Boston — Times are changing, and insurers need to take a close look at their policy administration systems’ functionality and scalability. According to Celent reports—“Will Your Policy Administration System Support Your Future Growth? Measuring Scalability and Performance” (Life/Health and Property/Casualty Editions)—it’s not enough for a system to fulfill all of an insurer’s functionality requirements; it must effectively handle the company’s business, and it must continue to perform in a satisfactory manner over years or decades, In order to guarantee this system behavior, insurers must be ready to discuss scalability and performance with vendors before any major software acquisition.
“When determining the future scalability requirements of a system, an insurer must make some predictions as to the growth of their business,” Jeff Goldberg, Celent senior analyst and author of the reports, tells Insurance Networking News. “While a policy admin system might be able to support their size upon production, that may not be true in five years. One factor that makes this prediction difficult is that the new policy admin system will actually change the playing field. Perhaps only 20% of an insurer’s agents submit business electronically, but after the new policy admin system is in place, that percentage may jump significantly. While making predictions about how their business will grow, the insurer also has to take into account how major new systems such as policy administration will change that business.”
According to the P&C and life/health reports, the major metrics an insurer can use to plan the future of a system include:
• Load scalability/transactions per hour
• Service scalability/simultaneous users
• Data scalability
• Page/screen response time
The difference between P&C and life/health systems depends on the types of policies an insurer processes. If an insurer is dealing with many small products, such as term life or personal auto, they will need a system that can process tens of thousands of quick quotes an hour, store millions of policies in the database and support real-time interaction from both agents and prospects via the Web, Goldberg says.
While there are minor differences between P&C and life/health policy admin system performance and scalability, there is almost a bigger difference between commercial and personal, Goldberg tells INN.
“Commercial policies are much larger than personal policies—they can be 100 or 1,000 times the size,” he says. “A system supporting commercial lines will likely never have as many total policies in the database and will almost never have to deal with as many quotes per hour. This means commercial lines insurers don’t have to worry as much about some growth issues, but they do need to be concerned about the processing time for a single policy, which can often take much longer.”
No matter what line, Goldberg says, when making policy admin system changes to address future scalability and performance requirements, the first thing the insurer needs to do is make some difficult predictions about how their business is growing and how the usage of the system will be different. An insurer should work with the system vendor to run tests to determine if it will be able to handle the future size.
“Just because a vendor has run their own scalability tests does not necessarily mean the system will scale as perfectly within the insurer’s unique infrastructure,” he says. “If (and when) problems are found, the insurer needs to determine how to resolve them. It may simply require adding new servers, or a better archiving plan—where older policies are backed up in a slower database so the real-time s stem can keep its high level of performance—or even just fundamental changes to some of the processes or better integration with other systems.”
Whatever the discovery, Goldberg tells INN, an insurer is much better off working with the vendor to run these tests and fix the problems in advance, rather than waiting until users begin complaining that the system is too slow or, worse, constantly crashing.
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