Core systems such as policy administration are once again taking center stage as the platform that will propel property/casualty insurers above the fray. So says recent research from Bermuda-based Accenture, which in November 2009 surveyed 27 P&C carriers across North America and Canada to determine their growth strategies.
Across a broad spectrum (half representing firms with revenue of more than $2 billion and half under $2 billion), the carriers surveyed overwhelmingly (92%) reported organic growth as their No. 1 objective, yet 81% said their current policy administration systems are inadequate to support such growth.
Based on the survey findings, only 50% of insurers queried currently use the Internet as a means to provide quotes back to the client, and only 42% use the Internet to facilitate a policy change. “These are all things that can be solved with a modern system,” notes John Vale, Accenture’s senior executive in charge of policy administration strategies and co-author of the report.
Yet challenges remain for carriers as they evaluate their legacy systems to determine best fit, i.e., gradual modernization via componentization or a Greenfield approach, notes Vale. Once that determination is made, the challenge is inherently shared by the vendor of choice.
“It will be a challenge for the vendor community to get out of their existing paradigms—how they sell their wares,” Vale told Insurance Networking News. “Clients are wary of getting into another package system that covers only one line of business, or doesn’t cover their specific needs within that line.”
According to Vale, some insurers have written off policy administration renovation as an initiative once thought to be great but failed for any number of reasons.
“It’s often like performing open heart surgery on a marathon runner—during the race,” he says, adding that Accenture advocates its clients choose a componentized approach.
“It’s a critical aspect of the business, and carriers have a lot at stake to getting it right,” says Vale. Further, policy admin modernization represents a large project with many moving parts, says Vale. “The new system has to jive with the insurer’s agency force, so it’s not just technology on the back end, it’s also how you set it up so it doesn’t conflict with other systems, yet feeds the distribution channel with the feature/functionality required to improve business.”
Other factors add to the urgency of getting it right the first time, such as the need to prove top-line growth along with a reduction in overall costs.
“We know based on the research that insurers view speed to market and differentiation as top-of-mind initiatives to meet those growth objectives, and the challenge is to create a CBA that will reflect the costs necessary to make that happen,” says Vale. “Technology vendors, meanwhile, need to rethink how to build software and address the legacy modernization problem from the carrier’s perspective. The time to act is now, because if you sit on your laurels, know that your competitors are not.”
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