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Imran Ilyas, PwC
Imran Ilyas, PwC
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6 Questions Insurers Should Ask Before a Policy Transformation

Insurers are developing different strategies for policy system transformation. Regardless of approach, the odds of success will be improved by answering six core questions, suggests PwC's Imran Ilyas.

The convergence of complex market demands, antiquated legacy platforms, and an increasingly mature vendor landscape has created an environment where carriers view policy administration system (PAS) transformation as a necessary and attainable initiative. Our research suggests that PAS transformations will be a top priority for insurers in 2012, regardless of size or product mix.

SIX QUESTIONS TO ADDRESS BEFORE TRANSFORMATION
  1. Where Is the Source of Business Value?
  2. What Organizational Alignment Is Required?
  3. How Can We Achieve Incremental Value?
  4. What Is the Role of Vendors?
  5. How Do We Mobilize for Success?
  6. Can We Effectively Manage Risk?

A practical limit has been reached for current system overhauls. A modern, flexible PAS platform is "table stakes" for any successful carrier. In modern policy administration systems, data and application flow is customer-, not policy-driven, and carriers will achieve a dramatic change in business results by moving PAS out of the back office to assume a bigger and broader role in day-to-day business operations.

Carriers are approaching PAS transformation from different angles, based on unique business, technology, and competitive circumstances. Regardless of approach, organizations will build the foundation for achieving expected benefits and minimizing risks by answering six core questions:

1. Where Is the Source of Business Value? PAS transformation is a strategic business initiative -- not an IT project. We have observed five common sources of business value as a result of successful PAS implementations:

• Differentiated customer/agent experience.

• Speed to market.

• Both expense ratio reduction and long-term efficiency gains.

• Better information management and analytics.

• Loss ratio improvements if a predictive model overhaul is part of PAS implementation.

2. What Organizational Alignment Is Required? Joint ownership by both business and IT is necessary for a successful PAS transformation project, and a common line of sight means that both groups can work together to agree on core business drivers, priority market segments, channels, and product lines.

3. How Can We Achieve Incremental Value? Staged delivery is the only way carriers can achieve early benefits and keep an organization energized over the course of a long project. Companies can apply the lessons they learn along the way, and can manage in small steps the significant risks of changing platforms. Carriers should prioritize rollout by selecting the product facing the most competitive pressure or the one that will provide the biggest "bang for the buck" from the PAS transformation -- that is, design your system around the most important product rather than the safest one.

4. What Is the Role of Vendors? Business priorities and industry benchmarking should drive vendor selection. Too often, PAS teams will begin selecting a vendor before they clearly define their business needs. Carriers also should consider the availability of a secondary sourcing market for a vendor solution because carriers will be committed to the new PAS for the long haul. The ability for third parties to configure and customize vendor product code provides the carrier with the greatest flexibility.

5. How Do We Mobilize for Success? Establishing a strong PAS organization that is accountable for delivering the benefits of transformation will help lead to an effective mobilization. Quarterly planning iterations ensure that the plan can adapt to changing market conditions. Moreover, don't forget that the human transformation will be as significant as the business and technical transformation.

6. Can We Effectively Manage Risk? This is the "core" system for insurers: replacing it requires changes to nearly every business process and technical system, and is likely to uncover any skeletons in IT's closet. Carriers should prepare to maintain both the old and new policy systems for a set period before shutting down the legacy platform. First-rate project and change management, along with staged deployment, are the keys to minimizing risk and managing complexity.

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

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