The newer generation of "rules-and-tools" policy administration systems has overcome many of the reservations about the systems held by insurers, including concern about the financial viability of vendors and reliability and scalability of the systems themselves. At least one significant concern remains even for the prominent vendor systems: functional limitations.
The rap against the modern-technology systems is that they can't compare with the functionality of well established vendor systems that have adapted to market needs, potentially over decades, to say nothing of highly customized installations at carriers, whether vendor- or in-house built. However, it's a mistake to think that any system will include all the functionality that a given insurer needs, insists says Robin Joshua, director, corporate underwriting and risk management at Canadian Automobile Association South Central Ontario (CAA; Thornhill, Ontario).
"I've never seen a system that has everything," Joshua relates. "There's a belief that legacy systems that have been around a long time have everything, but that's not true either — there will always be something you need to address in another fashion."
A customer of Guidewire's policy administration, claims and billing solutions, CAA turned to Toronto-based P&C insurance software provider iter8 for Canadian regulatory reporting capabilities not built into the system.
New systems provide new architecture that enables easier access, easier maintenance and compartmentalized functions, including rating, rules and product configuration that can easily be updated and modified, notes David Gallagher, VP, marketing, iter8. However, newer systems can indeed lack some of the functionality and applications built into older systems.
Gallagher describes some of the gaps in modern systems that can be filled by complementary solutions:
Agent connectivity (Upload and Download)
Download involves sending accurate policy information to agent management systems so that agents and carrier information is identical. Most legacy systems have data extract capabilities to handle this service. Most new packaged systems do not include download. Therefore if they are replacing their legacy system carriers must replace this solution. New development is needed, as is knowledge of agency management systems, and testing protocols. Poor quality data extracts or mapping can cause disaster with agency management systems.
Upload moves data from agency management systems and comparative raters to policy administration systems. This is often customized within a legacy system, and may not be present with packaged systems. Thus, for carriers replacing their legacy system this represents another missing component that requires an upload solution.
Carriers with legacy systems often built portals by exposing some of their legacy application. New packaged systems offer to web-enable their systems, but this does not replace an effective agent portal. This represents another gap, in which carriers working with new packaged solutions need to implement agent facing portals and upload/download solutions. Effective, modern agent portals offer easy-to-use underwriting rules, product configuration tools, modern user interface, and a landing site for upload with real-time feedback.
Legacy systems that lack this can add a new portal that improves their legacy ease of use. New portals will modernize the application, and offer new user-friendly tools. A new portal gives life to the legacy application, while keeping the legacy functionality.
A new portal can also integrate to a packaged system; in fact this is often the case, as portals are a unique, specific solution.
Consumer facing portals or web interface
More and more carriers want to develop a relationship with their policy holders, and potential policy holders, and are seeking to create a consumer facing online presence. Most legacy applications lack this capability; however, this functionality can be added to a legacy system, without the need to replace it. Third party systems are in places that work within the constraints of the legacy system. They access legacy systems data and account information, and with modern UI, easy-to-configure workflow, integration to third-party data, they can deliver a quality consumer experience. Many packaged policy admin systems will also require a separate consumer facing portal solution.
No carrier wants to leave data behind. In an era where business analytics is differentiating insurers, it is essential that the move to new packaged systems also brings historical claims, policy and billing information forward.
Legacy systems maintain this information, but new data migration solutions are needed to transform the data and move to new systems, new data warehouses, or integrate new and old systems. iter8 is working with a customer that moved over 10 years of data to the new policy administration system, plus kept the current portal operating with a real-time data migration to the new policy administration package.
Some package system vendors offer data conversion services, however the majority do not. For insurance carriers this represents another gap to be addressed.
This covers reporting to a variety of sources such as state, bureau and insurance regulators. Data is needed from policy and claims systems, and legacy applications have built this into their core coding. This is seldom "in scope" for a new packaged system. As a result carriers have to develop this themselves, or seek third-parties, such as iter8 to address this need. iter8 is working with new PAS vendors at present to offer this service, and with legacy solutions.
[For more on the limits of package policy administration systems, see Consider the BPM Route to Systems Modernization.]