Consultants' Corner

Designing a Policy Administration Transformation Roadmap

Imran Ilyas
Insurance Experts' Forum, February 24, 2011

In my last blog entry, I talked about justifying a policy administration system (PAS) investment. After making its case, the carrier faces its next major hurdle: How to determine a sequence for its PAS releases. Should it create a roadmap by products, lines of business, channels, and geography or should it modernize components in a sequential order?

There often is a strong temptation to frontload a transformation with too many functions and features. Some carriers have pursued a big bang implementation that affects multiple lines of business and includes platform changes; in some instances, carriers have wanted to conduct policy, claims and billing transformations all in one release. Not surprisingly, several large-scale programs have either missed the delivery date or ran over budget - almost always because the organization took on too much at once.

Rolling Out in Stages

While PAS transformations are complex and take several years to complete, organizations can still see results during the early stages with incremental delivery. Doing the rollout in stages allows executives to realize tangible value from their PAS investment and provides encouragement to the organization for upcoming releases. Insurers should host a series of workshops to determine how to best stage the features and benefits, as well as how to best phase the technological challenges.

Staging Functionality and Benefits

In my discussion with insurance carriers, they often ask how to proceed with their policy administration systems transformation? What functionality should they implement? Should they plan their releases by products or by geography? My suggestion is that:

Product — The largest or most complex product line that is under the most competitive pressure;

Lines of business — Auto (personal and commercial), property, life, annuities, retirement products;

Extended functionality — Agency, broker, TPA interfaces, product rules, rating, and pricing;

New business and renewal rollout — Reduced conversion effort; and,

Billing, sales and claims (only requires touches or decoupling).

Overcoming Technological Challenges

Once business functionality is defined, the focus should shift to IT estimation workshops. Carriers should run two parallel IT workshops, one that focuses on core systems and the other on channel integration and downstream systems. These workshops should promote an organization-wide understanding of the effort required to achieve the desired capabilities. During the IT workshops, technology leaders should strongly emphasize the importance of evaluating solutions for decoupling PAS systems from billing, claims and other downstream systems. Structuring the work during this phase and gaining credibility with the experts and legacy system owners is crucial.

Carriers should expect to spend several years completing a PAS transformation. The first release typically takes longer (18 to 24 months) because of the need to build foundational pieces, interfaces and conversion capabilities. With PAS at a carrier’s nucleus, organizations typically need to rebuild their interface architecture from the ground up. Transformation will undoubtedly expose the “skeletons” in IT’s closet by revealing tightly coupled interfaces, manual processes, or Excel-based processes. However, PAS transformation affords organizations the opportunity to fix these areas and streamline the entire interface architecture.

Bottom Line

At the beginning of a transformation, a carrier should focus on requirements that will drive new competitive and convince business leaders that subsequent releases will happen. While each item on the carrier’s shopping list may be a necessity, not all of them may be needed at once. Therefore, an incremental delivery is the only way to achieve benefits early, apply lessons learned, and keep the organization enthused and on target while managing the significant risk of PAS transformation.

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. 

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.

 

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