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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FIRE, READY, AIM DON'T MISS THE POINT OF A POLICY ADMINISTRATION TRANSFORMATION - A PUBLICATION OF PWC'S FINANCIAL SERVICES INSTITUTE (FSI)
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        ƒ 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                            ƒ Easy access to all products with the ability to quickly and
 responsiveness and operating                         easily create quotes.
 leverage.                                          ƒ The ease of doing business for distributors.
                                                    ƒ 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      ƒ 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                  ƒ 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:
                                                     ƒ Vendor solutions provide a viable implementation option,
                                                       particularly for mid-tier carriers.
                                                     ƒ 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                                             ƒ 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                                                                                          ƒ Nevertheless, PAS remains a top initiative
      companies are deploying new                                                                                        for these insurers.
      policyy administration
      p                                                                                                                     g insurers have g
                                                                                                                       ƒ 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%                      ƒ 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%
                                                                                                                       ƒ 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

                              ƒ 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              ƒ Agents don’t view the new PAS platform as a significantly                   improvement.
                                better tool to increase sales.

                              ƒ 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;
                              ƒ Responding to regulatory changes still requires a long IT                   the insurer can face adverse selection.
      improvements              development cycle.

                              ƒ 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      ƒ 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.

                              ƒ 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
                              ƒ 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           ƒ Customer-centric business processes are supported by
  optimized business processes within policy admin systems     operational data from all systems, including policy admin

                                                             ƒ 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
                                                             ƒ Increased personalization of content, products, and
                                                               services for the individual

                                                             ƒ 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

                                                             ƒ 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

  ƒ The systems are viewed as an                      Create                                                   Create                             ƒ 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
  ƒ Optimize agent recruitment using               experience                                               experience                            ƒ Integration of online,
                                                                                                                                                                   online agency,
                                                                                                                                                                           agency
    analytics                                                                                                                                       and call center, making complex
  ƒ Attract and retain top performers                                                                                                               transactions fast and easy
  ƒ Share consumer insights &
    prospect data
                                                                                                                                                  ƒ Increased sales
  ƒ Respond to agent
                 g      demands to                                           Simplified                                                               g
                                                                                                                                                  ƒ Higher customer retention
    improve servicing                                                      customer view                                                          ƒ Lower cost of service
  ƒ Improve profitability and market
    share

        Enable multi-channel                     Effective cross-                                           Data-driven
                                                                                                                                                         Enhance information
            distribution                         channel service                                             decision                                       management
                                                   experience                                                making
  ƒ Cross-channel information sharing                                                                                                             ƒ Increase cross-sell/up-sell by
    (full views of customer information,                                                                                                            pattern analysis
    interaction history, across all                                                                                                               ƒ Efficient campaign management
    channels)
                                           Increased focus on the customer is also a leading trend                                                ƒ Identify prospective customers
  ƒ Tailored messaging and updates                                                                                                                  and agents
  ƒ Experience sales and service           across the banking and capital markets space.
                                                                                                                                                  ƒ Mine cross-channel interactions
    consistency across channels                                                                                                                     to find sales opportunities and
                                           Companies across the financial services industry are recognizing the competitive
  ƒ 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                    ƒ R
                                                                                                                                                    Respondd to competitive
                                                                                                                                                                        i i fforces
  ƒ Improve profitability and market       to capture better data for profiling customers, enabling these institutions to gain deeper             ƒ 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                                       ƒ 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                                    ƒ 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                                                                ƒ React to regulatory & risk change - Improve ability to react to
  focus                                                                              regulatory change and risk exposure shifts.

        Customer                                                 Expanding         Consumer focus:
        experience                                               product lines
                                                                                   ƒ Respond to existing customer needs - Increase penetration
                                                                                     and share of wallet within consumer base and expand to new
                                                                                     consumer types.
                                                                                   ƒ 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                                                                        ƒ Flexible platform - Policy administration system can provide the
              Processes                                   Directed     Presence
  model                                                                              flexibility to handle rapid product change.
                                                                                   ƒ 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

                                                                    ƒ Enables improvements on the revenue side by improving delivery
                                                                      capabilities and getting profit-generating products to market faster.
                                                  Expand profit
                                                                    ƒ 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                                       ƒ Enables more underwriting efficiency and basic run-the-business
                      margins                                         efficiency.
                                                  Improve           ƒ 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-
                                                                    ƒ Enables a long-term technology landscape that can produce revenue-
                                                  term value
                                                                      generating change with less cost to the carrier.
                                                  engine
                     Benefits of
                     improving                                      ƒ Results in ease of doing business improvements and associated cost
                     operating                                        reductions
                                                                      reductions.
                                                  Improve
                                                                    ƒ Results in improved customer satisfaction associated with easier
                      leverage                    operational
                                                                      processing.
                                                  efficiency
                                                                    ƒ Results in potential headcount reduction associated with inefficient
      Consolidate                   Establish                         processes.
        legacy                      long-term
       platforms                   value engine                     ƒ   Reduces costs associated with old, inefficient systems.
                                                  Consolidate       ƒ   Reduces vendor and overall portfolio spend.
                                                                                                              spend
                                                  legacy            ƒ   Enables simplification of technology skill sets.
                                                  platforms         ƒ   Creates simplified technology landscape and contributes to improved
                       Improve                                          delivery assurance.
                     operational
                      efficiency
                                                                    ƒ A modernized platform helps to enable delivery capabilities.
                                                  Improve           ƒ Less complication of systems enables more distribution of system
                                                  d li
                                                  delivery            k
                                                                      knowledge.
                                                                           l d
                                                  capabilities      ƒ 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                                                           ƒ Insurers can leverage these industry
                                                                                                              advancements in terms of business
                   ƒ 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
                   ƒ Reduce UW cycle times and referral                         generating activities
                                                                                                              productive internal and customer-facing
                     volume, and enable automated re-
                                                                                                              environment.
                     underwriting
  Increase self-                                                                                            ƒ Operational efficiency derived from policy
                                                             Decrease data      Justification for
  services                                                                                                    administration claims
                                                                                                              administration,   claims, and billing
                                                             entry              potential staff
                                                                                                              transformation should make some manual
ƒ Implement                                                 ƒ 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.
                                                            ƒ Increase system
ƒ Reduce call                     Efficiency                  pre-fill rules,                               ƒ A modernized policy administration or claims
  center efforts                    Gains                     lookups, and                                    platform can enable insurers to automate
ƒ Reduce                                                      defaults                                        business rules, implement straight-through
                                                                                Further ease-of-
  unnecessary                                               ƒ 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.
                                                                                                            ƒ Carriers are able to focus underwriting talent
                               Simplify IT efforts                                                            on high
                                                                                                                 high-impact
                                                                                                                      impact activities.
                                                                                                                              activities

               ƒ Decrease product design, development &                                                     ƒ The benefits of operational efficiency derived
                 testing efforts                                                Future opportunity            from a core systems transformation will result
               ƒ Shorten PAS learning curve                                     cost avoidance                in time savings that can be reinvested toward
               ƒ 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
                           ƒ Save an estimated 10%-30%
                                                 10% 30% on maintenance                                    ƒ 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.

                           ƒ Identify and address vendor tool redundancy.                                  ƒ Reuse capabilities across distribution channels
  Reduced vendor
                                                                   p
                           ƒ Reduce the number of vendors and improve              Improved                  without having
                                                                                                                          g to re-program
                                                                                                                                  p g     the same
  spend
                             licensing agreements.                                 distribution              business logic.

                           ƒ Migrate to fewer supported technologies
  Simplified                 requiring a more consolidated skill set.
                                                                                                           ƒ Reduce time and costs of compliance since
  technology skill set     ƒ Develop expertise within a smaller set of                                       information and processes are built into
                             technologies.                                         Enhanced ease             reusable services.
                                                                                   off compliance
                                                                                           li
                           ƒ Fewer FTEs required to support the portfolio                                  ƒ 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              ƒ Break down application stovepipes, increasing
  utilization              ƒ Improve productivity by redeploying resources
                                                                                   system                    information sharing across the enterprise
                             to other activities that advance the business.
                                                                                   architecture and        ƒ High accuracy of data due to consistent
  Reduced                  ƒ 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
  ƒ Expanded profit margins            $ 20.0 M                             $25

  ƒ Increased market share             $ 15.0 M
                                                                            $20                      Net cash flow:
                                                                                                     US$60 million
  ƒ Improved loss ratios               $ 10.0 M

                                                  Forecast (US $millions)
                                                                            $15
  ƒ Increased growth and retention     $ 10.0 M

  ƒ Increased cross-channel sales       $ 8.0 M                             $10

  ƒ Enhanced information management     $ 5.0
                                          50M                                $5

  Improved operating leverage          $ 32.0 M
                                                                             $0

  ƒ Increased operational efficiency   $ 14.0 M
                                                                             -$5
  ƒ Modernized technology platform     $ 10.0 M

  ƒ 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:
  ƒ Understand business design and operating environment                solution:                  ƒ Decompose selected      ƒ Program management
  ƒ Prioritize key drivers for transformation                           ƒ Conduct vendor search      scenario into an        ƒ Development
  ƒ Identify and prioritize key technical constraints                   ƒ Execute an RFI/RFP         achievable roadmap      ƒ QA & deployment
  ƒ Determine transformation scenarios                                  ƒ Conduct vendor           ƒ Create execution plan
  ƒ Assess high level costs,
                        costs benefits,
                                benefits and risks of each scenario       workshops                ƒ Mobilize
                                                                                                     M bili resources
  ƒ Evaluate scenarios against business and technical drivers           ƒ Select a vendor
  ƒ 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   ƒ Leadership conducts a frequent and     ƒ Leadership reviews and refines business             ƒ 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. █

                             ƒ A senior management team               ƒ Business design refinement is not owned             ƒ 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      ƒ Business drivers are reviewed and      ƒ Insurer has no business case but only               ƒ 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
                             ƒ “Word of mouth” is used to                                                                     benefit of experience. █
                               disseminate changes in business        ƒ 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        ƒ The transformation initiative begins   ƒ IT constraints are clearly understood and           ƒ 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      ƒ 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       ƒ Senior leaders take time to              ƒ Leaders grow impatient with the rigor            ƒ 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. █
                              ƒ Key business owners work closely
                                with program leaders to identify,        ƒ 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   ƒ Insurer builds a strong business         ƒ Insurer manages risk by exploring                ƒ 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    █
                                                                         ƒ Senior leadership requires incremental
                                                                           planning to prioritize delivery of
                                                                           benefits. █

  Recognize and plan          ƒ IT is at the table for planning          ƒ IT is rarely involved in business                ƒ 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
                              ƒ IT is involved and has a voice in        ƒ 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   ƒ Senior leadership is only interested   ƒ Insurer selects a vendor because they           ƒ 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. █
                                                                       ƒ Insurer allows vendor to water down
                              ƒ Insurer engages relevant vendors         the business case because it reduces            ƒ 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              ƒ Senior leadership is actively          ƒ Senior leadership checks out after              ƒ 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. █
                              ƒ Governance venues are                  ƒ Program
                                                                              g    is critical to long-term
                                                                                                     g
                                established with the right               success, but senior management does             ƒ 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      ƒ Key roles staffed with dedicated       ƒ Insurer has strong and committed                ƒ 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. █
                              ƒ Insurer is contracted with a
                                reputable vendor but locked into a     ƒ Insurer utilizes vendor resources in            ƒ 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

      ƒ Validate the business model           ƒ Analyze the business design                   ƒ Using the prioritized business drivers,
                                                components, opportunities, and                  consider the relevant technology
      ƒ Define the operating model              constraints                                     factors, such as scalability and
                                                                                                integration
      ƒ Understand the necessary              ƒ Use the business design analysis to
        organizational structure and skills     develop a prioritized set of business         ƒ Leverage the technology
                                                drivers                                         considerations to produce
      ƒ Identify an appropriate technology                                                      transformation scenarios, such as using
        platform                                                                                a vendor solution or modernizing
                                                                                                legacy

                                                                                              ƒ 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
                                                 ƒ Flexibility to deliver ƒ Use data as an asset      ƒ Automated metrics to                                p
                                                                                                                                                          experience
                                                   new products/services ƒ Expand market reach          support process
       Business                                    to market                and capabilities            improvement
        Model                                    ƒ Customize channel      ƒ Put technology in the
                                                   usage by economics       product
                                                                                                                                                      Simplified customer
                                                                                                                                                              view
                     ƒ Additional products,                                ƒ Create a low cost        ƒ Automated metrics to
                       services, and                                         operating platform         support process
                       transaction/interaction                             ƒ Enable variable cost       improvement
      Operations

                                                –                                             +
                       types increase costs                                  operations and
                     ƒ Multi-channel                                         demand driven model                                                     Rapidly introduce new
                       integration                                                                                                                    products to market
                     ƒ Platform proliferation    ƒ Unresolved                                         ƒ 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      ƒ Capability duplication      limits the ability to
                     ƒ Lack of standards           reduce unit costs                                                                                  regulatory changes
                       compliance

                     ƒ Power bases built by      ƒ Efficiency and speed    ƒ Structure aligns
                       level and function          metrics reduce            technology with
      Structure &      hinder optimal              service quality and       business functions                                                         Legacy platform
       Incentives      business model              customer experience     ƒ 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

                                                                                   ƒ 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

                                                                                   ƒ 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

                                                                                   ƒ 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

                                                                                   ƒ 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
  ƒ Understand key aspects of the       request for information                structure                                         ƒ Drive execution of the program
    company’s business model            ƒ Identify vendors for consideration   ƒ Identify tracks and objectives                  ƒ Define cross-program interaction
  ƒ Identify opportunities and            based upon leaders in the field      ƒ Define roles and responsibilities
                                          and through market research                                                            Requirements gathering
    constraints
                                        ƒ Develop capabilities matrix based    Create detailed program and                       ƒ Document architectural,
                                          on business/technology               project plans                                       structural behavioral,
                                                                                                                                   structural, behavioral functional
                                                                                                                                                          functional,
  Business case development
                                                                               ƒ Identify timeline, milestones,                    and non-functional requirements
  ƒ Determine quantitative and            requirements
                                        ƒ Develop RFP, solicit responses,        dependencies, and resources
    qualitative benefits                                                                                                         Architecture oversight
  ƒ Perform cost/benefit analysis         and evaluate solution fit with       Develop program budget and                        ƒ Influence the quality and
                                          business and technology              metric-based reports                                consistency of business solutions
  Capabilities model definition           objectives                           ƒ Recommend sourcing approach                       and infrastructure
  ƒ Identify and prioritize strategic                                            and create cost model
                                        Vendor workshops and finalists                                                           Development
    business drivers                                                           ƒ Develop summary and drill-down
                                        selection                                                                                ƒ Manage all activities that make a
  ƒ Define desired future-state                                                  reports to track budget, forecast,
                                        ƒ 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                                                                                                                 ƒ Confirm business capabilities
                                          based on evaluation criteria         operationalize the program
                                                                                                                                   maintaining traceability between
                                                                               ƒ 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                         ƒ Draft orientation materials
  ƒ Outline scenarios against the
                                        ƒ Conduct PoC and provide                                                                Deployment
    business case                                                              Foundational analysis
                                          recommendation to business and                                                         ƒ Manage all conversion and roll-
  ƒ Determine scenario that aligns                                             ƒ 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

               ƒ What should we do and how     ƒ Many vendors claim that         ƒ Now that we have selected a             ƒ 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?

               ƒ Conduct full benefits case    ƒ Mobilize a solution selection   ƒ Conduct a rapid validation of           ƒ Conduct a program health
                                                 program                           PAS business case                         assessment to identify the
               ƒ Prioritize business drivers                                                                                 root cause of challenges
                                               ƒ Conduct rapid business          ƒ Define and deploy the                     and recommendations for
               ƒ Identify transformation         driver assessment                 program management and                    improvements
         ns

                 scenarios and develop                                             delivery capabilities needed
  Solution

                 roadmap                       ƒ Conduct rapid transformation      to implement a successful               ƒ Develop an action plan to
                                                 scenario planning                 solution                                  align the program for
                                                                                                                             success

                                                                                                                           ƒ 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
  ƒ The insurer’s policy administration platform is not allowing the
    desired market responsiveness and is costly to maintain.
  ƒ 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
  ƒ 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:
  ƒ 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
  ƒ How can complete and accurate articulation of costs and            ƒ Understand the key aspects of the company’s business design and
    benefits be captured to create a compelling business case?           strategy.
                                                                       ƒ Identify opportunities that map back to the 10 key business drivers for
  ƒ What options
          p      should the organization
                              g          consider?                       policy administration.
  ƒ What is the right way to approach the PAS transformation?          Develop business case
                                                                       ƒ Determine quantitative and qualitative benefits of conducting a policy
  How PwC can help                                                       administration transformation.
  ƒ PwC will work with the insurer to identify the capabilities and    ƒ 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
                                                                       ƒ Outline scenarios against the business case based on key business drivers
  ƒ PwC will conduct a transformation scenario diagnostic and            and technology considerations.
    planning exercise to provide perspective to cost/benefit           ƒ 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
  ƒ 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
  ƒ 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
  ƒ 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
  ƒ The criteria that would provide linkage between insurer needs      ƒ 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
                                                                       ƒ Map desired capabilities to RFI/RFP questions for the purpose of scoring
  ƒ PwC will work with the insurer to develop solution selection         perspective vendors.
    criteria by conducting a rapid business driver assessment.
  ƒ 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    ƒ Identify
                                                                          d    f prospective vendors
                                                                                                  d     and
                                                                                                          dddevelop
                                                                                                                l an RFI/RFP.
    level functional capabilities.                                     ƒ Score vendors based on the RFI responses and identify vendors to engage
                                                                         in onsite visits and proof of concept phase.
  ƒ PwC will work with the insurer to perform PAS vendor and           ƒ 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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