Get What You Pay For

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Reports from companies like Celent and Datos Insights (formerly Novarica) indicate Property & Casualty insurers rarely use more than 20 to 40 percent of their policy admin systems’ capabilities before opting to replace them, for a variety of reasons. Here are a few of them, in general terms:

They prioritize capabilities like policy issuance, underwriting, rating, and claims while under-utilizing things like predictive analytics, automated workflows, self-service capabilities, integration with emerging technologies. The reasons for that could be lack of training or internal expertise, misalignment with business processes or legacy infrastructures, costs, implementation complexity, or a focus on short-term operational needs at the expense of long-term, strategic objectives.

Given that, it might seem as if reversing that trend — or at least enabling insurers to get more from their systems than the 20 to 40 percent they typically get — would be complicated. It’s not. But it does require diligence and patience. Here are some of the steps to consider and to allow time for:

  1. Document your requirements based on a needs assessment and your business processes in the context of and in alignment with your strategic objectives. Analyze the gap between your needs and your current processes.
  2. Map your findings from Step 1 to the offerings of the vendors you consider working with.
  3. Prioritize the features of those offerings according to your strategic objectives.
  4. Work closely with the vendor you choose to configure the system to match your desired processes, bearing in mind that best practices are subjective and evolving. Try to avoid over-customization that increases complexity and maintenance costs.
  5. Don’t overlook change management. Beyond training, encourage adoption and address resistance to new processes. People who’d been marginal performers on old systems frequently become stars on new ones.
  6. Adopt a phased approach to implementation, starting with core functionalities and gradually incorporating advanced features like predictive analytics, AI-driven underwriting, or self-service capabilities. (See Step 3.)
  7. Maintain a strong relationship with your vendor to help employ unused functionalities and to assess whether additional features can address evolving business needs or market demands.
  8. Align your policy admin system with the goals in your digital-transformation strategy, ensuring it supports initiatives like paperless processes, straight-through processing, or omnichannel customer engagement. (See Step 1.)

Following those eight steps can extend the life and the value of policy administration systems, preventing or at least delaying the need for and the expense of replacements.

If you pay for what you get, it’s only fair that you get what you pay for.