Consultants' Corner

The Business Case for PAS Replacement

Imran Ilyas
Insurance Experts' Forum, January 20, 2011


Most insurance carriers are placing policy administration system (PAS) transformation near the top of their to-do lists for 2011. Several of them are ahead of the curve in developing externalized product rules, flexible pricing engines that enable increased rating factor granularity, support of multiple distribution channels, integrated third-party data feeds, and streamlined policy data collection. Because the frequency of market change is steadily increasing relative to market segments, products, and pricing, a modern, flexible PAS platform soon will be “table stakes” for any successful carrier. Companies that do not adapt risk losing market share while costs escalate.


Most PAS transformations come with high expectations of significant return. However, insurance executives still struggle with clearly explaining and justifying the benefits of what can be a significant investment. Developing a return-on-investment metric or NPV-based PAS justification can be challenging, given the scope of change, the scale of impact, and the complexity of accurately quantifying all the benefits associated with the transformation.


Carriers must clearly define what is driving the need for PAS transformation, and develop a process that will compel them to focus on what matters most: Establishing a common view of value for the business and technology communities, and setting the associated financial benchmarks for success. Establishing this commitment also will lay the groundwork for the human transformation required within the organization. To define the business case, carriers should carefully consider the following when developing their business plan

1. Flexible Product Management - Ability to rapidly create new products and tap new markets (e.g. international expansion opportunities);

2. Increase speed to Market - Ability to perform rating updates quickly, respond to compliance changes, and support multiple granularities of pricing models;

3. Integrated Channel - Ability to augment channel and distribution strategies;

4. Improved Third-Party Data Integration - Improved usage of third-party data (e.g. use of real-time CLUE, MVR or insurance score insurance score reports for risk assessment);

5. TPA delegation - Ability to outsource administration to third-parties (TPA) and maintain centralized control of business processes and data;

6. Automated Risk Assessment - Ability to implement fact-based predictive models which enable greater competition on the most desirable risks, and guard against adverse selection;

7. Cost Control - Ability to decrease overall expense ratio by retiring legacy systems, lowering maintenance efforts, and reducing operational costs;

8. Incremental Profitable Growth - Ability to increase premium growth by improving speed to market, automating risk assessment, and modernizing technologies;

9. Increase Operational Efficiencies - Ability to increase efficiencies within the organization by re-designing business processes, reducing data entry, and increasing productivity; and,

10. Improve Analytics - Expand business analytics, reporting, and data mining.

While PAS transformations are complex and require several years to complete, we believe that companies can deliver business value in stages throughout a transformation program. Incremental delivery is the only way to achieve these benefits early, apply lessons learned, and energize the organization while managing the significant risk inherent in a PAS transformation. Due to lengthy program roadmaps, carriers should focus on the most complicated, high-volume products/segments. While this approach carries a risk, the positive effect on business results will accrue more quickly.

So, as you look ahead, how are you planning to modernize your policy administration system?

Imran Ilyas, partner with PwC's Diamond Advisory Services insurance practice, specializes in P&C with a focus on policy administration systems transformations.

Readers are encouraged to respond to Imran using the “Add Your Comments” box below. 

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