In today's environment, carriers have an opportunity totransform their business and gain competitive advantage leadinginto an upcoming market upturn. In a marketplace that continues tobe dictated by ever-changing customer needs and their buyingbehaviors, success for insurers is based on their ability to createmore business agility from top to bottom, reduce total cost ofownership (TCO), improve time to market, and increase flexibilityacross operations.

To address this, insurers have sought to transform one of theirmost important business capabilities, policy administration(PA). According to Capgemini and Efma's 2012 World InsuranceReport, 67 percent of North American insurers say policyadministration transformation is their top priority over the nexttwo years.

Historically, insurers have been tied to a variety of legacybusiness practices, several involving the PA function limitingtheir capacity to create business agility resulting in higher TCOand inhibited ability to compete in the marketplace. However,according to the 2012 World Insurance Report, by making investmentsin core, back-office levers of PA, insurers could potentiallyimprove their business and technology efficiencies by up to 30percent, lower total cost of ownership by up to 40 percent, andlower cost-per-policy by up to 30 percent.

Four Back-Office Levers

Insurers have kicked off their PA transformation strategy byinvesting in those core back-office levers that most directlyimpact the customer and include confirmation of coverage and policyissuance; policy/contract maintenance; billing and premiuminvoicing; and premium reminders and renewals. These areas provideimmediate efficiency and financial benefits and lay the foundationfor other parts of the system including rate and quotes or productintroductions.

Confirmation of Coverage and PolicyIssuance

Since the introduction of the Internet and email, the industryhas gradually moved toward electronic formats, retiring thepaper-filing processes of the past. We found that 78 percent ofnon-life insurers and 68 percent of life insurers have adoptedelectronic formats to distribute contract documents.

As the online channel becomes the focal point for how agents,customers and insurers interact and do business, a shift isoccurring from electronic document distribution to the growingdemand for self-service capabilities. Self-service functionalitynot only provides more flexibility to the customer but also toinsurers managing the documentation. Insurers' investment in thisarea will multiply as reliance on the Web and mobile grows,positioning self-service tools as a competitive differentiator inthe eyes of the customer.

Policy/Contract Maintenance

Due to the role that financial change requests play, it comes asno surprise that policy and contract maintenance is an area primedfor proactive investment. According to the 2012 World InsuranceReport, 79 percent of life insurers and 65 percent of non-lifefirms are making the case to move toward automating processingcapabilities for both financial and non-financial policies as wellas contract changes.

Insurers who have moved to automated policy and contractmaintenance capabilities have reported increased agility inmaintenance functions along with an ability to support long-termcustomer relationships. We also found that insurers with higherlevels of agility in this function tend to have superior customerservice and better retention levels.

Billing and Premium Invoicing

Today's tech savvy customers expect more flexibility andconvenience in how they both receive and pay their bills. Andinsurers have listened. According to the 2012 World InsuranceReport, nearly 80 percent of insurers are now offering flexiblebilling with multiple payment options integrated with email and theWeb.

New investments in the billing and invoicing function haveallowed many insurers to offer account-level and channel-focusedbilling to support product co-branding and customization. As aresult, insurers are now able to have an invaluable, single view ofthe customer to generate better insights and real timedecision-making.

Premium Reminders andRenewals

Insurers have long sought to minimize the infamous paper trailassociated with policy renewals and are now making major headway,taking necessary steps to make these processes seamless anduncomplicated.

One way insurers are accomplishing this is by using historicalclaims data to provide automated policy reminders and renewals tocustomers that prove to be good risks. Improving this processenables insurers to easily meet their customers' needs while alsocreating an opportunity to leverage cross promotional productprograms.

Investment in this area is also enabling insurers to integratepolicy reminder and renewal activities with external and internalsystems including enterprise analytics platforms.

Investing in Analytics

By proactively investing in these four areas, insurers arestriving to generate more business agility with their PA function.And their agility is likely to increase by investing in moretechnologies like analytic platforms and tools to utilize in otherback-office levers.

More than 47 percent of non-life insurers and 27 percent of lifeinsurers are already leveraging analytics tools for theirunderwriting and risk analysis and rate and quote functions. Byleveraging more analytic tools for the underwriting process,insurers will slowly eliminate the chances of adverse riskselection and allow staff to focus on other core risk assessmentactivities.

Analytics usage will garner a desired outcome where insurers areable to extend automated rate and quote capabilities to allexternal entities, including banks, point-of-sale and otherchannels and partners, facilitate risk-profile evaluations, andprovide more real-time rates and quotes to customers. Several firmshave already reached this goal.

Where to Invest Next?

While so many areas of policy administration are directly feltby the customer and thus placing it at the top of the priority listfor investing, insurers cannot overlook other key areas of theirbusiness driven by the continual rapid evolution of consumerbehavior.

Look no further than the mobile space. As self service throughsmartphones and tablets become the preferred medium for customersand agents, the lines between front and back office aredissolving. No longer can these capabilities operateindependently. The full integration and investments in frontoffice systems, document and workflow management capabilities alongwith policy administration transformation is essential.

According to Forrester Research, spending on enterprise mobilityis anticipated to reach $1.3 trillion globally by 2015 and spendingon mobile IT is expected to double over the next five years. Manyinsurers have already begun devising and integrating mobilestrategies and investing where needed to capitalize on thisshift.

Conclusion

Although many insurers have started seeing positive outcomesfrom investing in several back-office levers they're well awarethat more investment is needed to transform the entire policyadministration function and other areas of the business. Insurersmust continue evaluating the needs and demands within theirecosystem of employees, customers, agents, brokers, and others inorder to decide where to invest next and to what extent.

By executing an investment strategy that prioritizes the needsof the ecosystem, insurers will avoid spreading their investmentdollars too thin and instead make larger investments that generateshorter and long term impacts on a specific business process andultimately the bottom line.