Equisoft is an Oracle Partner in Life Insurance space. This is an adapted version of the article. For more details about the original content, please visit Equisoft Insight.
Aging policy administration systems managing legacy blocks of closed business create an exponentially increasing drag on insurers' business processes—and hurting their ability to compete in an expanding global industry being revolutionized by digital transformation.
Equisoft works with dozens of global insurers across all regions that, like many in the industry, have 20, 30, even 40+year-old legacy core systems. These aging life and annuity policy administration systems for insurance were initially developed with a closed-architecture and are hard-coded rather than rules-based, meaning the logic resides in the application programs and information can't be shared with other platforms.
The legacy policy administration systems manage products but cannot be easily changed to accommodate new product features, benefits, or riders. This makes it difficult for insurers to quickly adapt to changing market conditions because changes to the application code are expensive and require intensive IT resources—if they are possible at all.
When increased competition from traditional companies, threats from new digital-born start-ups, increased customer expectations, and a shifting regulatory environment are putting pressure on insurers to increase speed-to-market and improve customer experience, the older policy administration systems are proving to be an Achilles heel.
The more old policy administration systems are part of an insurer's business landscape, the bigger an issue it is to fully leverage change on the scale required to accelerate business value.
Benefits of modernization
Today, more flexible, rules-based life insurance Policy Administration Systems (PAS) make it easier to implement the changes necessary to develop new products and allow for faster and easier access to data. But an insurer can't stop there. They also need a strategy to consolidate their core systems and reduce their aging insurance policy admin systems' complexity. Simplicity is better.
"Modern solutions use business rules to govern how the system is configured, eliminating the need to change an application system's core code or structure," says Roger Soppe, Vice President, Insurance Advisory at Equisoft.
Business rules make the platform more customizable, and changes can easily be made by the insurer—giving them ownership of the transformation over the policy administration system.
Additionally, on a modern policy administration system, the Insurer Project Team can change products, screen fields, languages, currencies, transactions, and more. This eliminates the need for large-scale IT resource investment and making it possible for Business and IT to collaborate on new product development.
Why companies resist PAS modernization
Although there are proven benefits of implementing a modern insurance policy admin system, organizations have yet to decide to replace their legacy core platforms in many cases. Old systems are patched and upgraded on an as-needed basis, but these efforts are resource and cost-intensive and do little more than maintain the status quo.
Even in the face of these issues, insurers have proven to be willing to live with the pain of operating jury-rigged legacy policy administration systems. This is observed to be due to the worry that the risk of migrating their data, especially their closed books of business locked in their aging PAS, is too significant.
In many cases, because policy administration system modernization takes place so rarely and few leaders have experience with these types of projects, the decision to embark on a large-scale transformation gets deferred.
We talk to many insurers that see the issues, understand them, and choose the status quo over-investing in meaningful transformation," says Mike Allee, President of UCT.
But after a phone call or two with our team of professionals, a growing number of executives are choosing UCT to help them navigate the uncertain waters of replacing these aging core policy administration systems.
Reducing modernization risk and accelerating digital transformation
The best way for a company to mitigate the reasons to postpone an insurance legacy policy administration system modernization is to partner with a proven vendor who has demonstrated an ability to successfully implement solutions with a wide variety of life and annuity companies—who can guide identifying potential pitfalls and strategic insights into how to avoid them.
Working with one vendor on an end-to-end insurance policy administration system solution will relieve many integration headaches created by fitting disparate systems and approaches together. A comprehensive solution, like Equisoft/Manage, includes innovative front-end applications, extensive back-office services, and proven data migration expertise.
Implementing a modern, robust core system such as Oracle Insurance Policy Administration (OIPA) provides end-to-end processing capability throughout the entire policy lifecycle. Additionally, integrated sales tools (needs analysis, quoting and illustration, and e-app) work with the core policy admin jump start innovation and accelerate an insurer's digital transformation.
Finding the right technology partner with the best set of solutions will enable insurers to leave behind their legacy infrastructure and innovate on a modern policy administration system. They can begin reaping the benefits of enhanced business intelligence, increased speed-to-market, and enabling a world-class customer experience.
To continue the conversation about what every life insurance leader should know about policy administration system modernization and data migration, please feel free to contact me.
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