To draw a parallel between biology and technology, policyadministration systems (PAS) started out as simple organisms,existing solely as systems of record for the business and insurerwrites. Functionality has gradually evolved and become increasinglycomplex, and so has the definition of PAS, which—depending on whomyou ask—may today incorporate rules-based underwriting andworkflow, business analytics, underwriting desktops, documentmanagement, and external data exchange.

“Over time, the scope of policy administration has grown to thepoint where some definitions cover nearly all of the core systemsan insurer has,” says Donald Light, senior analyst in Celent'sinsurance group.

What has also grown over time is insurers' appetite for PASmodernization and replacement. “Even though a policy administrationsystem replacement project is generally the biggest, mostexpensive, complex, and riskiest endeavor of any kind of ITinitiative there is, activity remains high,” says Light. “It mayhave slowed down just a bit in 2009, but now pipelines havedefinitely reopened. There is pent-up demand.”

The first target of modernization was PAS for personal lines. Ascarriers dealt with the need to drive down expenses in anincreasingly commoditized line of business, it was essential tohave a platform to support automation. Today, in anultra-competitive commercial lines marketplace, the focus hasshifted to commercial PAS.

“Carriers have already released all the reserves they can tolower loss ratios in commercial lines, and they can't do anythingwith pricing right now. That means they have to turn theirattention to expenses and underwriting results,” says Karen Pauli,research director in TowerGroup's insurance practice. “In order todo that, they need a system that automates non-value-added tasks inthe policy issuance and administration processes, givesunderwriters more information, provides diagnostics relative tobooks of business, and integrates external data.”

“For pure commercial lines carriers, their rate of spend onpolicy administration right now is as much as, if not more, thanother carriers,” says Frank Petersmark, former CIO of Amerisure andcurrent director of client development at technology architectureconsultancy X by 2. “Even among companies that write a mix ofpersonal and commercial lines, there is a considerable increase ininvestments in commercial policy administration technology.”

Petersmark says there are a number of discrete pain pointscarriers are looking to address in commercial lines PAS projects,including a lack of customer and agent self-service, automation ofsmaller commercial lines, decision support for larger lines, andoverall flexibility to accommodate underwriting complexity coveragecustomization.

Southwest Insurance Partners and Argo Group US are twocommercial carriers that have recently completed PAS modernizationinitiatives. Subsidiaries of Southwest Insurance Partners (SWIP),they underwrite small and medium size risks through independentagents. The group had utilized a number of different tools thatwere “cobbled together” for policy administration, according to JimMasterson, the group's director of application development.

“We had a combination of internally developed and off-the-shelftools. One system handled accounting, another piece handled rating,and some rating was done manually on spreadsheets. A differentplatform handled forms generation. There was no connectivitybetween any of those tools, so every policy would need to beentered three to five times to get it through the workflow,” hesays.

In September 2009, SWIP began implementing the Wynsure PAS fromWyde Solutions. “We were looking to streamline all the processesinvolved in policy administration. We wanted a single platform thatwas flexible and straightforward,” Masterson says.

Wynsure went live in April 2010 with commercial auto, worker'scompensation, and occupation protection lines. SWIP will continueto roll out additional lines of business through early 2011. Incombination with the PAS initiative, the insurer deployedImageRight for electronic document management companywide.

Argo Group has grown significantly through acquisitions over thepast ten years, collecting a number of PAS systems along the way.The company sought a PAS solution that it could use as agoing-forward platform for policy administration systemsconsolidation. However, the legacy platforms at its disposal wereinflexible and ill suited to handle growth goals.

“We spent far too much time bringing products to market,”explains Alan Wynn, vice president of Argo Group subsidiary AlterisAlterative Risk Solutions (AARS). Argo Group's specialty linesdivision, for example, was seeing a 12- to 18-month timeframe fromproduct initiation to market delivery.

“A significant problem was that we couldn't get rates loadedinto the system on a timely basis. Because rates weren't tabledriven, a lot of custom coding was needed,” Wynn says.

In an enterprise initiative, Argo Group selected Instec'squicksolver software for all its major standard commercial lines ofbusiness that require bureau content. In October 2010, nine monthsafter project kickoff, rollout was completed for Argo Group'sbusiness owners, commercial package, commercial auto, and workers'compensation product lines in all states, as well as for the AARSdivision.

Advances in Automation

The work that has gone on at these insurers in recent monthsillustrates several key trends in the commercial lines PASmarketplace. Light identifies those trends as the growth ofautomation, particularly in new business issuance and underwritingdecision support; the proliferation of underwriting and servicedesktops; the convergence of configurable and content-rich systems;and an increased focus on usability and UI design.

Light sees the ability to automate new business as the mostsignificant evolution in commercial lines PAS in the past twoyears. “Just a few years ago, it was difficult to find a policyadministration platform in place at an insurer that supported newbusiness automation in commercial lines. We saw insurersundertaking custom development to achieve that automation, ordealing with a lot of manual processes,” he says.

Just as in personal lines, new business automation in commerciallines links multiple systems, including Web portals, ratingengines, rules-based underwriting, and billing and financialsystems to take simpler policies straight through from applicationto issuance. Rules-based workflow enables more complex accounts tobe routed to underwriting for handling, and underwriting desktopsprovide information and decision support.

Light credits this automation to the development ofservice-oriented architectures on the part of both technologyvendors and insurers. “For insurers that have built out SOA, it'seasier to orchestrate business processes across multiple areas ofthe business without the extensive custom development needed in thepast,” he says.

How much can be automated in commercial lines depends in part onaccount complexity. “A small BOP [business owners policy] isn'tmuch different than a standard homeowners or automobile policy.Commercial underwriters will hate me for saying that, but it'strue. A structure is a structure, a vehicle is a vehicle,” saysPauli. “The liability may be a bit more complex but even with that,the standard classes can be automated using rules andanalytics.”

Beyond those commoditized lines, how much you are able toautomate depends on who you ask. “The more complex the account, themore difficult it is to automate, and the more resistance you willfind to attempts to do so,” Pauli says, adding that it's an“absolute fight” at some carriers.

“Unfortunately, the higher up in commercial lines management yougo, the more you find people who believe automation doesn't applyto them,” she says. “And if the chief underwriting officer doesn'tbuy into it, the CIO can't make a policy administration projecthappen.”

Even so, “You can still bring automation to bear in yourprocesses without pulling out the decision process,” Pauli adds.“You need to step back and focus on where you can support yourunderwriters by putting information and business intelligence attheir fingertips at the right point in the decision process.”

At Argo Group, a key benefit of the quicksolver platform hasbeen the automation of routine tasks that underwriters previouslyperformed. “Today, for instance, if we need to put to put anotification on policies written in Kansas that require a losscontrol notification, that happens automatically. Before, theunderwriter would have had to recognize that form needed to beapplied. We can also automatically control and apply loss-costmodifiers, deviations, and rating effective dates,” Wynn says.

The Instec platform has also brought consistency into theend-to-end new business issuance process. “Some of the coverages weprovide are specialized and require a number of premium-bearingendorsements, such as waiver of subrogation, maritime coverage, anddrug-free workplace credits. In the past, those were manuallyhandled and we'd have to true up the premium at policy audit. Withquicksolver, those endorsement charges can be built in,” saysWynn.

“The system that we had previously was built on workarounds,”says Byron Way, president and COO of Bunker Hill UnderwritersAgency, an MGA within SWIP. “Automation simply wasn't possible inthat manual environment. Today, applications can be entered, issuedas policies, and changed and administered without needing to bereentered.”

SWIP has also been able to leverage the Wynsure PAS platform inan outsourcing relationship with Resource Pro. Incomingapplications are scanned into ImageRight, giving underwritersimmediate access to the imaged application. Simultaneously, theimage is routed to Resource Pro's China-based data entry staff, whoset up the application record.

“We have essentially done away with application entryourselves,” says Masterson. “By combining contract resources withImageRight and Wynsure, we enable underwriters to do their jobwithout waiting for the file to be set up. Previously, a file wouldbounce back and forth ad nausea between the underwriterand assistant. Today, the application is automaticallytask-directed to the right people and multiple people can view afile at one time. We are able to grow our book a tremendous amountwithout adding new people on the service side.”

SWIP has explored expanding automation through online reportordering, VIN decoders and data scrubbing, and policy prefill, butfor now will continue to handle those tasks manually. “What thatdecision comes down to is that the volume of our auto policies isnot sufficient to justify the cost of those services,” says Way.“If that volume changes, it's something we'll reconsider.”

Underwriting Desktops

Underwriting desktops used to live outside the scope of policyadministration; however, as more administration platforms havebuilt in desktop capability, the lines have been blurred.

“Underwriting desktops are one of the top 10 business driversfor insurers in 2011 and are impacting policy administrationprojects as well,” Pauli says.

Carriers are also working to extend desktop capability beyondunderwriting. “A lot of carriers are really trying to push more andmore information into the agents' hands,” Petersmark says.

“There are a number of reasons for that,” he adds. “Particularlyin the commercial lines space, policies are more complex. Providingagents information that they need to conduct their business via theWeb takes on greater urgency in commercial lines than in personallines, where straight-through processing is more of the focus.There is a higher need for collaboration. And as part of trying toautomate the workflow in this environment, a sharable desktopexperience is valuable.”

A consolidated view of all the information related to acommercial lines policy has been a key benefit of the Wynsuresystem to SWIP. “Before, we had this hodgepodge of systems. Youenter data here, here, here, and here. Then, if the policy binds,you enter it here, and accounting has to enter it there. When youhave those individual pieces, things fall apart occasionally, butthere was no way to go to a single place and find out what theproblem was. Now, we can pull up data on an insured or prospect andfind out everything about them,” Masterson says.

Configurability

Speed to market may be an overused phrase, but getting newproducts on the streets fast is a driver behind commercial PASmodernization.

“Much more flexibility is needed in commercial linesadministration because of the complex definition of products andspecialized rating. The ability to create new products throughconfiguration, rather than customization, is critical,” Petersmarksays.

Argo Select has been able to trim the go-to-market timetable toabout four months. “With quicksolver and its array of programadministrator capabilities, we have control over the system,” Wynnsays.

SWIP was recently able to implement a new coverage undercommercial property in two weeks. “With our previous system, [thecoverage] would have been administered on a set of spreadsheets ormay have even involved handwritten calculation of rates. With other[PAS] solutions we evaluated, handling the administration of thatcoverage would have turned into a custom-development project thatspanned several months,” says Masterson.

“The advantage that we saw with Wynsure is that it is atool-based system. It provides great flexibility that enables speedto market,” says Way.

Light stresses that it's not just an ease of configuration, buta combination of configuration and bureau content thatdifferentiates today's commercial lines PAS from theirpredecessors. “Insurers should choose a PAS that comes with enoughdomain content to get them started with the implementation of newproducts and workflows, rather than simply a 'blank slate' that canbe configured,” he says.

“There is some great technology out there that is fully loadedwith templates for commercial lines administration systems,” Paulisays. “For small commercial lines where the expense ratio makes ahuge difference, you have to have it. If you don't, you're behindthe eight ball.”

Usability

Another driver cited by insurers in the modernization ofcommercial PAS is upgrade of the user interface. While it may seemtrivial to focus on the UI as a driver, the sheer amount of timethat users spend living in policy administration systems means thatsignificant gains in productivity can be made from making thesystems easy to work with.

“Better usability and an intuitive design can shorten thelearning curve and create greater buy-in among all the staff whodeal with the policy administration system,” Light says. “We'veseen more vendors make investments in the user interface andoverall design, and that's an area where we expect to see acontinued focus in the future.”

For users of Argo Group's quicksolver platform, a better UIcompared to the previous platform has been a welcome change. “Ourunderwriters like the enhancements. The navigation is userfriendly, intuitive, and simple,” says Wynn.

For AARS's state workers' compensation fund customers, enhancedVPN connectivity has also improved the user experience. “There aremany fewer steps than with our previous platform, and inputs arerecognized without having to do a screen refresh,” Wynn adds.

Cultural Changes and Challenges

The next trend to impact commercial lines policy administration,predicts Light, is mobility.

“Right now, the new business workflow in commercial lines tendsto be stationary. But more and more, people want to move around,and certainly producers tend be more mobile. Therefore, we expectmore insurers to consider whether their policy administrationsystems can support mobile functionality,” he says.

“Smartphone apps for business submission and administrationhaven't changed the business model yet, but they may, particularlyas the iPad and similar devices offer capabilities that can trulychange the location of where business gets done,” Light adds.

The shift to mobile is only one cultural change insurers have tocontend with. More challenging is the internal cultural shift thatneeds to accompany a move toward greater automation in commerciallines policy administration.

“Some companies are literally going today from paper files toimaged files and automation in one fell swoop. That's a tremendouschange,” Pauli says.

“The activity going on in commercial policy administration willcreate a vast difference between carriers that can truly elevatetheir performance in the marketplace versus those that will findthemselves at a disadvantage from an expense perspective. But onthe other hand, underwriters are concerned about attempts toreplace the underwriting decision process, or they see the effortto target expense reduction through automation as means toeliminate staff,” she adds.

Therefore, carriers should focus on the benefits of commerciallines PAS modernization to underwriting and sales staff, includingthe ability to be more competitive and take on additional business.“Insurers need to identify how they can provide better service andmake better decisions if routine tasks are taken off theunderwriters' desk. They need to show how internal staff can workon higher value-added tasks, spend more time with the agent andcustomer, and elevate their importance to the organization,” saysPetersmark.

“We are all subject to a mindset that says we should keep doingthings the same way,” Way says. “Fortunately, we didn't have topush the issue of change very much here because of how unpleasantand inefficient the manual process was before.”

Prior to deployment, Southwest Insurance Partners made it apoint to get everyone involved in PAS system specification andtesting and held naming contests for the new platform to generatebuzz. Now that the platform is in place, the business impact hasproven to be the most effective way to achieve system buy-in.

“Our submission flow has increased dramatically and we haven'thad to hire more people because of the Wynsure system and ResourcePro,” Way says. “When it comes to system modernization, people areasking, 'When am I next?'”