Judging by the number of replacements currently underway, policy administration systems are getting plenty of attention from insurers.

Boston-based research and advisory firm Celent trains its sites on this marketplace in its new report “Q&A: What’s Hot and What’s Not in North American Policy Administration Systems.”

The report, authored by senior analysts Jeff Goldberg and Donald Light, contends the interest in policy administration replacement is widespread but varies by type of insurer, with the least amount of interest coming from very large companies with major concentrations of business in a specific line.

Likewise, the interest in what type of policy administration solution an insurer seeks out tends to vary. “In general, smaller and midsize insurers gravitate toward end-to-end solutions—although they are likely to implement in a phased way,” the authors write.

Conversely, because of their larger IT shops with a broader range of modern integration/ development skills, larger insurers may favor point solutions. “The prospect of integrating multiple solutions and managing relationships with multiple vendors is less daunting—and the attractions of a best-of-breed portfolio more enticing.”

As for the value proposition, Goldberg and Light say the hard money savings—expense reduction in both business and IT, productivity improvements, infrastructure savings, and lower the total cost of ownership—are self evident.

However, the recent development of systems also reflects a preference by carriers on less tangibles benefits, such as flexibility and modernity.  “As insurers become more sophisticated in their assessment of how well their policy administration system is supporting their underwriters and service staff, vendors are creating environments crafted to enable those users to work faster and smarter,” they write, noting the fruits of vendor development efforts are now plainly visible on underwriter and service staff desktops. “Users can spend up to 10 hours a day on these core systems; an engaging design that effectively supports each user in their day-to-day activities is an important consideration.”

This trend is further reflected in the focus on new business automation found in modern systems.  “Ultra-configurable, metadata driven, rules-based and tools-based policy administration systems are now so key to the modern PAS marketplace that they are more of a reality than a trend.”

However, Goldberg and Light caution that these ultra-configurable systems may not be an optimal fit for all. “As long as a carrier has the skill sets and feels comfortable with the configurable approach, it should at least be an option on the table.”

Looking forward, they see vendors continuing to add new wrinkles to their offerings, such as adding product lifecycle management functionality. More boldly, they predict fundamental changes in delivery methods. “As use of SaaS and cloud computing grows more mature, insurers of all sizes will become more comfortable with the idea of moving a transactional (and central) system such as policy administration out of the data center.”

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