple quarters of repressed economy to see a change—and, of course, we might. But at this point in time any insurer who made decision in last few months were all ready to begin work and changing that plan would mean as much disruption as going forward.”

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