From a survey of property/casualty insurance carriers, Accenture has determined policy administration systems are overburdened and not meeting the market demands for growth, adaptability, and standardization.

So, it should not come as a surprise the consulting firm found 84 percent of those surveyed see modernization of their policy administration systems as a key priority over the next three years.

Insurers told Accenture the need for speed to market and greater flexibility in improving processes are the drivers for system improvements.

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

"The complex legacy environment as a barrier to high performance is not a new issue, as insurers have been trying to modernize their core systems for at least 10 years, but few can really claim success," says Michael Costonis, executive director of Accenture's insurance practice for North America.

"It is very difficult to enhance systems while keeping them working, and insurers need to have a well-defined release strategy that balances speed of implementation with delivery risk," says Costonis. "Some organizations opt for the big-bang approach, in which they effectively cut over to all new systems at once, and others find it more appropriate to break up the effort into manageable releases--by product, customer group, or some other distinction--to reduce operational and delivery risk."

Other findings from the survey include:

? 92 percent of insurers see organic growth as the main contributor to overall revenue growth, and 81 percent believe their current systems are inadequate to support current and anticipated needs.

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

Insurers express concern for the state of their current policy admin systems. Accenture indicates 65 percent of those surveyed report their systems need some level of improvement. Nineteen percent rate the effectiveness of their systems as poor with significant improvement needed.

Those looking for a competitive advantage express disappointment with their current systems. Less than half (44 percent) of insurers believe their current systems help differentiate themselves from the competition.

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

"Insurers recognize that in the current environment, they no longer can afford just to continue pumping more money into maintaining and enhancing legacy systems," says Costonis. "They understand the confluence of economic and market factors have created a unique window of opportunity to transform their technology infrastructure."

Insurers need strong business ownership and governance of the new system's design to help ensure the company redesigns its business operations around the new system's capabilities and not the other way around, according to Costonis.

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

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

Special Reports /

Policy Admin Systems Failing to Meet P&C Market Demands, Reports Accenture

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