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Actionable Advice for Succeeding in your Life Insurance Policy Administration System modernization

Actionable Insights

What is a Policy Administration System (PAS)?

A Policy Administration System (PAS) is a comprehensive software solution used by insurance companies to manage the entire lifecycle of insurance policies. This includes the creation, issuance, and maintenance of policies, as well as the processing of claims, billing, and customer service. PAS systems streamline administrative tasks by automating workflows, ensuring data accuracy, and improving operational efficiency. They provide a centralized platform for managing policy information, enabling insurers to quickly adapt to regulatory changes, launch new products, and offer personalized services to customers. Modern PAS solutions often feature advanced analytics, integration capabilities with other business systems, and support for various communication channels, enhancing both the insurer's and the customer's experience.

The Decision to Embark on PAS Modernization

The insurance industry is facing challenges from technological advancements, changing regulations, and rising customer demands, prompting businesses to modernize for improved agility, better decision-making, and more efficient product development.

However, even at a time when technological change is accelerating, and digital transformation is a top priority, many companies suffer from an inertia that prevents them from breaking free of legacy technology constraints. And, in the life insurance industry, there are lots of good reasons for that- such as project risk, cost, resources, priorities or just the fact that ‘we can deal with it later’ seems like an easier path to take. That inertia can act as a hand brake on innovation.

And, like everyone faced with important decisions, insurance execs have to grapple with three very common questions about the choices they make: are we doing the right thing? How will we manage the change? And, what can we do to mitigate the risk of transforming? It doesn’t help that core system modernization projects are often a once-in-a-generation occurrence. Some execs have never managed one, few have significant experience. The scope and importance of the project can give anyone doubts.

However, the advantages of successfully transitioning to a modern PAS make the need to embark on a new implementation inescapable.

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The benefits of modernizing your Insurance Policy Administration System 

Modernizing your Policy Administration System (PAS) is crucial for enhancing efficiency, compliance, and customer satisfaction in the insurance industry. Here are six key benefits of upgrading your PAS:

  • Improved Operational Efficiency: Automation and streamlined processes reduce manual work, minimize errors, and increase productivity.
  • Enhanced Customer Experience: Personalized interactions and omnichannel access improve customer satisfaction and retention.
  • Regulatory Compliance: Staying current with regulatory requirements reduces the risk of non-compliance and associated penalties.
  • Scalability and Flexibility: Adaptable to new products and market changes, allowing easy scaling to accommodate business growth.
  • Cost Reduction: Lower maintenance and operational costs, with potential savings from cloud-based solutions.
  • Advanced Analytics: Improved data integration and analytics provide deeper insights into business performance and customer behavior.

The importance of PAS modernization in the life insurance industry

Modernizing policy administration systems is imperative to meet the escalating customer demands of today's digital age. Because of the rise of digital startups, increasingly high customer expectations, and evolving regulatory requirements, insurance companies are accelerating their time-to-market and improving the overall customer experience. Unfortunately, legacy policy administration systems act as a major roadblock to achieving these goals, hampering insurers' competitiveness.

Policy administration system modernization is necessary in order to keep up with soaring customer expectations Because those systems act as a major roadblock to full digitalization and hinder insurer competitiveness. A well-planned modernization strategy, vendor and technology are required in order to implement a successful PAS modernization.

The new generation of life insurance customers, accustomed to on-demand services and unparalleled convenience, now carries these high service standards from companies like Amazon and Netflix into their interactions with life insurance.

Modern policy administration systems enable real-time data flow and the on-demand transactions that customers expect. They enable connections between internal and external systems critical to insurance workflows through APIs. Cloud-based SaaS models reduce resource requirements and free team members to focus on delivering against your most pressing business needs.

These core systems accelerate the pace of product innovation, increase efficiency and are the foundation for creating superior digital CX.

Equisoft Cartoon Rocket CIO Final

To help insurance executives make the right decision about modernization and have confidence in the ultimate success of their digital transformation project this HUB shares insights harvested from dozens of Equisoft sources, including:

  • Webinars, eBooks, and articles
  • Analysts and consultant advice
  • PAS modernization project veterans
  • Equisoft commissioned research
  • And much more
Discover actionable tips and best practices for successful implementation of your digital transformation journey, ensuring greater levels of automation, better CX, lower costs and faster, more impactful new product development.

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Challenges and opportunities in life insurance technology modernization

Equisoft commissioned Datos Insights to research and assist life insurers in understanding the drivers behind Policy Administration System (PAS) modernization. This study explores the challenges faced during implementation, drawing from the experiences of life insurance CIOs who tackled PAS modernization challenges from planning to execution.

The study identified two primary challenges: integrating new PAS with existing IT systems and migrating data from old platforms so they can be retired.

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Graph taken from the Datos Insights (previously known as Novarica) research report, “Transformational Journeys: Implementing Modern Core Systems at Life Insurers” depicts top transformation challenges that insurers face.

In addition to the two high level challenges identified in the research, insurers face a variety of organizational, planning, data, integration and testing challenges that need to be addressed.

Solving challenges with business needs’ alignment

Internal misalignment can be a significant challenge in PAS modernization. Some companies prioritize short-term, small-scale projects to fulfill immediate needs and generate quick ROI, while others pursue a more visionary, long-term digital transformation approach. Lack of clarity in choosing an approach can lead to scope confusion, increased costs, waning commitment, and failure to deliver expected benefits.

Solving challenges with changing culture

Digital transformation has not created the anticipated value for many companies because of how difficult it can be to change corporate culture. In reality, modernization is not only about digitization, it’s about transforming the way we think, behave and make decisions. Actual transformation involves revolutionizing the legacy business processes and culture that underpin and drive an organization. If those old ways persist the new technology solution will not deliver the desired transformation.

Solving challenges with addressing project scope 

When outlining your project's scope, the most common challenge is identifying objectives that will deliver enough value to justify the investment, without taking on so much that the project becomes impossible to deliver on time or budget given resource availability. It's essential to establish clear, primary objectives for the transformation and prioritize them. These objectives should remain your guide throughout the modernization process - they'll keep you from derailing. 

A good approach to creating initial project objectives that aren’t too broad is to envision the Minimum Viable Product—the least you can create to meet your business goals. Then build off that simple beginning in subsequent phases as you test, learn, and evolve.

Solving challenges created by legacy blocks and data migration

Neglecting data migration during Policy Administration System (PAS) modernization can lead to downstream problems when trying to retire legacy systems. . Too often all of the focus goes to standing up the new PAS to start processing new business and the data left on legacy platforms is not considered. Although, in a Greenfield strategy, this is a good way to get to market quickly, when legacy data is treated as an afterthought it creates problems because there is no plan for migration and often no budget for the project.

That makes addressing legacy policies stored in your outdated systems a crucial component of your plan. It’s important to craft a well-defined strategy for whether you'll be migrating your data to the new system, when that will happen and how it will be done with minimal risk.

Data migrations are, in themselves, complex projects that require experienced resources and the right tools and methodology-otherwise the risk of data loss or corruption can cause serious problems for the business. The data left behind on old systems is active policy, claims and billing information. Any problems with that data create problems with customers. And, not being able to migrate the data means those old core systems can’t be retired—resulting in ongoing costs and resource allocations.

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When it comes to shoving something into production, lack of validation causes bad data, lack of integration, where all your systems aren’t fully integrated, means that you haven’t proven the data actually exists there. And, you may not be able to recover from that. Because when you don’t have data, than there’s no way that you can recreate that data that you’ve lost over that period of time.
William Winicaties, Assistant Vice President, US Architecture & Systems Integration, Equisoft

Solving challenges with integration and technical debt

A central component of the planning phase involves understanding the true scope of the technical debt that you need to deal with. Projects can be delayed or worse by complications arising from the introduction of new requirements that ask for new integrations or consolidations that weren’t considered at the outset of the implementation but should have been.

Overcoming these challenges requires pre-planning to identify and address contingencies in advance, particularly when integrating multiple systems, as this helps streamline the process and prevent unforeseen frustrations. An experienced PAS modernization partner is invaluable at this stage of the project because they will be able to advise on requirements that should be considered and recommend against those that don’t support the core business needs.

Solving challenges with Testing in PAS Modernization

Testing tends to be undervalued during Policy Administration System (PAS) modernization planning because organizations sometimes assume that the vendor has already completed or is wholly responsible for testing the new platform. While the PAS solution itself will have been thoroughly tested, new complexities emerge when integrating with an insurer's systems. Therefore, it's essential to test the entire solution as you go. Research automated testing tools, understand the associated costs, commit the right resources and plan for end-to-end tests.

How to Prepare for PAS Modernization

To embark on such a large-scale project successfully, thorough preparation is vital. In fact, research conducted by Datos Insights (formerly Novarica) and Equisoft revealed that extensive pre-planning was a significant contributor to the success of modernization projects. This applies to both the organization as a whole and its leadership and employees.

Securing buy-in for a PAS modernization project is essential for success. Successful pre-planning involves creating a robust business case, transparently communicating it to all stakeholders, and ensuring their commitment. The key is aligning project goals with corporate objectives. Gaining buy-in from decision-makers is easier when they see how the project aligns with the organization's future vision.

Everyone wants to go faster. Everyone’s management is always trying to say that they want to get in within 3 months, 2 months, 1 month – whatever the new norm is. But, the reality of it is that, trying to push something into production and see if it sells has consequences. It’s our industry’s poor interpretation of a ‘move fast and break things’ strategy.
William Winicaties, Assistant Vice President, US Architecture & Systems Integration, Equisoft

In this Life Accelerated Podcast episode, Hector Martinez, Head of Life Insurance at Equitable, explains the importance of planning how your organization is going to evolve. It requires that careful and deliberate planning is completed that recognizes the long-term impact and endurance of the new system and how it will affect the sustained success and adaptability of your company.

Given that your new Policy Administration System will likely be in use over the next 20 years, it's crucial to allocate ample time for planning.

We conducted nine months of planning. We lined up resources and made sure people were aware of what we were doing internally. The planning stage was invaluable. Make sure to receive buy-in from the top of the organization. Enterprise leadership must want to modernize, support the transformation, and understand the potential value. You are transforming your business; get people thinking along those lines.
CIO comment from the study, Implementing Modern Core Systems At Life Insurers The following are the essential steps to ensure your organization is fully prepared for a Policy

The following are the essential steps to ensure your organization is fully prepared for a Policy Administration System (PAS) modernization.

Develop a compelling business case for PAS Modernization

Set Organizational Priorities

To launch a successful modernization project, it's important to begin by gathering feedback from a diverse range of stakeholders, to identify and address pain points and areas of concern. Include IT staff, business unit staff, customers, agents, distributors, and finance.

Clearly define project priorities and risks. Work with stakeholders to set realistic expectations and ensure they understand the potential challenges. Develop contingency plans for addressing these challenges and managing risk. Being transparent about potential roadblocks and your preparedness to address them will instill confidence in stakeholders.

Define project objectives and scope

Setting clear objectives and goals is the next crucial step to ensure everyone involved is aligned with the project's purpose. Additionally, determining the KPIs that will be used to measure the project's success is vital.

In this segment from our Accelerate webinar titled, Tackling Your Legacy Challenges: Holistic Digital Transformation for Insurers, Kartik Sakthivel, Vice President & Chief Information Officer at LIMRA, LOMA, reveals some transformation best practices. Amongst those best practices, he talks about the importance of setting clear expectations from the get-go.

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When it comes to selecting an approach for modernization, organizations have options, ranging from the traditional Big Bang approach to the increasingly popular Greenfield approach.

Some carriers opt for large-scale modernization, migrating data and consolidating platforms into a new system. Others take a Greenfield approach, running new products on a modern system alongside old systems and leaving the old policy data where it is for the time being.

The decision on whether to focus on back-office modernization or front-end tool implementation differs among carriers, with some starting by modernizing foundational systems to integrate new digital sales and service solutions, while others begin with specific solutions in areas like self-service, digital sales, or claims, with back-end revamps coming later.

New York Life, for example, initiated its transformation with electronic applications and fast-track underwriting that doesn't require fluid collection. These new solutions are designed to integrate into a new digital platform for increased automation and improved experiences for both agents and clients.

For most insurers seeking fast results, it's advisable to start by modernizing a small number of products and implementing a new Policy Administration System solution in the initial phase. To expedite implementation, minimize customization and consider cloud-based, SaaS solutions that are ready-to-use, highly flexible without extensive code changes, and offer a faster path to going live and taking autonomous control of the system as quickly as possible. This approach can accelerate the modernization process, give you independence from the vendor and start processing new business quickly.

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Involve stakeholders from the start

It’s important to recognize the full range of people impacted by the project and actively engage those stakeholders from the earliest stages of the project. In many companies, the IT team often leads the initial exploration of modernization options, dedicating a year or more to gathering data on potential solutions primarily from a technological standpoint. However, this approach sometimes overlooks the significant differences among available solutions and their respective gaps when it comes to delivering on business needs.

To address this, it's crucial to involve operations and business leaders from the outset to ensure a holistic view and consideration of all business needs during the vendor selection process. This early involvement of key stakeholders also helps in setting realistic expectations for vendor presentations and demonstrations, instilling confidence that the selection team has thoroughly evaluated market offerings and how they would or would not address the business needs that drive the project.

Seek stakeholder input on requirement gathering, solution design, and user acceptance testing. This helps gather valuable insights and also gives stakeholders a sense of ownership and investment in the project.

We need to ensure that we’re moving quickly, but still have the governance and policies in place to ensure that the Policy Admin is going to meet the needs of the business in the long term.
William Winicaties, Assistant Vice President, US Architecture & Systems Integration, Equisoft

Leverage executive support

While it's important to engage all stakeholders, gaining support from key executives is critical. Ensure that the project aligns with the organization's strategic goals and emphasize this alignment to decision makers.

Clearly communicate the benefits of PAS Modernization

Effective communication is vital in securing buy-in for a project. For large projects it may be necessary to develop an ROI presentation that is extended over a period of years, since tangible financial returns may not be sufficient in year 1 or 2.

To support the need for an extended ROI timeframe, emphasize how the new PAS will improve efficiency, reduce costs, enhance customer service, and ensure compliance with regulatory requirements. Use various communication channels and methods to reach all stakeholders. Reiterate these benefits throughout the project to reinforce the value and maintain engagement. You can also try to highlight the near future benefits of being able to serve data in real-time to other applications such as analytics, AI, digital engagement and sales solutions.

Open dialogue is essential to gathering targeted feedback and anticipating potential issues. Use various communication channels and methods to reach all stakeholders. Without a comprehensive understanding of risks and benefits, achieving true buy-in is challenging. Successful projects convert this communication and buy-in process into a governance and change management plan before project development begins.

All the trends in our organization that come from AGILE and sitting the business together, are trying to solve for that communication problem. When we have a greenfield approach, we can define capabilities and organize our business and IT systems with capabilities in mind so that every single piece that is processing the business is organized in ways that the business understands. Now, we’re not having to translate each one of these requirements from a business perspective into a technology perspective. We’re creating capabilities and a diagram that everyone can understand – not just the IT side of things.
William Winicaties, Assistant Vice President, US Architecture & Systems Integration, Equisoft

Effective change management communication is equally valuable. Change, especially in the context of technology and systems, can often be met with resistance from employees and stakeholders. Effective change management helps address potential sources of resistance and ensure that the organization is ready for the transition. A huge part of this is helping employees develop the required skills they will need to operate the new system and setting the context for how they will benefit and thrive in the new environment.

In this segment from our Accelerate webinar titled, How to leverage BI, Data & Sales Enablement Tools, Lesilee Lee Fook, Director - AI, Analytics, & Automation, Incus Services, talks about the real challenge in modernization - bringing people along on the journey of transformation.

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How to Evaluate Potential Policy Admin System Solutions

Evaluating potential Policy Administration System (PAS) solutions is a crucial process for organizations in the insurance industry. A well-chosen PAS can streamline operations, improve customer service, and ensure compliance with regulations.

Here are the steps to help you evaluate and select the right PAS solution for your organization:

Assess the current policy administration systems and identify pain points

By following these steps, you can systematically assess your current PAS, define your transformation goals, and plan for a new system that addresses your organization's specific needs and objectives.

Assess Your Current Legacy System and Pain Points: The first thing you need to do, is evaluate your existing PAS infrastructure and identify its limitations and areas of concern. Understand what is working and what isn't. Legacy insurance policy administration software was designed in a time when self-service and digital interactions were not common. These systems relied on paper reports sent through mail and lacked the ability to change policy details online. Their IT architecture is outdated and inflexible, requiring extensive coding in languages like COBOL or RPG. Often, data transfer and reporting was completed through some form of batch processing rather than on demand.

In this segment from our Accelerate webinar titled, People-Centric Digital Transformation, Brian Carey, Senior Director, Insurance Solutions, Equisoft delves into some key challenges insurers encounter when preparing for PAS modernization.

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Trying to update these systems is costly and time-consuming, and they often cannot support modern digital features like APIs and web service calls, making it challenging to provide superior digital customer experiences.

One of the reasons that the old platforms have persisted the way they have is that long-liability tail products have a persistence about them which values consistency and stability, which those platforms offered. Over time, however, they have become increasingly difficult and expensive to maintain. Concurrently, they were never designed to support the type of rapid product development processes or the diversity of servicing channels that are now needed by carriers to maintain relevancy. To prepare for the realities of the 21st century’s third decade requires rethinking technology paradigms. Core systems modernization should be a foundational part of that type of strategy.
Michael Zelesnik, Vice President, Insurance Solutions USA

Define Requirement and Create a Transformation Roadmap: Use the gathered feedback and identified pain points to specify the functional and non-functional requirements that the new PAS must meet. From there, you can create a detailed plan that outlines how the new PAS will address the identified requirements and align with the digital transformation objectives.

Certainly, assessing the legacy systems when considering greenfield objectives is important. But, I think equally important, is assessing the business objectives, making sure that you have a firm grasp and clear alignment amongst your most senior stakeholders. Particularly, on the business side if you’re a technology person. “The strategies that the business is pursuing should then create a direct line to the assessments and the points you’re looking to understand with respect to the legacy system. So, the business may want to get product to market faster, may want to enter a new marketing channel, it may be important to expand distribution relationships, or influence or accelerate underwriting – there can be a wide variety of capabilities that are key to profitable growth that should have a direct line to the legacy assessment.
Richard (Dan) McCoach, Managing Director, Insurance, Deloitte

Some requirements to keep in mind when deciding on a PAS solution include:

Policy Administration and Management:

  • Automated policy issuance, underwriting, and endorsement processing.
  • Policy data maintenance and updates.
  • Flexible premium calculations and billing.
  • Policy renewal and termination processes.

Product Flexibility: 

  • Support for a wide range of life insurance products, including term life, whole life, universal life, and more.
  • Ability to create and modify product definitions easily.

Customer and Agent Management:

  • User-friendly interfaces for policyholders, agents, and customer service representatives.
  • Access to customer information and communication history.

Commission tracking and management for agents.

  • Underwriting and Risk Assessment:
  • Automated underwriting rules and decision-making.
  • Integration with external data sources for risk assessment.

Claim processing and management.

  • Compliance and Regulatory Support:
  • Ensure compliance with local and international insurance regulations.
  • Audit trails and reporting for regulatory purposes.
  • Support for policy document generation and delivery.

Billing and Payment Processing:

  • Flexible billing options, including one-time, recurring, and multiple payment methods.
  • Integration with financial systems for premium collection and disbursement.

Reporting and Analytics:

  • Robust reporting capabilities to monitor policy performance, financial metrics, and customer data.
  • Customizable dashboards and alerts for key performance indicators.

Integration and Interoperability:

  • Support for APIs to enable integration with third-party systems, including CRM, accounting, and data analytics.
  • Seamless data exchange with reinsurance partners and other stakeholders.

Scalability and Performance:

  • Ability to handle growing volumes of policies and data.
  • High availability, fault tolerance, and disaster recovery capabilities.

User Experience:

  • Intuitive and user-friendly interfaces for both employees and customers.
  • Accessibility and mobile-friendliness for on-the-go interactions.

Scope the Greenfield Minimum Viable Product (MVP): Determine the initial features and functionalities that the new PAS must have to address the most critical pain points and meet immediate needs.

Conduct a Cost-Benefit/ROI Analysis: Evaluate the costs and expected benefits of the MVP initiative. Consider factors such as implementation costs, ongoing maintenance, and the potential return on investment.

Evaluate Potential Solutions and Select a Modernization Approach: Selecting the right modernization approach is a critical decision that can significantly impact your organization's efficiency and competitiveness in the insurance industry. To make an informed choice, you need to carefully evaluate potential solutions in terms of their features, alignment with requirements, operational capabilities, scalability, integration possibilities, implementation cost, user-friendliness, and cloud-hosting or Software as a Service (SaaS) capabilities.

Benefits of an SaaS model to the insurer

  • The SAAS model offers numerous advantages to insurers, such as enhancing operational efficiency and reducing Total Cost of Ownership (TOC).
  • One key benefit lies in the system's perpetual up-to-dateness, as the latest releases, updates, and security patches are seamlessly maintained by the vendor. This ensures that insurers constantly operate with cutting-edge technology, mitigating potential vulnerabilities and keeping pace with evolving industry standards.
  • By entrusting these crucial aspects to the vendor, insurers can substantially diminish their reliance on in-house IT resources, leading to a lower TOC. Consequently, the IT department can redirect its focus from routine maintenance of the Policy Administration System (PAS) to more strategic and value-driven tasks, ultimately fostering innovation and driving the insurer's long-term success.

This comprehensive evaluation process will ensure that the selected PAS modernization approach is tailored to meet the unique needs of your organization and can adapt to the ever-changing landscape of the insurance industry. 

Conduct an RFI/RFP process

The RFI/RFP stage marks the beginning of the vendor selection process. This phase can often act as a roadblock for organizations due to the temptation to gather too much information about potential solutions and insurance software vendors. It’s important to carefully select a manageable number of questions that cover the essential areas you are concerned about. Consider the resources you will need to devote to reviewing and rating hundreds of responses from a half dozen or more vendors—and the cost of diverting those essential resources away from daily operations. By following these steps, you can streamline the RFI/RFP process, make more informed vendor selections, and ensure that the chosen vendor aligns with your organization's specific project and budgetary requirements. 

1. Initial Planning:

  • Invite selected companies to respond to an RFI/RFP to explore potential solutions and insurance software vendors.

2. Response Evaluation:

  • Review and evaluate the responses you receive from the companies.
  • Focus on how well their solutions align with your organization's specific needs and avoid gathering excessive information to prevent information overload.

3. Shortlisting:

  • Shortlist 2-3 companies based on the quality of their responses and alignment with your requirements.

4. Detailed Assessment

  • Assess the shortlisted vendors more comprehensively:
  • Examine their technology stack, development methodology, and project management approach to ensure they meet your organization's needs.
  • Consider the cultural fit by evaluating their communication style, responsiveness, and willingness to collaborate with your internal team.
  • Evaluate pricing, Service Level Agreements (SLAs), and contract terms to ensure they are in line with your budget and requirements.

How To Uncover Policy Administration System Vendor Credibility

The RFP or selection process may indicate clear functional winners, but there are many considerations for selecting a “partner” vs. a process “winner".
Dan McCoach, Head of North America Insurance, Life & Health, Celent

To choose the best Policy Administration System (PAS) for your organization, it's essential to go beyond the standard claims made by vendors and ask the tough questions that will give you a true understanding of the vendor’s capabilities. Potential problems that could arise from inflated vendor claims are present through the selection process, if you’re able to ask the right questions.

These questions should cover various critical themes, such as New Product Development, Configuration, Integration Capabilities, Cloud Compatibility, Upgradability, PAS Suitability for Scale & Product Complexity, Costs, Client References, Implementation, End-to-End Functionality, and data migration. Asking these hard questions will provide true insights into a vendor's suitability for your organization's current and future needs.

For a detailed list of questions you can ask during the vendor selection process, download this eBook: “The Reality Behind SaaS Vendor Claims”.

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Graph from the Equisoft and Datos Insights report titled, “Transformational Journeys: Implementing Modern Core Systems at Life Insurers” measures the average weight of importance of service partner evaluation criteria.

Insurers prioritize selecting the right partner by considering client references and cultural fit during their due diligence. They also value service partners with change management skills and digital expertise, as some partners can bring valuable tools, methodologies, and best practices to an organization.

Select a vendor and solution

After assessing software and implementation capabilities, the next step is to invite potential vendors to demonstrate their platform's functionality in practice.

A valuable partner doesn't just deliver and implement a quality PAS solution but also shares their implementation experience. This should be kept in mind when assessing vendor competence. Collaboration can enhance the carrier's modernization strategy, identify potential flaws in the plan, validate assumptions, and provide valuable perspectives that may have been overlooked.

We have internal lessons learned about choosing the right partner. Both parties need to invest in the partnership, as trusting and collaborative relationships needs to be built at all levels of the organization.
CIO Quote retrieved from Novarica x Equisoft Report, Transformational Journeys: Implementing Modern Core Systems at Life Insurers

Demos, the Shortlist and Proof of Concept (POC)

To maximize the value of PAS demos, it's important to provide vendors with a specific script outlining a scenario tailored to your unique needs. This approach helps evaluate their commitment and readiness to address your requirements and will help you understand their level of seriousness and interest in your business.

The next step in vendor selection is shortlisting one or two vendors for the Proof of Concept (POC stage). During this phase, it's crucial to validate their claims about their capabilities. Pay attention to the number of clients they permit you to speak with. If they limit access to just one client, it could be a red flag. Companies that allow you to interact with a diverse range of clients are generally more reliable and take pride in their relationships

In the Proof of Concept (POC) stage, select 1- 2 vendors to create a solution that demonstrates their ability to meet project goals. This stage is highly valuable and reassuring in the vendor selection process. During this stage, a common mistake is asking for too much in the POC, sometimes requiring the vendor to undertake almost the entire project. Instead, it's advisable to request three functionalities that all vendors should be able to accomplish easily with minimal development or configuration. Ensure that your POC examines capabilities that were not evident in the sales demos. This should encompass features tailored to your specific environment, country, and region, as well as complex business processing, calculations, and volume testing.

Also, it's recommended to pay vendors for their POC work. This will eliminate excuses for incomplete or poorly executed tasks and ensure vendor accountability. As a general guideline, POCs typically cost 1-2 percent of the total project budget.

Evaluate the Competency of the Vendor's Project Team

When evaluating a vendor for a project, consider the make up of the vendor's project team. Assess how the team will be staffed, the roles that will be filled, the expertise and seniority of team members, and their compatibility with your own team.

Key roles in PAS modernization projects include:

  • Project Manager: Responsible for coordinating and organizing the project, ensuring it stays on track and aligned with objectives.
Of course, the clients always assign a project manager. But we need a project manager that's really active to make sure the success of the project is a shared responsibility.
Florence Sabbah, Vice President, Canada, Equisoft
  • Business Analyst (BA): Gathers information from the insurer to understand their business processes and requirements. Translates business needs into functional requirements and helps identify solutions to address challenges.
  • Solution Architect: Defines the technical ecosystem for the solution, specifying integrations with other systems and setting the IT landscape.

Other critical roles include functional developers, integration specialists, and quality assurance (QA) specialists.

When assessing vendor team resources, consider:

  • Do they have the resources to fill these roles?
  • Are these resources allocated specifically to your project?
  • Is there enough staff dedicated to the project at each stage?
  • Do the resources have experience with projects similar to yours for similar companies?

These questions help ensure that the vendor's team is adequately equipped to meet the requirements of your project.

Select the Champion and Build the Business Case for the Chosen Vendor

When developing the business case for the project, it's crucial to thoroughly assess all aspects of the proposed solution, such as costs, timing, data migration implications, long-term platform stability, and the vendor's suitability.

Evaluate the solution’s features and capabilities. Does it align with your requirements? When making the final decision, make sure to evaluate the following:

  • Evaluate the solution's features and capabilities to ensure they align with your requirements.
  • Assess the system's capability in handling new business, underwriting, policy administration, claims management, and billing functions.
  • Evaluate the solution's scalability, flexibility, and integration capabilities to adapt to changing organizational needs.
  • Assess the implementation cost, timeline, hardware, software, customization expenses, and integration time.
  • Evaluate the system's ease of use and assess cloud-hosting and SaaS capabilities.

The final step in the vendor selection process involves obtaining approval for the core system modernization project. This often requires approval from various levels, including the Board of Directors. Engaging third-party assistance can be beneficial at this stage since obtaining approvals can be complex due to internal politics and complications. Many companies find it helpful to enlist a consulting firm to assist in creating the final presentation and navigating the approval process more smoothly.

Implementation and Execution

Once the vendor and solution have been chosen the planning process begins. PAS modernization projects can face various challenges that may derail them, such as inadequate requirement definition and scope creep.

Define key requirements

After completing the discovery phase, the vendor gains a clear understanding of the client's project. The subsequent step is defining the scope of the project and key requirements. Defining requirements is the most important part of the whole plan sometimes - this is where you get really specific about what is needed and informs the scope and priorities. It represents the stage where the project becomes highly specific, providing a detailed roadmap for its execution. This process ensures a clear and agreed-upon understanding between the client and the vendor regarding the project's objectives.

Furthermore, the definition of key requirements serves as the stage for effective communication and alignment of expectations. It establishes the parameters for successful collaboration and project execution. In essence, this step is pivotal for fostering a shared understanding, minimizing risks, optimizing project efficiency, and ultimately delivering a solution that not only meets but exceeds the client's expectations.

Define the project scope

The subsequent crucial step is defining the scope of the project. Initially, the scope is outlined at a high level when a vendor is chosen and a product is selected to meet the client's needs. However, to ensure project success, a more detailed and granular scope is essential.

Because we understand insurance, the technology and carrier’s biggest challenges we can help direct companies when planning their project.
Florence Sabbah, Vice President, Canada, Equisoft

Increasing granularity enhances the definition of the scope and also contributes to the development of a comprehensive solution architecture. It helps establish a foundational design agreement between the partners and serves as a guide for project implementation. While each client and modernization project is unique, predefined requirements play a crucial role in streamlining, accelerating, and de-risking the project.

This phase of the project is about gaining a better understanding of its scope. We come into this at maybe 50% accuracy in terms of scope. We know the client has products ABC, processes 1, 2, 3. That’s about all we know.” “We get into discovery and we dig into things like, What do you really mean when you say product ABC? “Do you mean product A has 10 plans, product B has one and, oh, in product C there’s a valuation. There are more complex calculations. “And so we start to speak the same language. We startto really understand and meet each other and say, OK, well, when you when you say you know you want to be able to do a quote, you really mean an illustration for example. “So, we really try to dig into more detail about what each criteria means. The more we refine the scope the more we can build a better estimate of the project.
Florence Sabbah, Vice President, Canada, Equisoft

The success of a modernization project often hinges on the vendor's experience with similar projects. Vendors with experience can provide a pre-defined set of requirements based on their collective project experiences. These pre-defined requirements offer a solid framework for the vendor to navigate the project, including knowing which requirements to prioritize, the necessary levels of detail, and the most critical requirements.

Set clear priorities

It’s essential to identify and prioritize project goals before starting any project. In large projects like PAS modernization, there's no room to delay implementation while resolving conflicting requests. The project team must translate initial goals into well-defined priorities that provide a clear and shared understanding of what the carrier wants, why they want it, and when they need it. This helps guide decision-making during project implementation.

Examples of Priorities

The client has to determine what’s most important, hitting the date or the full scope? Sometimes there are regulatory changes that have to be made for a certain date. That changes the approach to the project. We know the date cannot move. And we always work to deliver on time and on budget, but we can’t just assume or pretend that we don’t have tough choices to make along the way. I bet we make hundreds or even thousands of priority judgements across the course of a project.
Florence Sabbah, Vice President, Canada, Equisoft
When you still have 12 months until Go-Live and the client asks for a new feature, perhaps that is doable. But when you’re only two months from your delivery date there’s no room for that anymore. People get a lot more selective.
Florence Sabbah, Vice President, Canada, Equisoft

Ensure sufficient resources

A significant and common challenge is resource management. Challenges related to internal resource availability include being short-staffed, staff turnover mid-project, assigning resources to the project while maintaining their original roles, assigning the wrong resources, or lacking critical information at crucial times.

Staffing a PAS modernization project can be challenging because many employees lack experience with legacy system replacement. These projects are complex, involving numerous internal and external systems. In-depth knowledge of how these systems operate and connect is vital for configuring and integrating the new PAS into the carrier's IT ecosystem. Resources are required on both the vendor/partner and carrier sides to translate business needs into software requirements, manage complex project phases, and design a solution aligned with the carrier's goals.

You know we can do everything we can here at Equisoft to deliver a solution to the client, but if we don't have the information to be able to deliver on the need, it's really hard to make it to the finish line. So, we need solid project managers on both sides‒here at Equisoft and at the client.
Florence Sabbah, Vice President, Canada, Equisoft

Building a well-balanced team with both carrier and vendor experts, along with appropriate levels of authority, is crucial.

Build a cross-functional team

The internal team composition for a project mirrors the roles required on the vendor/partner team but with some differences in execution. The internal project manager is crucial for facilitating communication, task tracking, and issue resolution, particularly for time-sensitive matters. They must have a clear understanding of priorities in the context of flexible modern PAS systems, considering market changes, regulations, and business priorities within fixed project deadlines and budgets.

In this segment from our Accelerate webinar titled, Launch New Products Quickly, Chip Bircher, Co-founder and CEO of SCL Consulting, LLC explains the importance of having the right team in place for effective digital transformation. He explores the 4 C’s of team structure - Capacity, Competency, Culture and Communication.

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Technical resources, such as business analysts and solution architects, are essential for sourcing critical information efficiently on the carrier side. Architects, in particular, play a vital role in integrating the PAS with various internal and external systems.

Actionable Insights Hub Article MC 3 EN
he business analyst is like the meat in the sandwich‒the liaison between the client and the people who are doing the configuration, the developers. Our role is to understand the business need and to then translate that into requirements that are intelligible to the person who's going to be programming the software or application we're working on.
Natalia Witkowsky, Manager, Business Analysis, Equisoft

Change management and training

Effective change management involves securing buy-in and support from key stakeholders, maintaining clear and consistent communication, addressing resistance to change, and assisting employees in acquiring the necessary skills and competencies to maximize the benefits of new data capabilities.

Training is a critical aspect of change management. This entails the development of comprehensive training materials and thorough staff training. It's essential that employees understand the new system's functionality and how it differs from the old one to minimize any hiccups in the transition.

On the customer side, clear communication about the changes is equally vital to prevent disruptions. Informing customers and stakeholders about the upcoming alterations can help in preparing them for the transition, ensuring minimal disruptions. Additionally, establishing a robust support plan to address any customer questions or concerns during the transition period helps maintain a positive customer experience throughout the process.

Policy Admin System Configuration

The specific configuration of a Policy Administration System will vary based on the carrier’s unique needs, industry regulations, and technology stack. Careful planning and attention to detail are essential to ensure a successful PAS implementation.

System Architecture:

  • Determine the appropriate system architecture, whether it's on-premises or cloud-based.
Event-driven architecture is changing the way that the life insurance and annuity industry operate in general – especially when managing technical debt into the future. Technical debt is clearly a challenge in our industry because we have to deal with years of history in our system that other industries don’t have to deal with. When we talk about event-driven architecture, we’re talking about ways to decouple systems and capabilities in a way that makes the most amount of sense and allows us to separate systems, pair off pieces of functionality, and replace it anew without increasing any of that risk.
William Winicaties, Assistant Vice President, US Architecture & Systems Integration, Equisoft
  • Select the necessary hardware and software components for the PAS.
  • Decide on a scalable and secure infrastructure to support the system's growth.

Data Model and Configuration:

  • Define the data model for policies, including the structure of policy information, coverage details, endorsements, and other relevant data.
  • Configure databases and data storage solutions to store policy information.
  • Establish data access and security protocols to protect sensitive policy data.

User Access and Security:

  • Set up user roles and permissions based on job responsibilities within the insurance company.
  • Implement security measures, such as authentication, authorization, and encryption, to protect sensitive customer data and maintain compliance with industry regulations.

Policy Workflows: 

  • Define and configure policy administration workflows, including underwriting, policy issuance, endorsements, renewals, and cancellations.
  • Ensure that the system supports the unique business processes of the insurance company.

Product Configuration:

  • Configure the PAS to accommodate various insurance products, including different lines of business, coverage types, and policy variations.
  • Define rules and logic for product pricing, eligibility, and underwriting.

Integration of the Policy Administration System with Internal and External Systems

The integration of systems, both internal and external, can present challenges when there are expectations that the primary application, the Policy Administration System, will handle tasks beyond its scope. Such misunderstandings often lead to conversations with vendors where the carrier requires clarification on the system's limitations and the possibility of integrating with other applications to meet specific needs.

Potential Integration challenges

Integration challenges in projects vary due to differences in capabilities and technological environments. Some carriers have already migrated a lot of their data and applications to the cloud and possess integration components, making it relatively straightforward to integrate their systems. However, others undertaking modernization projects may not be in the cloud and need to integrate with legacy systems or components hosted on-premises, presenting compatibility issues.

In some cases, discussions are necessary to align modern integration patterns with the carrier's existing setup. Another challenge arises when dealing with old systems that require custom connectors to establish integration because the solution does not inherently support them.

On the other hand, some carriers opt to replace various systems like accounting, CRM, or document generation as part of their modernization. In such instances, external expertise is vital, as insurance companies may not have in-house IT specialization in the required area. Collaboration is essential in order to offer solutions, provide support, and assist in implementing new components to facilitate integration.

Testing and quality assurance

To ensure a successful transition to the new PAS system, conduct comprehensive testing, including unit testing, integration testing, performance testing, and user acceptance testing. Develop a rollout plan that facilitates a smooth transition, ideally through a phased approach to minimize disruptions. Continuously monitor the new system's performance and gather user feedback to identify and address areas for improvement.

Different types of testing

Different types of testing are essential to ensure the system's quality, reliability, and security.

Functional Testing:

  • Unit Testing: This involves testing individual components or units of the system to ensure that they work as expected.
  • Integration Testing: This type of testing checks how different components or modules interact with each other when combined. It verifies that integrated parts of the system function correctly.

Performance Testing: 

  • Load Testing: Load testing evaluates how the system performs under expected and peak loads. It helps identify performance bottlenecks, such as slow response times or resource limitations.
  • Stress Testing: Stress testing goes beyond load testing and assesses the system's performance under extreme conditions, often exceeding its capacity. This is done to understand how the system behaves in high-stress situations.

Security Testing:

  • Vulnerability Assessment: This type of testing identifies vulnerabilities and security weaknesses in the PAS that could be exploited by malicious actors. It helps in securing the system against potential threats.
  • Penetration Testing: Penetration testing (or pen testing) simulates real-world attacks on the PAS to identify vulnerabilities that could be exploited. It involves ethical hackers attempting to breach the system's security to expose weaknesses.

Set Testing Criteria 

Defining testing criteria involves setting clear objectives, specifying test scenarios, establishing acceptance criteria, and defining test data, all aligned with the goals of functional, performance, security, and other types of testing. Additionally, it outlines the testing environment, schedule, responsibilities, and reporting procedures. By doing so, testing criteria provide a structured roadmap for evaluating the PAS's functionality, accuracy, and security, ensuring that the system meets quality standards and is well-prepared for production use. 

Monitor and Optimize 

Continuous performance monitoring tracks key indicators, error handling, security, scalability, and resource utilization, enabling timely issue detection and resolution. Optimization efforts include enhancing performance, ensuring security through updates and audits, planning for scalability and capacity, and conducting regular testing. A feedback loop with users and stakeholders helps prioritize optimization activities and adapt to evolving business requirements. Documentation and knowledge sharing are essential for maintaining a high-performing PAS that aligns with the insurance company's needs, minimizes downtime, and maximizes user satisfaction. 

Post-implementation review

Post-implementation review occurs after the PAS has been in operation for a defined period and serves to assess the project's success, evaluate whether the system meets its objectives, and gather feedback from stakeholders. Key aspects of the PIR include evaluating the PAS's performance, identifying lessons learned, assessing compliance with scope, schedule, and budget, and gathering feedback from users and stakeholders. The PIR results in a report with recommendations for further improvements and informs ongoing efforts to ensure the PAS aligns with the evolving needs of the insurance business and maintains its effectiveness. 

Continuous improvement 

PAS improvement is an ongoing process that involves refining the system and associated processes to adapt to changing business needs. 

It involves collecting feedback, analyzing and prioritizing areas for improvement, implementing changes, and regularly reviewing the system's performance. This process also includes optimizing business processes, staying compliant with regulations, and embracing innovation.

In this segment from our Accelerate webinar titled, Tackling Your Legacy Challenges: Holistic Digital Transformation for Insurers, Karhik Sakthivel, Vice President & Chief Information Officer at LIMRA, LOMA, explains the importance of optimizing business processes to truly reap the benefits of technology modernization.

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Key components of continuous improvement include feedback collection, benchmarking, training, and a user-centric approach to ensure the PAS remains user-friendly and efficient. Documentation of changes and rationale is crucial for future reference and training. Continuous improvement is a cyclical and iterative approach that ensures the PAS evolves to meet the evolving needs of the insurance business and industry standards.

Measure Success

Measuring success is an ongoing process, and it should involve a combination of quantitative and qualitative assessments. Regularly reviewing these metrics and indicators allows insurance companies to adapt, optimize, and continuously improve their PAS to remain competitive and meet evolving business requirements.

Determine Metrics for Success

Goal achievement is a critical aspect of measuring the success of a Policy Administration System implementation. Goals in this context refer to the specific objectives that the insurance company aims to accomplish through the PAS. These objectives guide the implementation project and provide a clear benchmark for evaluating the PAS's effectiveness.

Successful project teams determine metrics before the project start and use them to communicate with business leadership. Insurers use various metrics to evaluate their speed to market, servicing, and environment simplification. This includes assessing historical data for speed and internal servicing, measuring staff satisfaction with new systems, and recording metrics like NIGO percentages and underwriting time. They also count drop-offs in applications to identify issues in the quoting process. Customer experience is gauged through net promoter scores (NPS) and satisfaction ratings, with simpler indicators like red, yellow, and green faces gaining popularity for providing a general customer impression.

Set Key Performance Indicators (KPIs)

Setting meaningful and relevant KPIs is essential for monitoring the success of a PAS implementation, providing a clear framework for ongoing assessment, and enabling data-driven decisions and improvements.

Define and monitor KPIs that reflect the PAS's performance. KPIs are specific, measurable, and relevant metrics that help assess how well the PAS is performing and whether it aligns with the organization's goals and objectives. Examples of PAS-related KPIs include policy issuance time, error rates, user adoption rates, customer satisfaction scores, system uptime, revenue growth, and regulatory compliance levels.


Evolving technological landscapes, regulatory shifts, and heightened customer expectations make Policy Admin System modernization imperative. New core systems bring increased agility, decision-making, and product development efficiency. And they also create a foundation for realizing the potential of quickly evolving Machine Learning, analytics, Large Language Models and AI.

The road to successful PAS modernization requires a proactive approach, strategic planning, and a commitment to embracing technological advancements. By addressing these challenges head-on and leveraging the insights shared, life insurance carriers can position themselves for enhanced competitiveness, improved customer experiences, and sustained success in the dynamic digital landscape.

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