By Roger Soppe, Oracle Insurance, and Scott Mampre, Capgemini Financial Services USA
Insurers are taking a closer look at systems that help them rapidly enter new markets, exit unprofitable ones, introduce uniquely differentiated products, and support diverse sale channels - all while improving operational efficiency. According to Novarica, policy administration systems top the list of IT projects for insurers in 2010. Despite the advantages of migrating to a modern adaptive policy administration system, there also are inherent risks. Fear should not, however, halt progress. A comprehensive proof of concept (POC) can ease the path forward, reducing risk, building organizational support, and offering the opportunity to test a vendor's claims prior to implementation.In many product evaluations, the formal selection process often ends after the final vendor choice has been made and the project moves directly into implementation mode. However, since policy administration systems are core to an insurer's operations and replacing them introduces more risk than perhaps any other IT project, it is prudent for insurers to go beyond the traditional selection process and undertake a "proof of capability."
Many insurers are familiar with the idea of a POC, but they often omit it due to time or budget constraints. For policy administration system migrations, a POC can be a critical, final step in the evaluation process. In a perfect situation, the process should go beyond just proving the technology; it should also focus on ensuring that the insurer has the right team in place to do the job.
Insurance carriers should not only examine the technology available, but the "soft" skills that set the vendors and system integrators apart. They should look at cultures, roles, and responsibilities, and weigh which team members could best help with implementing the proposed solution. Carriers should then put the combined skills of the vendor and systems integrator to the test during the POC.
The first goal of a POC should be to prove that the system and the team do, indeed, have the capabilities needed to accomplish the insurer's end business goals. For example, a life insurance carrier might ask its vendor and implementation partner to:
➢ Configure a new life insurance product with a specific set of benefits and riders ➢ Configure the system to perform specific product transactions, including loans, withdrawals, and anniversary processing ➢ Demonstrate the system's ability to support product versioning, rate loading, and shared features across product lines ➢ Perform changes "on the fly" during a live demonstration of the POC
The second goal should be to determine whether the new policy administration system is compatible with the insurer's existing architectural and technology requirements. Questions to be answered here might include:
➢ Can the application be installed by the company's specific technology staff? ➢ Can the application integrate readily with other strategic applications? ➢ What are the performance metrics of the interactive and batch processes?
In addition to affirming the capabilities of the system, the POC should provide an opportunity to prove that the insurer's people and processes are up to the cultural shifts that a large system migration presents. For example, the insurer might want to gain an understanding of the organizational impact of the project and learn best practices for policy administration system migration. This may include educational classes delivered by the vendor for the insurer's team.
One of the greatest benefits of a POC is that the work performed during the process can be used as the first step in the implementation of the new system. Rather than assigning "sample" work to the vendor and implementation partner, the insurer can ensure that the configuration done during the POC can be reused during the actual implementation. In this way, the insurer can, in essence, complete the first phase of the project as part of the POC, prepping it to move immediately into the next phase of detailed requirements gathering and configuration. This approach gives the insurer a jump-start on system migration - and further helps to mitigate risk.
Migrating to a new policy administration system comes with inherent, but not unmanageable, risk. The end benefits far outweigh the risk when the project is managed carefully from day one. As insurance companies seek to mitigate the risk associated with policy administration system migrations, a reusable, carefully thought-out POC with well-defined steps and goals can be one of their most powerful tools for success.
About the Authors: Roger Soppe is senior director of global strategy, Oracle Insurance; and Scott Mampre is vice president, Capgemini Financial Services USA. since policy administration systems are core to an insurer's operations and replacing them introduces more risk than perhaps any other IT project, it is prudent for insurers to go beyond the traditional selection process and undertake a "proof of capability."