New York — Property/casualty CIOs name policy administration system replacement as their No. 1 priority, according to a recent Novarica survey. The survey results indicate that 38% ranked policy administration system enhancement or replacement as their top priority, and PAS replacement was the most commonly selected No. 1 priority. Life, annuity and health carriers' interest in core systems replacement has grown more slowly, but still at a steady pace over the past several years.
This is the key reason for an exploding vendor population, according to the New York-based research firm. With more than 60 insurance policy administration systems providers now vying for carriers' attention across both property/casualty and life, annuity and health in the United States, the market for policy administration systems has never been so large, or potentially confusing to insurers.
One policy administration change Datamonitor, a London-based independent market analyst, is seeing is interest in policy administration business process outsourcing (BPO). This may be a result of challenging market conditions but, oftentimes, these goals are stymied by a rigid policy administration platform, which are frequently built in-house, states Datamonitor’s report, “Trends and Strategies in Policy Administration BPO.”
The report also identifies the rise of business "transformation” outsourcing, a long-term outsourcing contract where the outsourcer transforms the policy administration process through application replacement and process reengineering, as the next and essential frontier.
Novarica reports reflects a number of trends within the P&C policy administration market:
• The need to improve product development speed to pursue new opportunities (e.g., excess and surplus lines, workers’ compensation, etc.), or to accommodate market demands (e.g., micro-rating, direct to consumer, etc.)
• The need to improve product development flexibility to enter new niches in a softening market that continues to push toward commoditization
• A desire to reduce dependence on vendors to maintain or enhance the system, or to make day-to-day changes to rates, underwriting rules, etc., thereby reducing long-term total cost of ownership
There are a number of modern systems already making waves in both personal and commercial P&C lines, but the vendors behind those systems tend to be smaller and have limited bandwidth, according to Novarica. Accordingly, a large percentage of systems are being retooled to be more modern and, therefore, more competitive, and new entrants—either completely new solutions or solutions that are new to the U.S. market—are rapidly emerging.
Another Novarica report reveals happenings in the life, annuity and health policy administration market. Today, carriers are recognizing more and more that modern solutions are not a fad. According to Novarica, the trend has been validated in a number of different ways:
• Systems that were considered immature just a few years ago are now being used at top-tier carriers, and are experiencing rapid growth
Major players such as Oracle and Accenture are acquiring vendors of modern solutions such as AdminServer and NaviSys, respectively
• Even bellwether systems such as CSC’s VANTAGE-ONE (now Wealth Management Accelerator) are being overhauled and migrated off of COBOL onto Java, and surrounded by rules and tools
Given this information, if an insurer—life, annuity, health or P&C—is looking at making enhancements or replacing their policy administration system, Novarica recommends they narrow the overall market to a short-list of three or four by focusing on four main areas: staff, organization, functionality and technology.
Source: Novarica and Datamonitor
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