FIRE, READY, AIM DON'T MISS THE POINT OF A POLICY ADMINISTRATION TRANSFORMATION - A PUBLICATION OF PWC'S FINANCIAL SERVICES INSTITUTE (FSI)
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A publication of PwC’s Financial Services Institute (FSI) Fire, Ready, Aim… Don’t Miss the Point of a Policy Administration Transformation
Contents Section Page 1 1. P i t off view Point i 2 2. Competitive intelligence 18 3 3. A framework for response 23 4. How PwC can help 29 5. 5 Select q qualifications 37
Section 1 Point of view
Point of view The convergence of complex market demands, antiquated legacy platforms, and an increasingly mature vendor landscape has created an environment where carriers view policy administration system (PAS) transformation as a necessary and attainable initiative. In today’s evolving industry Complex Carriers are facing demands from both customer and agent: landscape, carriers require a market Customer preferences have changed and continue to change modern foundational system that demands (e g Generation Y and Millenials). (e.g. Millenials) enables improved market Easy access to all products with the ability to quickly and responsiveness and operating easily create quotes. leverage. The ease of doing business for distributors. The ability for business and product managers to make An increasingly mature vendor changes h without ith t relying l i on IT IT. landscape enables carriers to Antiquated Many carriers are struggling with policy administration systems embark on the PAS transformation legacy that are over 30 years old: journey with less risk than they platforms These aging systems impede carriers from capitalizing on had to endure ffive years y ago, g thus growth opportunities or reacting to competitive pressures. enabling them to build a sound and These systems also require significant maintenance, thus realistic business case for taking away from discretionary investment and creating a transformation. “strategic squeeze” for carriers. Mature A significant market for vended solutions has emerged over the vendor d past 5-10 years, and with this emergence carriers have an landscape alternate option to the often expensive “homegrown” solution: Vendor solutions provide a viable implementation option, particularly for mid-tier carriers. This increasingly mature vendor landscape is focused on modern architecture with feature-rich solution options. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 3
Point of view Our industry research, observations, and experience suggest that PAS transformations will continue to be a priority for insurers—regardless of size and product mix—for the near future. Claims Billing 4% 4% Other Large insurers tend to spend more on 8% PAS PAS transformations than small or mid- 44% tier carriers due to the increased D ’ get left Don’t l f behind: b hi d IT lik lih d off implementing likelihood i l ti a customized, t i d Infrastructure home grown solution. 20% An estimated 60% of P&C Nevertheless, PAS remains a top initiative companies are deploying new for these insurers. policyy administration p g insurers have g Large greater than systems or enhancements to Underwriting US$2 billion in net written premiums 20% modernize their current (NWP). systems this year. Insurers are expected to invest a Underwritingg Other significant i ifi t amountt iin PAS 9% 2% Nea Nearlyl 40% of mid-size mid si e ins insurers, rers those replacement or with US$500 million-US$2 billion in modernization efforts over Billing NWP, cite PAS as one of their top three 10% PAS initiatives over the next three years. the next three to five years. 37% Mid-size insurers are able to contain IT Infrastructure spenddbby purchasing h i iintegrated d software f 11% solutions. Claims 13% Compliance 18% Sources: DataMonitor, Ward Group, Celent, PwC analysis PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 4
Point of view We have observed that large PAS transformation programs are often delivered late or over budget—if at all—as a result of the magnitude, complexity, and above all, poor upfront planning and alignment with key business drivers. A review of past efforts in this area illustrates there is room for improvement. Transformation Succeeded: The project was completed on time, within parallels with the 29% budget, and met all original benefit requirements. banking industry… We have observed that the system transformations being undertaken by the insurance industry parallel those occurring in many banks. 53% 53 Challenged: The project made it to the deadline, but Like insurance firms, banks experienced cost/schedule overruns and was unable to are struggling with fulfill all of the original benefit requirements. requirements implementation challenges such as building the business case, managing project execution, and measuring project impact and benefits. For more information, see PwC's FS Viewpoint publication entitled When the 18% Failed: The project was abandoned or cancelled due to project Growing Gets Tough: How being unable to meet cost, schedule, or customer expectations. Retail Banks Can Thrive in a Disruptive, Mobile, Regulated World. Sources: The Standish Group, based on Fortune 1000 Corporate Interviews regarding strategic projects costing > $10 M; Ward Group PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 5
Point of view Insurers in the “53% – Challenged” category can miss ROI opportunities and struggle to achieve profitable growth and expense ratio reduction targets. Common characteristics and business implications of challenged PAS initiatives: Challenges Characteristics Business implications Customer experience is not tailored to specific segments; Differentiated customers continue to encounter inconsistencies across Despite a significant PAS investment and a new customer and agent channels. policy platform, customers and agents see little experience Agents don’t view the new PAS platform as a significantly improvement. better tool to increase sales. Introducing new products and enhancing existing products Product agility and Competitors who implemented business-aligned is not as easy as envisioned. regulatory PAS systems can take additional market share; Responding to regulatory changes still requires a long IT the insurer can face adverse selection. improvements development cycle. Smaller than expected expense ratio benefits are realized Expense ratio in the years following the PAS transformation. Missed expense ratio expectations; lack of free reduction and long The insurer continues to bear the cost of legacy systems capital for business improvements to maintain term efficiency gains because pplanned systems y conversions/sunsets are never parity p y or achieve competitive p advantage. g completed. Data is not integrated, lacks definition, and continues to be Information difficult to access and use. The insurer does not realize the promise of higher management g and p Business departments struggle gg to leverageg data for value information to understand customer needs analytics operational analysis, improving underwriting profitability, and and make better business decisions. gaining insight to customer behaviors and needs. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 6
Point of view When initiating a PAS transformation, insurers often fire at a target before they fully understand where to aim, causing them to miss out on significant ROI by not aligning key business drivers with their transformation strategy. Carriers can maximize value by approaching PAS transformation as an opportunity to enable carefully targeted business benefits through modernized technology. Most carriers are taking a technology-driven approach without the benefit of a PAS Transformation guiding business strategy and associated capabilities focused on yielding the Target Business Benefits greatest benefit. By replacing or modernizing the legacy systems and doing nothing more, carriers are taking on higher risk and missing significant opportunities to create a competitive advantage through a cost-efficient operating model, enhanced customer focused capabilities, or improved market agility. In other words, these carriers are firing at a PAS transformation target before they fully understand where they should be aiming. Before moving forward, carriers should fully understand their business case, which can vastly differ based on company size, product mix, geographical presence, distribution channels, and overall market dynamics. Carriers planning policy administration transformation should evaluate specific business drivers as a diagnostic for assessing how a transformation will impact profitability. This process will enable carriers to gain executive alignment and confidence that available capital is aligned with the highest business priorities. The carrier can target functional enhancements that have the most significant impact on their business. Most importantly, they will be transitioning from a technology-led to a business-led approach pp in setting gppolicyy administration direction,, reducing g the risk of firing at the wrong target. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 7
Improve market Improve operating responsiveness leverage Point of view Leading carriers have recognized that a successful PAS transformation is dependent on aligning to the prominent industry business drivers that are most relevant to their strategy and operating environment and will result in the most benefits. Improve market responsiveness Improve operating leverage Product cross- Simplify customer view sell Improve operational Expense ratio 1 Enable more timely and accurate response to efficiency inquiries q through g aggregation gg g of customer data Profitability 7 Create a more efficient and productive environment Policy throughput Customer e customer Improve customer & agent experience retention 2 Focus on high-quality customer and agent Increase delivery interactions and strengthened relations Revenue assurance Expense ratio Focus on the Provide greater Revenue 8 confidence in Enhance multi-channel distribution strategy transforming the 3 Increase effectiveness and consistency of business in a timely and Cost to introduce/ product distribution through all channels Profitability minimally disruptive react fashion Enhance information management Revenue Eliminate legacy Expense ratio 4 Increase use of business intelligence and Retention platforms analytics for key insights and real-time decision making Profitability 9 Migrate toward more Reusability modern, standard, and Introduce new products to market more Revenue efficient technology Maintenance rapidly platforms 5 Profitability cost Implement product, rate, and service changes Market agility in a more timely fashion Market share Reduce cost pressures Cost to compete React to regulatory change more rapidly Cost of compliance 10 Achieve sustainable cost IImprove alignment li t with ith llegall statutes, t t t red ction thro reduction through gh M 6 compliance regulations, and changing reporting financial management Profitability requirements Profitability PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 8
Improve market Improve operating responsiveness leverage Point of view Shifting to a customer-centric business model by integrating data across channels will be the first point of differentiation for carriers who are trying to meet the demands of their customers and agents. Old paradigm: Policy-centric New paradigm: Customer-centric (legacy PAS platforms) (modernized PAS platforms) Policy-centric system design and data management Customer-centric business processes are supported by optimized business processes within policy admin systems operational data from all systems, including policy admin Segmentation differentiates treatment of customers, customers including data available in admin systems as well as Standardized approach to customer service, with limited external (third-party) data use of segmentation for differentiated treatment Increased personalization of content, products, and services for the individual Customers expect insurers to provide a consistent, Customer interactions history and associated information multi-channel experience and share the data from policy isolated into channel-specific servicing applications admin and other systems for use in all customer-facing business processes p Carriers must leverage real-time data services, Reactive back-office processes analyze policy and analytics, and business intelligence tools to deliver the customer data in batches to identify sales opportunities right products and service at each customer interaction PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 9
Improve market Improve operating responsiveness leverage Point of view An efficient, customer-centric model can help create the foundation for superior customer experience, multi-channel service, and informed decision making enabled by a business-aligned PAS transformation. Improve agent experience Improve customer experience The systems are viewed as an Create Create Ease of access to information invaluable tool to increase close differentiated differentiated and services at the point of rates and serve customers convenience agent customer Optimize agent recruitment using experience experience Integration of online, online agency, agency analytics and call center, making complex Attract and retain top performers transactions fast and easy Share consumer insights & prospect data Increased sales Respond to agent g demands to Simplified g Higher customer retention improve servicing customer view Lower cost of service Improve profitability and market share Enable multi-channel Effective cross- Data-driven Enhance information distribution channel service decision management experience making Cross-channel information sharing Increase cross-sell/up-sell by (full views of customer information, pattern analysis interaction history, across all Efficient campaign management channels) Increased focus on the customer is also a leading trend Identify prospective customers Tailored messaging and updates and agents Experience sales and service across the banking and capital markets space. Mine cross-channel interactions consistency across channels to find sales opportunities and Companies across the financial services industry are recognizing the competitive Respond to agent demands to advantages that may be gained through better customer targeting. As discussed in gaps improve servicing p PwC's FS Viewpoint p publication entitled Getting g to Know You: Building g a Customer- Centric Business Model for Retail Banks, many banks are investing in new technology R Respondd to competitive i i fforces Improve profitability and market to capture better data for profiling customers, enabling these institutions to gain deeper Improve underwriting profitability share insight into ways to build more loyal and profitable customer relationships. and customer intelligence PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 10
Improve market Improve operating responsiveness leverage Point of view Leading insurers recognize that improved market agility is one of the most direct and immediate impacts of a well-aligned PAS transformation. Market agility drivers influenced by Market Agility Framework effective PAS transformation: Product offerings: Platform Innovative products to market - Drive significant quantities of Technology new, innovative products within existing products lines to the Information flexibility & marketplace (e.g. product bundling). management speed Scope of existing markets & products - Expand breadth of Consumer offerings outside core markets and products (e.g. introducing Product Offering breadth & coverage for a specialty market). generation Consumer depth React to regulatory & risk change - Improve ability to react to focus regulatory change and risk exposure shifts. Customer Expanding Consumer focus: experience product lines Respond to existing customer needs - Increase penetration and share of wallet within consumer base and expand to new consumer types. Respond to prospective customer needs - Drive innovation Organization Intermediated based on changing consumer bases and continually respond to structure customer needs and desires. Platform: Operating Flexible platform - Policy administration system can provide the Processes Directed Presence model flexibility to handle rapid product change. Business intuitive platform - Enables business users to rapidly Strategy & Incentive & move from business ideation through technology implementation metrics controls for significant changes to products or features. Culture PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 11
Improve market Improve operating responsiveness leverage Point of view PAS transformation can be a direct enabler to improved operating leverage by addressing redundant platforms and processes, simplifying existing systems, and reducing underlying cost pressures. Benefits of improving operating leverage Enables improvements on the revenue side by improving delivery capabilities and getting profit-generating products to market faster. Expand profit Enables expense-side improvements by reducing cost to run the margins business, the cost to implement change, and the cost to process business. Expand profit Enables more underwriting efficiency and basic run-the-business margins efficiency. Improve Reduces cost associated with multiple systems, operational expense ratio inefficiencies, and failed IT implementations. Overall expense ratio improvements will be experienced in the years immediately following a Improve Improve PAS transformation. delivery expense capabilities ratios Establish long- Enables a long-term technology landscape that can produce revenue- term value generating change with less cost to the carrier. engine Benefits of improving Results in ease of doing business improvements and associated cost operating reductions reductions. Improve Results in improved customer satisfaction associated with easier leverage operational processing. efficiency Results in potential headcount reduction associated with inefficient Consolidate Establish processes. legacy long-term platforms value engine Reduces costs associated with old, inefficient systems. Consolidate Reduces vendor and overall portfolio spend. spend legacy Enables simplification of technology skill sets. platforms Creates simplified technology landscape and contributes to improved Improve delivery assurance. operational efficiency A modernized platform helps to enable delivery capabilities. Improve Less complication of systems enables more distribution of system d li delivery k knowledge. l d capabilities More readily available and skilled resources are associated with modernized systems. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 12
Improve market Improve operating responsiveness leverage Point of view Policy administration system transformations can also enable important operational efficiency improvements. To help maximize the benefits of these improvements, insurers should also account for productivity considerations in their business case development. Operational Efficiency Gains Productivity opportunities and benefits Automate UW processes Insurers can leverage these industry advancements in terms of business Implement STP via advanced Reinvest in value- value capabilities and technological flexibility in business rule definition add growth- order to create a more efficient and Reduce UW cycle times and referral generating activities productive internal and customer-facing volume, and enable automated re- environment. underwriting Increase self- Operational efficiency derived from policy Decrease data Justification for services administration claims administration, claims, and billing entry potential staff transformation should make some manual Implement Leverage third- reductions or business processes obsolete, resulting in agency and party data redeployment potential staff reductions or more effective customer self- integrations opportunities service portals Operational utilization of talent through redeployment. Increase system Reduce call Efficiency pre-fill rules, A modernized policy administration or claims center efforts Gains lookups, and platform can enable insurers to automate Reduce defaults business rules, implement straight-through Further ease-of- unnecessary Reduce data processing (STP), streamline underwriting doing-business customer entry/hand-offs procedures, and more effectively conduct improvements touch-points claims adjustment and fraud detection. Carriers are able to focus underwriting talent Simplify IT efforts on high high-impact impact activities. activities Decrease product design, development & The benefits of operational efficiency derived testing efforts Future opportunity from a core systems transformation will result Shorten PAS learning curve cost avoidance in time savings that can be reinvested toward Reduce error-prone batch cycles & defect more value-added activities. g management PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 13
Improve market Improve operating responsiveness leverage Point of view A well-designed transformation can enable systems reuse and legacy platform consolidation that improves operating leverage and drives both qualitative and quantitative benefits to insurers. Opportunity categories Consolidation: Reduce the number of systems or feeds needed to support similar functions across departments; move systems off obsolete platforms to align with future architectural direction. Integration: Increase the use of existing system and data through effective interfaces and, as appropriate, provide uniform views of information across departments. Sourcing: Introduce alternate sourcing strategies for application development, maintenance, and/or operations. Quantifiable benefits Qualitative benefits Save an estimated 10%-30% 10% 30% on maintenance Improve scalability, scalability performance performance, and resilience Reduced portfolio budget through license reduction, Improved service of applications to meet planned growth in maintenance spend hardware/software rationalization, or service levels demand. contract elimination. Identify and address vendor tool redundancy. Reuse capabilities across distribution channels Reduced vendor p Reduce the number of vendors and improve Improved without having g to re-program p g the same spend licensing agreements. distribution business logic. Migrate to fewer supported technologies Simplified requiring a more consolidated skill set. Reduce time and costs of compliance since technology skill set Develop expertise within a smaller set of information and processes are built into technologies. Enhanced ease reusable services. off compliance li Fewer FTEs required to support the portfolio Decrease the risk that critical functions are left Reduced FTE count due to simplification of technology and unsupported or on outdated systems. or improved talent reduction in environment complexity. Simplified Break down application stovepipes, increasing utilization Improve productivity by redeploying resources system information sharing across the enterprise to other activities that advance the business. architecture and High accuracy of data due to consistent Reduced Reuse common functional services to reduce enterprise-level business rules and processes encapsulated development costs custom development needed on per-project data within the shared services. and delivery time basis. aggregations PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 14
Point of view A PAS investment aligned to the carrier’s specific business drivers can result in material and quantifiable market responsiveness and operating leverage benefits. Hypothetical scenario: US$1 billion regional carrier, 10-year business case $30 Improved market responsiveness $ 68.0 M Total benefits: US$100 million Expanded profit margins $ 20.0 M $25 Increased market share $ 15.0 M $20 Net cash flow: US$60 million Improved loss ratios $ 10.0 M Forecast (US $millions) $15 Increased growth and retention $ 10.0 M Increased cross-channel sales $ 8.0 M $10 Enhanced information management $ 5.0 50M $5 Improved operating leverage $ 32.0 M $0 Increased operational efficiency $ 14.0 M -$5 Modernized technology platform $ 10.0 M Reduced FTE count $ 8.0 M -$10 Total investment: (US$40 million) -$15 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 15
Point of view Leading insurers are already reaping the benefits of modern and flexible policy admin systems because they prioritized business drivers and aligned them with the PAS transformation. Leading insurers have successfully replaced policy administration systems via business-led programs, allowing them to plan and execute a PAS transformation that was fully aligned with their long-term business priorities. Some of these insurers have aligned their transformation programs with the primary objective of improving operating leverage by modernizing platforms that enable automated underwriting, reduce data entry, and eliminate systems redundancy. These carriers i recognized i d the h need d to d decrease operating i costs, iimprove the h expense ratio, i and d increase productivity through reinvestment in more high-value tasks. Other insurers have determined that aligning the PAS transformation with the primary objective of improving market responsiveness will result in the most benefits and have the b best impact p on their bbusiness ppriorities. These leadingg carriers have moved forward with a system designed to enable a simplified customer view and reliable data gathering. A system that is flexible to rapid change will result in improved profitability and operating ratios. These leading insurers understood what was driving their business and planned for the PAS transformation to be an enabler for those improvements. improvements PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 16
Point of view In our experience with leading insurers, PAS transformation programs are far more likely to succeed when carriers invest time to understand the core business drivers upfront and plan a business case that fully aligns its operating strategy with the transformation. Strategy and business case Vendor selection Mobilization Execution scenario planning 1 Strategic and business case scenario planning 2 Select a vendor & 3 Mobilization 4 Execute the Program: Understand business design and operating environment solution: Decompose selected Program management Prioritize key drivers for transformation Conduct vendor search scenario into an Development Identify and prioritize key technical constraints Execute an RFI/RFP achievable roadmap QA & deployment Determine transformation scenarios Conduct vendor Create execution plan Assess high level costs, costs benefits, benefits and risks of each scenario workshops Mobilize M bili resources Evaluate scenarios against business and technical drivers Select a vendor Recommend optimal scenario based on evaluation output Understand business design Prioritize business drivers Align transformation scenarios PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 17
Section 2 Competitive intelligence
Competitive intelligence Leading insurers have a strong understanding of their business drivers, but not all excel at aligning with their strategic transformations. Characteristics of What we observe in the industry business design and transformation Insurer A Insurer B Insurer C Grasp of business design Leadership conducts a frequent and Leadership reviews and refines business Senior leadership team rarely and operating thorough review and refresh of its design objectives less than once a year, revisits business design and environment strategic drivers, drivers business design design, but is aware of how they are tracking operating environment to determine and operating environment. █ against objectives. █ if revisions are necessary. █ A senior management team Business design refinement is not owned Few employees can understand member is dedicated to owning and within the senior management team. █ what is driving the organization and understanding how market how they plan to move forward to dynamics and competitive improve the business. business █ landscape could alter the insurer’s business design. █ Alignment of business Business drivers are reviewed and Insurer has no business case but only Insurer starts with a business case priorities & objectives often re-prioritized based on aspirational objectives that are not linked that ends up underestimating cost outcomes of the frequent reviews. █ to specific people, process, and and overestimating benefits due to t h l technology enablers. bl █ th lack the l k off detailed d t il d analysis l i and d th the “Word of mouth” is used to benefit of experience. █ disseminate changes in business Insurer builds technology and assumes priorities, which takes time and benefits will follow, rather than first results in inconsistent messages. █ developing a business case and aligning the transformation program to it. █ Transformation that The transformation initiative begins IT constraints are clearly understood and Insurer has a portfolio of disjointed reinforces business and business priorities are considered in scenario planning, which transformation programs that are not priorities considered when implementation avoids costly missteps. █ focused on a common objective and questions arise, resulting in linked to business priorities. █ disruption, rework, and unplanned Motivated by previous challenges, an costs. █ overly cautious IT influence limits financial and business benefits. █ █ Leading █ On par █ Lagging PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 19
Competitive intelligence Transformation scenario planning can be a difficult and ambiguous task. The following are observations of how various insurers have dealt with this exercise. Characteristics of What we observe in the industry transformation scenario planning Insurer A Insurer B Insurer C Active and consistent Senior leaders take time to Leaders grow impatient with the rigor Leadership does not request a involvement by business understand the initiative and are needed to develop a clear and viable business case, but the initiative runs and IT leaders actively engaged from strategy business case and decide to proceed into roadblocks when it cannot be cost through deployment. █ without a sufficient understanding of justified. █ costs and benefits. █ Key business owners work closely with program leaders to identify, Key business owners are champions of quantify, and validate realistic the initiative and insist on being closely benefits █ benefits. involved in planning planning, mobilization mobilization, and execution to ensure benefits are realized. █ Balancing risk and reward Insurer builds a strong business Insurer manages risk by exploring Initiatives are prone to prolonged and through incremental case for an initiative that is doomed options for breaking the transformation unplanned incremental delivery cycles business benefits because of the “big bang” approach into achievable pieces. █ as a result of shifting priorities within t accelerate to l t benefits. b fit █ th organization. the i ti █ Senior leadership requires incremental planning to prioritize delivery of benefits. █ Recognize and plan IT is at the table for planning IT is rarely involved in business IT is included in transformation around a ou d IT co constraints st a ts discussions d scuss o s but risks s s raised a sed a are e not ot prioritization p o t at o anda d bus business ess case planning p a gaand d tthe e co constraints st a ts aare e cclearly ea y taken seriously. █ development. █ recognized, but the organizational will is not present to embrace the hard IT is involved and has a voice in IT is included in scenario planning but realities and adjust the plan. █ the transformation scenario does not make a meaningful planning. █ contribution due to lack of business context. █ █ Leading █ On par █ Lagging PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 20
Competitive intelligence Even if insurers identify an ideal PAS transformation scenario they still have additional challenges to address within vendor selection, mobilization, and execution. Characteristics of PAS What we observe in the industry transformations conducted by various insurance carriers Insurer A Insurer B Insurer C Choosing the right vendor Senior leadership is only interested Insurer selects a vendor because they The vendor met at a conference is in the cost aspect, abdicating liked the sales presentation and the selected after seeing the user interface management of other success licensing fee is low. █ mock-ups and deciding it is a fit for the factors. █ insurer’s transformation program. █ Insurer allows vendor to water down Insurer engages relevant vendors the business case because it reduces Insurer conducts a use case based in a rigorous process to understand their risk and accepts the implications proof-of-concept to validate the vendor business fit and platform agility. █ unchallenged. █ can meet real-world requirements. █ Leadership and Senior leadership is actively Senior leadership checks out after Senior management has authorized a governance to keep the engaged and requires regular contract negotiations, relying on strategic investment in the program but initiative out of trouble updates with facts and analysis to periodic updates to stay then loses interest, no longer citing the enable informed decisions. █ informed. █ program as key to meeting long-term objectives. █ Governance venues are Program g is critical to long-term g established with the right success, but senior management does Inexperienced junior management participants and operating not understand how the business case resources are accountable for principles to make them effective. █ will produce the needed results. █ delivering a strategic program without sufficient oversight. █ Resources and capacity Key roles staffed with dedicated Insurer has strong and committed Insurer uses low-cost/capability needed to be successful internal and external resources resources. █ internal resources on the contractors with limited vendor program. █ knowledge and motivation. █ Insurer is contracted with a reputable vendor but locked into a Insurer utilizes vendor resources in SMEs are allocated with limited time and material contract with no strategic roles where their specialized involvement as they try to balance their incentives to control costs. █ skills can make a difference. █ day job with project responsibilities without backfill. █ █ Leading █ On par █ Lagging PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 21
Competitive intelligence In our experience, insurers will be forced to consider a number of success factors and stumbling blocks throughout the PAS transformation. Critical success factors (+) Stumbling blocks preventing success (-) () Business capabilities should drive the technology roadmap and Scope creep Stakeholders continually change or add features Business-IT key decisions. When the business and IT are engaged in a true without regard to impact to cost and schedule. alignment partnership, the chances for success greatly improve. Lack of leadership With a lack of a strong leader to maintain focus Strong An active, aligned leadership team sets the tone for the rest of the leadership and program By being willing to make tough decisions and being program. and pace, pace the initiative is orphaned by business program actively engaged in the program, strong leaders provide the steady and IT management. management hand and focus required for a long-term PAS journey. Insufficient change Training and communication are often viewed as Successful programs employ a structured approach to Formalized management scope sufficient to drive adoption but are not enough. organizational change management that identifies all affected organizational stakeholders early and develops a plan to obtain buy-in, develop g change Tactical solution By using old inefficient processes on new and execute communication/training plans, plans and effectively management implement organizational change with minimal disruption. technology, organizations miss out on lower cost and higher customer service opportunities. A well-defined roadmap addressing scope, architecture, Clear roadmap integration, conversion, resources, and sun-setting laid out in a logical progression enables a timely PAS transformation. Lack of talent/ Existing resources without complex program experience experience and skills cannot be successful on a Having H i kkey stakeholders t k h ld actively ti l iinvolved l d and dh holding ldi ththem strategic initiative. Active accountable for decisions is absolutely critical to program success. stakeholder By creating a sense of ownership, stakeholders tend to make more involvement Alternate governance The organization undermines its initiative by responsible decisions because they have “skin in the game.” allowing a vocal minority of dissenters to drive Identifying top resources to help ensure that the right people (such Right people on their own agenda. as SMEs, BAs, PMs, and testers) are playing critical roles on the the bus project is paramount to the success of PAS PAS. Passive stakeholder Stakeholders abdicate their role as leaders and At every level, people need the proper authority to make decisions Empowered involvement disengage from the day-to-day decision making. without having to go to a committee or upper management. This team members yields quick decisions and prevents delays and rework. Tying benefits to delivery milestones provides stakeholders with Shifting focus Stakeholders lose focus on the initiative that is g immediate and tangible results and increases support pp throughout g p most important to the future of the organization g Quick wins delivery. Quick wins are necessary to build confidence and buy-in in favor of other priorities. for the program. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 22
Section 3 A framework for response
A framework for response Successful PAS transformations are aligned with the insurer’s business design and operating environment. Leading insurers understand what will make them more competitive and help ensure that the PAS transformation reinforces those business drivers. Understand business design Prioritize business drivers Align transformation scenarios Where lagging insurers often miss the target Validate the business model Analyze the business design Using the prioritized business drivers, components, opportunities, and consider the relevant technology Define the operating model constraints factors, such as scalability and integration Understand the necessary Use the business design analysis to organizational structure and skills develop a prioritized set of business Leverage the technology drivers considerations to produce Identify an appropriate technology transformation scenarios, such as using platform a vendor solution or modernizing legacy Score each of the transformation scenarios against how well they support the prioritized business drivers PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 24
Understand business Prioritize business Align transformation design drivers scenarios A framework for response An understanding of the overall company business strategy sets the context for a successful evaluation of a potential PAS transformation. Sample business design components and diagnostic findings Products Channels Markets 1. Business model Trade-offs where Products in each Best market single margins are channel that opportunities across sacrificed to represent the best products and How we fundamentally increase overall cross-sell/up-sell channels. profit… share. opportunities. Identify product bundles that represent growth. 2. Structure & incentives Subsidies for one Online & offline Incentive changes product to drive channel incentives to orient more How we encourage and growth in another. to support each toward customer enforce our vision… Commission and other vs. competing than product. bonus structure against each other. impact. How will product How will we What additional 3. Operating model management be leverage customer services need to be organized to best support functions supported in the How we most effectively cover the matrix of across channels future. organize to support geographies, (i.e. call centers). What trends will business model… products, & impact our design. channels. Which functions should be centralized. Degree to which Level of channel The right sequence 4. Technology platform reduced technology integration for reorganization to spend with self-fund necessary. maximize the How we support, changes. Definition of how a largest top & bottom automate, improve, and Degree to which single, flexible line opportunities. innovate our go-to- technology online channel can market capabilities… platforms enable be leveraged. products to be sold p in multiple channels. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 25
Understand business Prioritize business Align transformation design drivers scenarios A framework for response By evaluating the business design across various dimensions, insurers should clearly identify opportunities and constraints that will enable them to prioritize specific business drivers that can be aligned with their PAS transformation. Prioritized business drivers Business Technology Structure & Illustrative Operations Model Platform Incentives Improve customer Flexibility to deliver Use data as an asset Automated metrics to p experience new products/services Expand market reach support process Business to market and capabilities improvement Model Customize channel Put technology in the usage by economics product Simplified customer view Additional products, Create a low cost Automated metrics to services, and operating platform support process transaction/interaction Enable variable cost improvement Operations – + types increase costs operations and Multi-channel demand driven model Rapidly introduce new integration products to market Platform proliferation Unresolved Greater leverage from w// integration i t ti l it iin th complexity the l d hi tto ffrontt liline leadership Technology challenges business/technology Rapidly react to Platform Capability duplication limits the ability to Lack of standards reduce unit costs regulatory changes compliance Power bases built by Efficiency and speed Structure aligns level and function metrics reduce technology with Structure & hinder optimal service quality and business functions Legacy platform Incentives business model customer experience Technology focused elimination function cost reduction efforts Improve p o e ope operational a o a efficiency PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 26
Understand business Prioritize business Align transformation design drivers scenarios A framework for response A combination of the prioritized business drivers and most relevant technology considerations will produce various transformation scenarios that can be evaluated. Prioritized business drivers Prioritized technical considerations Transformation scenarios Lower Improve customer Scenario 1 Scalability Scalability Integration Integration experience Leave system as is and continue to modernize internally “Defense” More Multiple platforms will Use of modern increase the complexity of technologies enable higher Simplified customer the solution. There is an degrees of integration view implicit architectural flexibility. System should preference for fewer be able to integrate with interfaces. other vended or Scenario 2 h homegrown systems t Leave PL as is, but re- Rapidly introduce new necessary to function. platform CL with products to market System X Degree of Change Rapidly react to Scenario 3 regulatory changes Modernize PL products Support the Delivery internally, but re- business timelines platform CL with vended product “Offe More Legacy platform Efficiencies and A solution should be ense” e elimination effectiveness that drive brought online within the quality, turnaround time, existing schedule; and customer satisfaction otherwise, there may be can be derived from considerable impacts to Scenario 4 Improve operation eliminating or minimizing strategy and benefits. All LOB and all states unnecessary with vended solution efficiency ffi i inconsistencies. Higher PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 27
Understand business Prioritize business Align transformation design drivers scenarios A framework for response Various transformation scenarios should be evaluated and given an overall score in relation to how well they align with the prioritized business drivers. Simplified Speed to Operational Delivery Platform customer Scenario rationale Overall evaluation of scenario market efficiency timeline elimination view Basic modernization of the system will not fully maximize benefits around speed to S Scenario i 1 market, cost reduction, and customer Does not Partially Supports view, but will improve delivery timeline. support supports Leave low-touch customer lines of business as is and focus on the Scenario 2 underwriting heavy CL products for policy Does not Partially Supports administration transformation. support supports Address personal lines and commercial lines products with separate solutions. Scenario 3 The PL solution will require customization Does not Partially Supports as the vended products is not adequate. support Supports Address all lines of business with a vended solution that will simplify the system and address many of the business Scenario 4 Does not Partially Partiall S Supports t drivers. However, this will be the most support supports expensive scenario with the greatest impact on delivery timelines. Does not meet Partially meets Meets business business driver business driver driver criteria criteria criteria PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 28
Section 4 How PwC can help
How PwC can help PwC provides a one-stop solution from strategy to results; our experience with PAS transformation spans each approach, and we can help emphasize the factors that can result in a successful transformation with real business benefits. Strategy and business case Vendor selection Mobilization Execution scenario planning Duration: 6 6-12 12 weeks Duration: 7 7-14 14 weeks Duration: 6 6-10 10 weeks Duration: Dependent on scope Prioritize business drivers Develop capability matrix and Design program organizational Program management Understand key aspects of the request for information structure Drive execution of the program company’s business model Identify vendors for consideration Identify tracks and objectives Define cross-program interaction Identify opportunities and based upon leaders in the field Define roles and responsibilities and through market research Requirements gathering constraints Develop capabilities matrix based Create detailed program and Document architectural, on business/technology project plans structural behavioral, structural, behavioral functional functional, Business case development Identify timeline, milestones, and non-functional requirements Determine quantitative and requirements Develop RFP, solicit responses, dependencies, and resources qualitative benefits Architecture oversight Perform cost/benefit analysis and evaluate solution fit with Develop program budget and Influence the quality and business and technology metric-based reports consistency of business solutions Capabilities model definition objectives Recommend sourcing approach and infrastructure Identify and prioritize strategic and create cost model Vendor workshops and finalists Development business drivers Develop summary and drill-down selection Manage all activities that make a Define desired future-state reports to track budget, forecast, Engage vendors in oral software system available for use business capabilities and map to and actual costs by dimensions a future-state conceptual presentations and conduct Quality assurance scoring effort to evaluate fit Establish processes and tools to architecture Confirm business capabilities based on evaluation criteria operationalize the program maintaining traceability between Define and implement a PMO to Transformation scenario b siness capabilities and testing business Proof of concept and final manage program execution planning activities recommendation Draft orientation materials Outline scenarios against the Conduct PoC and provide Deployment business case Foundational analysis recommendation to business and Manage all conversion and roll- Determine scenario that aligns Define business processes and technology stakeholders out activities across the with the business objectives as technology architecture organization team transitions to solution selection PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 30
How PwC can help As insurers progress through the policy administration transformation lifecycle, they face questions that encompass strategic, business value, risk, and cost considerations. Situation #1 Situation #2 Situation #3 Situation #4 Strategy and business Vendor selection Mobilization Execution case scenario planning What should we do and how Many vendors claim that Now that we have selected a How do we salvage a can we get the business and they have what we need and partner, how do we avoid the challenged project and IT leaders behind the have done the project we are pitfalls that other insurers minimize cost overruns initiative? envisioning before, but how have experienced, resulting while delivering a solution Questiions can we be sure who would in lower than expected value that is viewed as a be the right partner for us? or a complete write-off? write off? success? Conduct full benefits case Mobilize a solution selection Conduct a rapid validation of Conduct a program health program PAS business case assessment to identify the Prioritize business drivers root cause of challenges Conduct rapid business Define and deploy the and recommendations for Identify transformation driver assessment program management and improvements ns scenarios and develop delivery capabilities needed Solution roadmap Conduct rapid transformation to implement a successful Develop an action plan to scenario planning solution align the program for success Implement the program remediation plan PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 31
How PwC can help Situation #1 – The need for a new PAS platform is understood, but the insurer is unclear on how to gain alignment and develop a compelling business case. Overview off current PAS lifecycle f y p phase Policy Admin Transformation Lifecycle The insurer’s policy administration platform is not allowing the desired market responsiveness and is costly to maintain. A new platform is needed, but the organization first needs to Strategy and business case Vendor selection Mobilization Execution identify the PAS capabilities that will enable the business scenario planning strategy. t t A compelling business case needs to be developed with options in order to move forward. Develop a business case Considerations Key y activities may y include: With the th breadth b dth and dddepth th off PAS business b i functions, f ti what h t capabilities should be prioritized to maximize ROI? Prioritize business drivers and define required capabilities How can complete and accurate articulation of costs and Understand the key aspects of the company’s business design and benefits be captured to create a compelling business case? strategy. Identify opportunities that map back to the 10 key business drivers for What options p should the organization g consider? policy administration. What is the right way to approach the PAS transformation? Develop business case Determine quantitative and qualitative benefits of conducting a policy How PwC can help administration transformation. PwC will work with the insurer to identify the capabilities and Understand which business drivers will bring the most benefit (cost/benefit analysis). develop a business case using the 10 key business drivers, resulting in a prioritized set of capabilities. Identify transformation options and scenario planning Outline scenarios against the business case based on key business drivers PwC will conduct a transformation scenario diagnostic and and technology considerations. planning exercise to provide perspective to cost/benefit Determine the relevant options based on the business objectives for options. consideration by organizational leaders. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 32
How PwC can help Situation #2 – Insurer has a clear justification for a new PAS vendor and solution but is unsure how to select the right partner given their business and IT environment. Overview off current PAS lifecycle f y p phase Policy Admin Transformation Lifecycle Key business and IT stakeholders agree on the need for a new policy administration platform as a means to enhance market responsiveness and control costs. Strategy and business case vendor selection Mobilization Execution The insurer has investigated PAS solution options but needs to scenario planning b tt understand better d t d th the strengths t th andd weaknesses k off each h tto narrow the field of potential partners. Mobilize solution selection and conduct Considerations rapid business driver assessment There are many vendor options but with unclear differentiation Key activities may include: and understanding of which vendor would most appropriately align with the specific needs of the insurer. Rapid business driver assessment and scenario planning The criteria that would provide linkage between insurer needs Conduct rapid business driver assessment to identify prioritized high- level business capabilities and scenarios designed to create clarity to the and vendor capabilities is missing to inform the solution insurer’s specific solution requirements. selection process. How PwC can help Capabilities matrix for solution selection Map desired capabilities to RFI/RFP questions for the purpose of scoring PwC will work with the insurer to develop solution selection perspective vendors. criteria by conducting a rapid business driver assessment. PwC will work with the insurer to create a vendor assessment Conduct solution selection and produce recommendation f framework k and d scorecard d linked li k d to t bbusiness i d drivers i and d hi high- h Identify d f prospective vendors d and dddevelop l an RFI/RFP. level functional capabilities. Score vendors based on the RFI responses and identify vendors to engage in onsite visits and proof of concept phase. PwC will work with the insurer to perform PAS vendor and The result is a recommendation based on scoring and proof of concept solution due diligence to arrive at a recommendation for a results based on objective, insurer-specific criteria. vendor partner. PwC Fire, Ready, Aim... Don’t Miss the Point of a Policy Administration Transformation 33
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