Despite heavy investment in policy administration modernization projects, fewer than one-third succeed, half are “challenged” and one-fifth of them fail, according to “Eyes on the Prize: Implementing fast, flexible policy administration systems in the P&C insurance sector,” a report from PwC.
The goal of policy administration modernization projects is to deliver transformative capabilities to the business, PwC said, and carriers are committing unprecedented levels of investment to gain a competitive advantage. But in terms of time, budget and scope delivered, just 30 percent succeed and of that group, just one-in-three realize the full business benefits.
“Those carriers that do ‘optimize’ and achieve this rare level of success will be able to leapfrog their competition, which may be in the approximately 70 percent of projects that are challenged or that outright fail,” PwC said. “Successful policy administration implementations will provide them with the ability to leapfrog larger, better-funded competitors through improved product flexibility, speed to market, and lower IT costs.”
According to a separate forecast from Celent, 120 policy admin projects are started per year, and PwC said that 50 percent experience cost and schedule overruns and are unable to fulfill all of the original benefit requirements; 20 percent are abandoned or cancelled because they were unable to meet cost, schedule or customer expectations, PwC said.
Carriers with less than $500 million in written premiums are responsible for 75 percent of policy admin modernization projects, and predominantly choose off-the-shelf policy systems. Tier 1 carriers, those with more than $5 billion in gross written premium tend to favor custom development, but PwC anticipates a reversal of that trend as more mature products are now more capable of supporting the required scope and scale, adding that legacy development processes that worked in the past are no longer sustainable.
“Differentiators in policy transformation projects include the ability to continually map daily program management decisions to the original benefits case, rapidly deliver code in an iterative manner, and apply a policy-specific framework to proactively identify and address common project challenges,” PwC said, and flexible project methodologies, tailored to the unique requirements of these programs should be used.
PwC said the features of such an iterative development methodology include: emphasizing working code over documentation; utilizing short development cycles; conducting daily project status calls, and breaking large workstreams into finite goals.
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