By Richard Barbarino

A typical Policy Administration system (PAS) replacement is a straight forward affair. Once the vendor has been selected and new footprint determined the requirement process begins. These requirements are derived from the functionality and workflow of the existing legacy system, with some wrinkles thrown in. The end result is a replacement PAS that mimics legacy workflows with some process improvements like real-time print processing. The real question is: Are those legacy workflows valid? By implementing processes that are outdated you are essentially taking the easy road paving cow paths because they are already there instead of looking at the optimal solution.

Many legacy system workflows were originally implemented as a work around due to system limitations. As time goes by, this “band-aid” becomes the workflow and is perpetuated by different generations of employees. When the question “Why?” is asked, two responses are typical. “That is how it has always been done…” or “I have no idea”. The advantage of mimicking this approach is twofold, quicker speed of implementation and less corporate disruption. It is far easier to document something that exists than it is to build something that does not. Second, for an insurance company, change is not easy. Undertaking an enterprise wide business process re-engineering effort would take the support of executive level management and several different functional areas: Claims, Product Management, Underwriting, Audit, Stat, Rating, and IT.

Instead of accepting processes and their results, why not take this opportunity to look beyond what “is” to what can be, by coupling business process re-engineering with your PAS replacement effort. Installing PAS is just one piece of the puzzle but it is the foundation and backbone to initiate business process improvement. PAS replacement requires multiple departments, different disciplines, with an overarching project management structure in place. So, what better time than to analyze and change the fundamentals of the way your company conducts business?

1. Rating

Each line of business (LOB) or coverage has a rating algorithm associated. Many rating algorithms have evolved over the years, due to state filing requirements, system limitations, or to satisfy a long since retired business need. A comprehensive review of the rating algorithm, by LOB and state, will allow the company’s actuaries the opportunity to make needed changes and revisions based on their analysis and foresight. Examples include: the use of predictive modeling, writing company deviations, and rating algorithm structure. The way an insurance company rates specific lines of business, directly relates to the combined ratio. Improving the speed to mark for rate changes will allow product pricing flexibility in ever evolving market conditions.

2. Product

The LOB is defined by such things as coverages, limits and deductions and the relationship between them. A review of your product, based on jurisdiction, would allow an opportunity to pinpoint issues and deliver specific remedies. Once product issues have been addressed it is now possible to increase sales and marketing activity for that area, thus leading to an increase in premium. The ability to rollout new product enhancements and/or products with PAS would allow implementation to combine technology and product changes. The distribution force would see this as one change and less painful hopefully increasing your company’s market share within each agency.

3. Policy Transactions

Transactions can include quote, bind, issue, endorsements, cancel, reissue, reinstate, rewrite, renew, non-renew, and policy audit. The type of transaction will dictate whether it is date driven, require a user to initiate, or event driven and can be automated. Automation of date and event driven transactions allow the company to dictate, by jurisdiction and LOB, what this structure looks like. Changing the way you do business allows for efficiency gain and reduced expenses.

4. Underwriting

Risk eligibility and characteristics are gathered through the PAS’ User Interface or interface with third party services. It would make sense to do an analysis of the information that is collected. If nothing is done with certain data than ask why? Can we find out more from the information we collected? Is there a way to automate any of these processes? The benefit of improving automated underwriting is two-fold; first, reduction of expense. Second, by providing underwriters more information, it serves to improve risk selection and profitability.

5. Workflow

Change from policy to customer centric workflow processes. It requires a corporate mindset change but it is well worth it in dealing with your customers. Everything from product, system and process gaps need to be analyzed along with any conversion processes. Challenge existing workflow and tailor new workflows to meet current requirements and the company’s strategic vision. Moving to a customer centric model will improve the customer experience and thus increase retention.

6. Print and Document Management

All forms, including declarations page, notices, and all other documents that may be produced during the life of a policy. Rendering forms in real time will improve the users experience, storing them more effectively will decrease expense and processing costs.

7. Premium Accounting, Statistical Reporting, and Reporting

Tracking of written and earned premiums and the collection and reporting of various types of data is clearly essential. The increase efficiency with Bureau communication will directly lead to a reduction in expense. The usage of an Operational Data Store will allow management to react quicker to trends identified in the data.

PAS replacement is the appropriate time to undertake a robust business process re-engineering effort if you are working with the right partner with insurance expertise who can work hand and hand with you to improve processes. This is not an all or nothing approach. For some organizations, the change management process would overwhelm and even overshadow the implementation effort, thus mitigating effectiveness. By finding the right vendor to work with, and a flexible system, you should be on the road to transforming to a streamlined operation.

Rich Barbarino is currently a Sr. Business Analyst at OneShield, Inc..OneShield, Inc. is the developer of OneShield Dragon(R), an innovatively modern, rules and tools-based, data-driven policy management suite for personal, commercial and specialty lines of the property/casualty insurance market. Dragon’s highly configurable tool-set enables customers to configure all components by combining a defined standards-based business process with web-enabled components, including underwriting, rating, workflow, compliance management, CRM and policy administration so insurance organizations can deploy new products faster and manage existing business better. He can be reached via email at rbarbarino@oneshield.com.