The New Core Sys­tem Equa­tion

Seek­ing to quickly launch new lines of busi­ness, car­ri­ers have be­gun de­ploy­ing mul­ti­ple pol­icy ad­min sys­tems.

Digital Insurance - - STRATEGIES - By El­liot M. Kass

Driven by de­mands for more flex­i­ble prod­uct de­vel­op­ment and faster speed to mar­ket, P&C car­ri­ers are step­ping up their new pol­icy ad­min­is­tra­tion sys­tem de­ploy­ments. “Ini­tially, there was the claims wave,” says Amy Sher­man, a prin­ci­pal with Deloitte Con­sult­ing. “Now the car­ri­ers have be­gun work­ing their way through the PAS wave. Af­ter a lit­tle bit of a lull around 18 months ago, we're def­i­nitely see­ing an uptick in the ve­loc­ity.” Mar­ket re­search by in­sur­ance in­dus­try ad­vi­sory Strat­egy Meets Ac­tion bears this out. New core sys­tem in­stal­la­tions dropped from an an­nual high of 143 in 2014 to a low of 91 in 2016, ow­ing in large mea­sure to the years' long time­frame re­quired to im­ple­ment a new pol­icy ad­min­is­tra­tion sys­tem. But last year, per SMA's find­ings, a new buy­ing cy­cle be­gan and new core sys­tem pur­chases were up 13 per­cent, en­com­pass­ing both stand­alone pol­icy sys­tems and suites. This lat­est wave of new PAS de­ploy­ments is pri­mar­ily aimed at help­ing in­sur­ers set up new lines of busi­ness, ac­cord­ing to Karen Fur­tado, an SMA part­ner, who notes that it's no longer un­com­mon for a car­rier to have mul­ti­ple pol­icy ad­min sys­tems. These in­sur­ers may al­ready have a core en­ter­prise PAS in place, but time-to-mar­ket con­sid­er­a­tions will in­duce them to bring in ad­di­tional pol­icy sys­tems to sup­port new busi­ness lines and prod­uct of­fer­ings. “Quick-to-win, built-to-pur­pose core sys­tems are hot,” Fur­tado says. “In­sur­ers are re­think­ing how core sys­tems can sup­port their busi­nesses.” The SMA ad­vi­sor cites work­ers' comp provider Cake In­sure as an ex­am­ple. The newly es­tab­lished distri­bu­tion arm for Pin­na­col As­sur­ance, Cake opted to de­ploy its own PAS, rather than try to sup­port its busi­ness model with its par­ent com­pany's legacy sys­tem. In other in­stances, a car­rier may be go­ing through a pro­longed five to seven year im­ple­men­ta­tion of a new PAS, but can't af­ford to hold back on new busi­ness un­til its en­ter­prise-wide so­lu­tion is fully baked. Un­der these cir­cum­stances, the in­surer may opt to roll out a ded­i­cated pol­icy sys­tem to move into new mar­kets and sup­port new prod­ucts. ”From a tim­ing stand­point, some­times it sim­ply doesn't work for a car­rier to synch up its en­ter­prise PAS with a new prod­uct that they are try­ing to get to mar­ket,” Fur­tado ob­serves. The emer­gence of man­ag­ing gen­eral agents is also driv­ing new PAS de­ploy­ments, she adds. “Dur­ing the past two years, MGAs have in­creas­ingly pur­chased their own pol­icy ad­min sys­tems,” Fur­tado re­ports. “Pre­vi­ously, they typ­i­cally would have used the sys­tems of the car­ri­ers they rep­re­sent. But with the pro­gram and spe­cialty busi­nesses just ab­so­lutely boom­ing, they've turned to the pol­icy ad­min mar­ket to get the level of sys­tems sup­port that they need.” Mul­ti­ple PAS de­ploy­ments is def­i­nitely a trend, es­pe­cially among the larger car­ri­ers, con­firms Deloitte's Sher­man. “They're sit­ting there say­ing, `I want to be nim­ble. I want mar­ket agility. I've got a new cy­ber-risk prod­uct, and I would rather start fresh,'” in or­der to get that prod­uct—what­ever it is—out to the mar­ket quickly. In this, they're abet­ted by the lat­est PAS of­fer­ings. These in­te­grated prod­uct suites sup­port a much broader range of ca­pa­bil­i­ties within a sin­gle soft­ware frame­work, ex­plains Martina Con­lon, a se­nior vice pres­i­dent and P&C prac­tice leader at the

“Now the car­ri­ers have be­gun work­ing their way through the PAS wave. Af­ter a lit­tle bit of a lull around 18 months ago, we're def­i­nitely see­ing an uptick in the ve­loc­ity.” Amy Sher­man, Deloitte Con­sult­ing

in­sur­ance in­dus­try con­sul­tancy No­var­ica. And be­cause these fea­tures are pre-in­te­grated and sup­ported “out of the box,” Con­lon says that car­ri­ers can fre­quently im­ple­ment the full core suite, in­clud­ing busi­ness in­tel­li­gence and re­port­ing func­tions, as well as cus­tomer and agent por­tals, with a sin­gle roll out. “Be­ing able to de­liver all of these ca­pa­bil­i­ties in one shot is a big win,” she notes. “The re­port­ing ca­pa­bil­i­ties help car­ri­ers run their busi­ness more ef­fi­ciently; the an­a­lyt­ics pro­vide in­sights and help them au­to­mate more, and the por­tals fa­cil­i­tate a bet­ter and more ef­fi­cient ex­pe­ri­ence for cus­tomers and agents.”

Five busi­ness im­per­a­tives

In its 2018 report on P&C pol­icy ad­min sys­tems, No­var­ica iden­ti­fies five key ob­jec­tives be­hind in­sur­ers' new PAS im­ple­men­ta­tions:

1. Ac­cel­er­at­ing prod­uct de­vel­op­ment to ag­gres­sively pur­sue new mar­ket op­por­tu­ni­ties, such as mi­cro-pol­icy rat­ing and di­rect-to-con­sumer of­fer­ings. 2. In­creas­ing prod­uct flex­i­bil­ity to meet new cus­tomer re­quire­ments, such as the grow­ing de­mand for us­age-based auto poli­cies. 3. Re­duc­ing the cost of op­er­at­ing and main­tain­ing legacy sys­tems, which cur­rently ac­count for more than 75 per­cent of many in­sur­ers' IT bud­gets. 4. Low­er­ing the to­tal cost of core sys­tem own­er­ship, which of­ten means mi­grat­ing from older sys­tems that re­quire ex­ten­sive cus­tomiza­tion to new sys­tems with em­bed­ded con­fig­u­ra­tion tools. 5. Im­prov­ing data ac­cess to sup­port new busi­ness in­tel­li­gence and data an­a­lyt­ics ap­pli­ca­tions.

But un­der­ly­ing ev­ery­thing is the ur­gency in­sur­ers feel to im­prove their cus­tomers' ex­pe­ri­ence. “It's a hyper-com­pet­i­tive mar­ket right now,” says SMA's Fur­tado, “and in­sur­ers feel they have to own their users' ex­pe­ri­ence.” This more than any­thing else is shap­ing in­sur­ers' re­quire­ments for the new pol­icy sys­tems they de­ploy. At the top of their fea­tures check­list are open APIs that al­low them to pro­vide mul­ti­ple front-ends that sup­port a va­ri­ety of user ex­pe­ri­ences. “In­sur­ers may want to present dif­fer­ent user ex­pe­ri­ences to dif­fer­ent seg­ments of the mar­ket,” says Fur­tado. “If they work with in­de­pen­dent agents, some of whom are very spe­cial­ized, for ex­am­ple, an in­surer may want to pro­vide a dif­fer­ent in­ter­face with a dif­fer­ent view for each of the prod­ucts and pro­grams it rolls out. So the flex­i­bil­ity to pro­vide dif­fer­ent front-ends for dif­fer­ent types of agents and cus­tomers is ab­so­lutely crit­i­cal.” But if a flex­i­ble API is most car­ri­ers' top buy­ing cri­te­rion for a new PAS, the abil­ity to ex­port and uti­lize its data runs a close sec­ond. Says Fur­tado, “No in­surer will even con­sider pur­chas­ing a pol­icy sys­tem without en­sur­ing that they can ac­cess and ex­port the sys­tem's data into a data repos­i­tory or an­a­lyt­ics engine of their choos­ing.” No­var­ica's Con­lon agrees, not­ing that the data is needed to fuel new ar­ti­fi­cial in­tel­li­gence ap­pli­ca­tions, which are poised to have a huge im­pact on the in­sur­ance mar­ket over the next few years. “AI-based data in­ges­tion, ma­chine vi­sion and ma­chine learn­ing ap­plied to sales, un­der­writ­ing and claims could be rev­o­lu­tion­ary,” she says. “The ven­dors that em­bed these ca­pa­bil­i­ties in their of­fer­ings will trig­ger a change in the mar­ket.”

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