Enterprising Developments

6 Ways to Implement a PAS—Without All the Pain

Joe McKendrick
Insurance Experts' Forum, March 26, 2013

Across many industries, the term ERP (enterprise resource planning) evokes bad memories and feelings of dread. That's because these systems are inherently complex, linking financials with all other parts of the business—human resources, production, sales, and much more. The end-result, when and if it's finally attained after years of struggle, is a seamless enterprise in which data quickly moves from module to module, and decision-makers can peer in and see what's happening in all corners. That's the goal at least.

And for CIOs and IT leaders, the success of an ERP installation is often either a career-catalyst or career-breaker.

Insurers have been spared from the ERP monolith, but they have something that comes close—policy administration systems. These systems have a wide scope, and touch many parts of the insurance enterprise. Not as extensive as ERP, which reaches into areas such as HR, but pretty close.

I recently spoke with Frank Petersmark, former CIO for Amerisure, about the headaches with policy admin systems, and ways to successfully see a PAS project through to fruition. Petersmark, who currently advises insurers on technology implementations VP through his work with X by 2, points out that many PAS out there have been in place for a long time, and there's good reason why these systems last such a long time -- it takes a lot of work and resources to upgrade or replace them. Such efforts are “'bet-your-career' projects,” he says. “Any legacy core system upgrade or modernization, policy, claims, billing, are sort of fraught with peril. Policy is probably most complex. Because it's the gateway for information into an insurance company. So it's a big deal.”

My discussion with Petersmark is included in a recent Insurance Networking News article, “10 Questions that Need to be Asked When Moving to a New Policy Administration System.”

Petersmark provided the following advice for getting a PAS upgrade or implementation off the ground:

Consider the new business capabilities, such as analytics: New PASes tend to be based on open technologies that enable greater sharing of data with other applications, and this could be a prime selling point to the business. “Carriers will get smarter in how they do business—underwriting, servicing, renewing—based on pulling data from the policy admin system into other data stores to apply analytics,” says Petersmark.

Consider the cost savings and boost in IT department productivity: At Amerisure, Petersmark helped justify new projects by asking if and how many IT resources would be freed up by the new system—resources that could “be rededicated to something that’s more important to the company—develop a new product, get into a new geography, create a new portal.”

Look to outside talent to fill the gaps: Implementing a new system requires a stable of talent, which may need to be brought in from the outside. “Many companies don’t have the talent they need especially to run big complex projects, where you need people who have a big picture overview, and can communicate well, and can be forthright about about problems,” says Petersmark.

Include end-users in the process early: “The toughest part of any core system implementation is the process change that comes with it,” says Petersmark. “So people have to actually change the way they do things. And, often,. People don't want to change—those are in hidden costs. The impact and the cost of process change, which really means people change, is a big factor that isn’t part of the equation up front.”

Virtualize: Virtualization has helped open up system interoperability and access, Petersmark says. “Most of the new policy platforms are native web. You used to have to bolt on front ends to these systems.” This is compelling sell to the business, since it helps open up access on a 24x7 basis from any location or end-user device.

Think about what happens to the data: “A lot of people make the mistake of not thinking about data up front in the process. How much legacy data will go to the new system? Should you create a separate repository for it and keep it around? What about people to maintain it. These things don’t get talked about up front.”

When it comes to systems upgrades, Petersmark has a golden rule: “If you install something new, you must unplug something old. Otherwise you just end up with layers of complexity after years.”

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (1)

Having implemented dozens of P+C systems a few thoughts come to mind. The two most important things are to know absolutely what the existing system does and what the replacement system needs to do.

It is scary how poorly most existing systems are documented. The best effort of reverse engineering will miss a lot of the changes made since the initial implementation.

Time spent on defining what is and isn't desired is an effort that will save a lot of time and money. This is the most critical process to having a successful implementation. The first step is to carefully compare the new system to the old to define exactly what needs to be added, deleted or changed. This is both difficult and costly. Just determining that one needs to calculate premium for an endorsement is not enough. You have to know if the computation shows an exact result. Or possibly your underwriting requires data that the new system does not have. Etc, etc!

Icould go on but if you stand back and look at the situation common sense can dictate what to do. Your customer will be the first to deny needing the extra time effort and cost. One major reason is that he doesn't have a clue!! But when it is wrong the implementor will bear the burden of proving they did the right thing from the faulty spec.

One of the products that I was involved in was Mass Auto policy processing as a service. I was constantly amazed at the amount of customization that most companies required since Massachusetts set the rules for all carriers!!

Do file comparisons to be sure you have the same result (where appropriate) and yes this can be very difficult.

If I have one final piece of probably unwanted advice it is to absolutely try to convince the customer to minimize changes to what is standard in the during the initial implementation. You might be surprised how the implementation cost and effort can be reduced by putting an honest cost estimation for each "change" and that the efforts includes testing in place. Sales often likes to low ball this cost to get the deal. They get the commision and you get a long stint in hell during the implemetation. Another method is to have every deviation signed off on by the user management. Both is best.

Posted by: Chas B | April 18, 2013 5:19 PM

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