You Need to Replace Your Policy Admin System — But Are You Ready?

Typically, core administration system replacement becomes part of the conversation when an insurer realizes it must modernize its technology infrastructure to keep up with the competition. With much gnashing of teeth, the company makes the decision that now is the time to take on such a gargantuan change. From this point, the insurer’s journey can take many different twists and turns on the way to completion. That is, if it’s ever completed.

Andy Scurto, ISCS

Core administration system replacement projects, specifically policy administration system (PAS) replacements, can be risky. Some industry sources set the failure rate as high as 75 percent. There are ways to lower that risk, such as using agile project methodologies, but I’d like to focus on perhaps the best way to increase success — insurer “readiness,” through vendor and insurer alignment.

Deciding that the time is right isn’t the same as the insurer being ready. But mistaking the two as the same is an easy trap to fall into. After the decision to start, the next step of system selection is a long, laborious search. The insurer naturally focuses on the tasks of differentiating the systems and vetting the vendors. The insurer’s readiness should stay in the equation, but it’s easy to be consumed by the questions “What can this new system do?” and “What should we know about the vendor?” and not give equal or more attention to “What will we have to do, and are we ready for that?”

Both insurers and vendors have a vested interest in avoiding a failed project, but the burden is heavier on the vendor to enable the insurer to develop realistic plans for its readiness. The insurer likely hasn’t gone through a major systems change in years. It’s likely staffed to keep the old system working, not to implement a new system.

On the other hand, the vendor has, we hope, completed successful implementations recently. It should know what resources it will provide and its technology’s capabilities. Consequently, it’s critical that the vendor and insurer be aligned regarding the insurer’s readiness before the insurer “takes the plunge.” After you jump in the deep end of the pool, the last words you want to hear are, “I thought you were the one who could swim.”

Insurer Preparedness As the cliché says, you don’t know where you’re going until you know where you’ve been. In the case of system replacement, insurers need to know where they are before beginning such a massive project.

It’s important for the insurer to do an internal assessment of the following:

• Skills

• Current Systems & Technology

• Needs (vs. Wants)

• Facilitating Factors

Implementation is an all-encompassing business project, requiring support throughout the organization. Readiness includes developing a support structure for executive sponsorship and involvement, adequate subject-matter experts, and a project team that includes business users. The insurer must also put in place processes that align all participants’ expectations and allow for rapid and accurate decision-making.

The insurer needs to not only understand its business—products, states, ratings, rules, and the like—but also know where in the organization that understanding resides. When a business process is different from common practices, the insurer needs a method to decide quickly whether it is a true business differentiator or an opportunity for improvement. There are tremendous opportunity costs in configuring a new system to look exactly like the old one, as the old adage about paving cow paths warns us.

The insurer’s leadership must assess how mentally prepared its employees are for the path ahead. The fear of change can’t be eliminated, but the insurer can be ready to manage it. “Early and often” change management can turn an obstacle of an employee into an ally who embraces change. Involving people in process changes can transform the implementation from something that “happens to them” to something they make happen.

The insurer’s self-assessment should identify all stakeholders, taking care not to overlook those who play supporting roles or appear in later phases. Back-end infrastructure must be considered, for example. Clear internal responsibilities for rolling out the system to agents and others affected should be assigned early.

Vendor Expectations

Insurer readiness includes setting expectations for the vendor. It’s reasonable to expect the vendor to have expertise in emerging technologies and in the system it will implement, as well as knowing the environment needed to install the system. It should be able to share best practices on system use.

To keep the vendor’s focus on implementation, however, insurers shouldn’t hold a vendor responsible for product, rate, and compliance knowledge. And, while a vendor can provide guidance for hiring staff and gaining approvals, navigating corporate politics should never be assumed to be in the vendor’s bailiwick.

It’s possible the vendor offers business consulting services, but product consulting services and software development tend to be different competencies. Product consulting is best kept separate from product implementation, or decision-making can fall out of synch, extending project timelines.

Filling the Gaps

Given the breadth and depth of a system replacement, outside counsel will be needed at points. A good vendor partner will be aware of the gaps neither the vendor nor the insurer can fill, and will help identify internal or external assistance. For example, a consulting firm may be needed to manage risk factors, temporary help may be needed to backfill the regular duties of the subject matter experts assigned to the project, or an actuarial group’s expertise may be sought.

Outside help may be advisable in such areas as:

• Product information documentation creation for the vendor

• User acceptance testing

• Data migration

• Change management

• Documentation

• Training

• Rollout

Navigating a large project with many vendors—not to mention internal staff with a variety of personalities in varying locations—is tricky. It can help to bring in someone with system replacement experience as a guide.

Conclusion

Core administration system replacement has risk. Fortunately, vendor and insurer goals can be aligned. Knowing “where you are” in organizational readiness can keep you off the path to disaster and on the road to success.

About the Author: Andy Scurto is the president of ISCS, Inc. He can be reached via email for further comment at [email protected].