Insurers' interest in purchasing and implementing policy administration systems is expected to rise during the next four years, according to a new report from Celent Communications Inc., Boston. Six major factors are influencing property/casualty and life/health insurers to consider new policy administration solutions, Celent reports: regulatory/compliance issues; product flexibility/speed-to-market; cost reduction; Web enablement of systems; consolidation/integration of systems and servers; and business process flexibility /improvement.Although the market for policy administration systems has changed in recent years as more vendors incorporate browser-based functionality, a majority of carriers have not yet migrated their systems to these offerings, according to the report, titled "Policy Administration Systems Overview: 2005."

For many carriers, the norm is having five or more policy administration systems integrated with multiple billing, commission, licensing and contracting systems. As a result, "extracting the right data in a timely fashion can be difficult if not impossible," according to Chad Hersh, author of the report. Modern, open systems "can help dramatically improve audit and report capabilities, particularly when those systems are tightly integrated and share data," he writes.

Another driver for carriers considering policy admin systems is that many are pushing for reducing costs by consolidating servers and software.

L&H System

Upgrades

Projected new life/health policy admin dealsThe number of life/health deals for new policy administration systems will nearly double by 2007. However, the increase will be minimal among small life/health carriers.

Source: Celent Communications Inc.

L&H Policy Admin Spending

Estimated software/services spending in U.S. $ millionsSpending by mid-size life/health carriers is expected to increase from $30 million this year to $40 million by 2007.

Source: Celent Communications Inc.

P&C Policy Admin Spending

Estimated software/services spending in U.S. $millionsThe bulk of spending will be concentrated among mid-size P&C carriers. In this group, spending will rise from $80 million this year to $200 million in 2007.

Source: Celent Communications Inc.

P&C System Upgrades

Projected new life/health policy admin deals

The number of deals signed by small P&C carriers is expected to grow from 40 this year to 85 in 2007.

Source: Celent Communications Inc.

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