From a survey of property/casualty insurance carriers, Accenturehas determined policy administration systems are overburdened andnot meeting the market demands for growth, adaptability, andstandardization.

So, it should not come as a surprise the consulting firm found84 percent of those surveyed see modernization of their policyadministration systems as a key priority over the next threeyears.

Insurers told Accenture the need for speed to market and greaterflexibility in improving processes are the drivers for systemimprovements.

From August through November 2009, Accenture surveyed majorP&C insurers in North America to get a better understanding ofthe policy administration system landscape and the opportunitiesand challenges carriers are facing in this space.

"The complex legacy environment as a barrier to high performanceis not a new issue, as insurers have been trying to modernize theircore systems for at least 10 years, but few can really claimsuccess," says Michael Costonis, executive director of Accenture'sinsurance practice for North America.

"It is very difficult to enhance systems while keeping themworking, and insurers need to have a well-defined release strategythat balances speed of implementation with delivery risk," saysCostonis. "Some organizations opt for the big-bang approach, inwhich they effectively cut over to all new systems at once, andothers find it more appropriate to break up the effort intomanageable releases--by product, customer group, or some otherdistinction--to reduce operational and delivery risk."

Other findings from the survey include:

? 92 percent of insurers see organic growth as the maincontributor to overall revenue growth, and 81 percent believe theircurrent systems are inadequate to support current and anticipatedneeds.

? High costs are a major concern, with almost all insurersreporting the cost of running their business has increased in thepast three years, and almost two thirds believe those high costsprevent them from performing at a higher level.

Insurers express concern for the state of their current policyadmin systems. Accenture indicates 65 percent of those surveyedreport their systems need some level of improvement. Nineteenpercent rate the effectiveness of their systems as poor withsignificant improvement needed.

Those looking for a competitive advantage express disappointmentwith their current systems. Less than half (44 percent) of insurersbelieve their current systems help differentiate themselves fromthe competition.

Carriers also cite a lack of flexibility to meet customer needs;the time needed to bring new products to market; and the cost ofmaintaining and/or running the systems.

"Insurers recognize that in the current environment, they nolonger can afford just to continue pumping more money intomaintaining and enhancing legacy systems," says Costonis. "Theyunderstand the confluence of economic and market factors havecreated a unique window of opportunity to transform theirtechnology infrastructure."

Insurers need strong business ownership and governance of thenew system's design to help ensure the company redesigns itsbusiness operations around the new system's capabilities and notthe other way around, according to Costonis.

Nearly all the carriers surveyed (92 percent) report the cost ofrunning a business has increased in the past three years, andnearly two thirds (64 percent) expect an increase in the next threeyears. To balance those increases, insurers must turn to areas suchas process optimization and consolidation of systems in the nextthree years.

"Because raising their top line is a significant challenge inthe marketplace, many insurers really have only one choice to boosttheir margins, which is to reduce dramatically the ongoing cost oftheir steady-state operations," says John Vale, a senior executivein charge of P&C policy administration solutions for Accenture."Such a reduction is not achievable by simply reducing headcount oreliminating certain projects or initiatives. It requires afundamental change in the underlying cost structure of the businessto which complex, outdated core systems are a majorcontributor."