Survey after survey confirms policy administration replacement and modernization as a top-of-mind concern for insurers. This seems hardly a surprise when one considers the centrality of a well-functioning policy administration system to ensuring satisfactory customer experience. Indeed, with organic growth and new business flexibility at a premium, many recent policy administration projects have been undertaken to deliver new capabilities unavailable with aging legacy systems.
Yet, this search for new functionality is not a risk-free endeavor. As the most interconnected of core systems, policy administration replacement projects are prone to fail. In this light, the question of whether to replace or to instead opt to extend and/or deepen the use of an existing policy admin system is germane. If a carrier does decide to replace, the question then becomes whether to opt for a targeted replacement or to take a more holistic approach that stresses making organizational and process changes alongside technological ones.
To find answers to these questions, Insurance Networking News asked James Klauer, VP, Client Services Technology at Fidelity Investments Life Insurance, for his take on the issues surrounding policy administration replacement.
INN: What are the primary business benefits to adopting a modern policy administration system?
JK: Modern policy administration systems are more flexible than systems of the past. This has allowed us to shorten our delivery time for new products and product changes. We have also had a greater ability to integrate with other systems and to deliver process efficiencies.
INN: What best practices should a carrier bear in mind when replacing a legacy policy administration system?
JK: Ensure that you have a solid understanding of the requirements. Legacy systems users often have a hard time articulating what they want in a new system: "just make it work the same as the old system." If you can afford the time, take the opportunity to re-engineer inefficient business processes. We were able to drastically change our death processes, introducing automation and error-proofing.
Ensure that all key stakeholders agree to the same set of success criteria. Establish a tight change-control process that ensures that only changes critical to the success of the project are accepted.
As with any large systems initiative, you should expect to experience issues. Ensure that you have the right processes and tools in place to manage the intake, triage, backlog, and workarounds for system defects. Also, if possible, you should delay any subsequent projects until the policy administration system has been stabilized. Then ensure that the system is working correctly before making additional changes.
INN: What has the move toward service-oriented architecture meant for carriers looking to replace core systems?
JK: For us, it made the process of integrating with other systems a bit less complicated. For integration with our customer website, an SOA service was already in place with the legacy system. For the customer website, the switch from the legacy system to the new policy administration system was relatively seamless.
INN: What impact will anticipated regulatory changes have on legacy administration systems?
JK: Required regulatory changes will make it that much harder to deliver product changes to legacy administration systems. Where there is typically a scarcity of resources and funding for legacy administration systems, the regulatory changes will have to be done first, leaving little ability to deliver on strategic work.
INN: Given the long-tail nature of life insurance products, can an argument be made for extending a legacy system rather than full replacement?
JK: Yes, it certainly can, though you need to weigh the potential cost savings against the ability to quickly deliver new products, deliver product innovations, deliver process efficiencies, and respond to regulation changes.
