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NIIT Technologies White Paper

Policy Administration Transformation –How do you avoid the pitfalls?Policy Administration Transformation –How do you avoid the pitfalls?

Rupesh P.Practice Lead - Insurance Vertical

CONTENTS

Introduction 3

Challenges 3

Making the Right Move 3

Conclusion 6

Introduction ChallengesSome of the common pitfalls on major system transformation

projects include the following:

• Lack of clarity around the business goals and drivers for the

policy transformation project

Before carrying out system transformation, firms must

understand the business goals/drivers for the project. Ideally,

the business drivers and goals need to be clearly articulated

before embarking on the program.

• Over customization/configuration - Most times carriers end

up over customizing/configuring the vendor package (most

often to tailor their existing processes).

• Lack of regular sponsor involvement throughout the program

• Unavailability of the right people at the right places

• Rushing to a solution without spending enough time to go

through a well thought out Request for Information(RF)I

process

• Inability to select the appropriate sourcing model

• Inability of the carrier to manage risks

• Unavailability of a good communication and training plan for

internal and external stakeholders

Making the Right MoveMany software vendors focus on specific elements in the chain

of system transformation without having a holistic view of the

complexities surrounding the entire process. However, the

transformation processes should focus on the complexities and

define ways to avoid challenges that arise with the process.

3

Insurance companies across the globe face similar issues with

policy administration function and supporting technologies,

including: difficulties with creating new products, high

processing and maintenance costs, and low customer service

satisfaction levels. To keep up with the changes in the market

place, in the current economic climate, many Property and

Casualty (P&C) insurance carriers are modernizing their

systems. They are replacing rigid and outdated legacy systems

with modern and flexible distributed Policy Administration,

Claims Administration and Billing systems.

These new policy administration systems provide unmatched

levels of reliability, availability and security. They also provide

carriers the flexibility to roll out new products or make changes

to existing products quickly making them more agile, and

reducing time-to-market. However, the transformation to

modern systems presents a formidable challenge that most

companies fail to understand. According to CIO.com, more

than 60% of system transformation projects fail.

A policy transformation project impacts all aspects of the

organization – People, Process and Technology. It requires

substantial investment - on an average, 27% of the insurers budget

is spent on these insurance specific systems. Other than the

financial investments, this complex transformation needs a

commitment to lock in key business and technology talent and

willingness of the executives to make difficult business decisions.

Given these challenges, this whitepaper addresses the pitfalls

and provides recommendations that organizations can use to

avoid challenges that arise while executing policy

administration transformation.

4

Define Business Goals

It is imperative for the Insurance Carriers to understand what drives

businesses future profitability and benefits the new solution. The

organization must understand the wider business goals and

constraints and then select solutions that help

• Tthe carriers become more agile

• Reduce time to market on additions of new products or changes

to existing products

If the carrier takes time to understand the specific business case

and product mix and market dynamics, then the modern policy

administration system can provide

• Improved experience for the customer and users of the systems

(typically agents, underwriters, claims adjusters, etc. )

• Improved operational efficiencies through automation, straight

through processing and data pre-fills

• A simplified single customer view, enabling agents to better

serve customers

• More accurate risk assessment leading to improved loss ratio

Reduce Customization/Configuration

The best way to avoid this is to look at how the system works out

of the box (OOTB) and only change the process/functionality, if

there are very crucial business reasons to do so. Recreating the

legacy system/old way of doing business in the new vendor

package entirely defeats the purpose of investing in a new system.

It leads to over customization of the product that will not just put

delivery at risk but also make future upgrades extremely complex

and time consuming.

Clear and transparent communication with sponsorsTransparent communication on the state of the program and the

risks on a weekly basis are crucial for the success of the project.

Communication helps find out challenges/issues impacting the

progress of the program.

Right People at Right Places

Staffing levels in IT departments may be reduced through year

2020. Therefore insurance carriers must define appropriate

organizational structure, communication plan and people. As

insurance CIOs adopt new approaches to IT, they need

Solution Architects, for taking technology related decisions,

Business Leads for business related decisions and PMO Leads

to understand scope, schedule and budget, and help with

system transformations.

Well thought out RFI processInsurance carriers must

• Include skilled resources in your RFI team

- Technical Architect

- Business Lead

- PMO Program Lead

- Business SME’s

• Consider some Factors during the RFI process

- Vendor financials. Whether the vendor fit with the carrier techni-

cally, culturally, size wise, etc.?

- Does the functionality meet business needs?

- Level of customization required

- Ability to configure

- Ease of integration with other systems in the landscape

- Upgrade path and complexity

- Suite offerings – Does the vendor have an end-to-end solution for

all business capabilities – all lines of policy, claims, billing, etc.

- Licensing model and costs

- Typical duration and cost for implementation

- References

• Include time for site visits to customer locations where the vendor

package has been implemented and is in production (for the top

2 selected vendor packages)

Define Business Goals Reduce Customization/Configuration

Well thought out RFI process Select Appropriate Sourcing Model

Clear and Transparent Communicationwith Sponsors

Right people at RightPlaces

Manage Risk Communication and Training Plan

Recommendations

• Ensure the customer is similar to your organization in terms of

size, lines of business, complexity, etc.

• Get a good understanding of the challenges they faced, how the

vendor partnered with them on the engagement and their

thoughts on the success of the program.

Select Appropriate Sourcing ModelInsurance carriers need to figure out the sourcing model that works

best for the organization based on the budget, culture and

expertise. Therefore, it is important to engage an external

consulting/contracting help with a well thought out methodology,

models and tools which help insurers make the right selection to

drive IT investments for the future.

Also if budget and 24 hour development lifecycle is a factor,

organizations can go for a blended model where some of the

developers work offshore for significant cost savings and

efficiency gains.

Manage RisksThe risks during a program implementation change with every

phase. Insurance carriers must adopt a methodology of analysing

the risks early in the development cycle and ensure that all

milestones are reached. Once the analysis is complete, a phased

approach to implementation should be carried out to reduce the

risk of failure. Typically most organizations prefer taking on one line

of business (LOB) when it comes to a Policy Administration system

implementation. It’s best to select a LOB that provides the most

value in terms of ROI.

5

Insurance carriers must also connect with a few key agencies

before opening up the new system to the entire user base. They

should place heavy emphasis on technologies to tie together

legacy and newer system during the rollout.

Conversion is another key area that needs a lot of focused

attention and can be a major risk to the policy administration

implementation. This involves moving data (policies, claims, etc.)

from the legacy system to the new system. Decisions need to be

taken on how to handle in flight policies or claims, how much

history needs to be ported, etc. One of the best choices is to

convert policies into the new system at renewal instead of

converting the entire book of business in one go.

An organization also needs to take a realistic look at its strengths

and weaknesses while building strategic architecture roadmap,

reference architecture and technological accelerators. The

decisions need to be in congruence with the strategic architecture

roadmap. Insurers must also build the reference integration

architecture and make any associated tooling decisions, purchases

(for example investment in an ESB or ETL tool) and associated

training before starting on the transformation program.

Communication and Training PlanA communication and training program can be extremely

successful from a technical perspective but can fail miserably if

communication is handled poorly and user expectations are not

managed through all phases of the transformation program. For

example, if you plan on introducing a new predictive model with

your PAS implementation, it is crucial to have the support of

agency managers and agents for the success of the program.

It is also important to put a detailed communication plan in place to

address all the stakeholders that are exposed to the new system –

agents, underwriters, agency managers, business users, etc.

Insurers must also invest in a good training team to train all users

of the system and communicate with all project team members on

a regular basis with the help of weekly status reports, monthly

meetings, etc.

6

It is necessary to reduce the cost involved in legacy system

maintenance in the next two to three years and identify ways to

consolidate systems, move to lower-cost platforms, reduce

redundancy, and externalize rules and processes that are

hard-coded in legacy systems, and eliminate systems that are

high in cost.

In order to achieve these carriers must streamline their business

processes and simplify their architecture by investing in a

modern distributed system. They must apply savings from

legacy system replacement and modernization to transformation

initiatives aimed at building competitive advantage. Clearly

articulating the business goals/drivers of the program and

understanding the linkages between the business drivers and

technological capabilities derived from the new system is the

need of the hour.

ConclusionThe insurance industry is faced with an opportunity to transform

significant aspects of its operations via technology. Companies

should ensure adequate finances for transformation to these new

systems. According to a study, 45% of life insurers and 50% of

P&C insurers have dedicated budgets for transformation.

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