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[Q&A]: How to Avoid LATAM & Spain's Biggest Insurance Policy Management Software Challenges

Interview

The LATAM insurance industry was already in flux and, due to the global pandemic, the pace of change is accelerating. Remote work, technological transformation, regulatory upheaval, and rising customer expectations are pushing industry stakeholders to redefine how they add value. Those carriers with aging policy administration systems will be challenged to keep pace.

We sat down with Equisoft’s Mauricio Monroy, Vicepresident of LATAM & Spain, to discuss the changes that are sweeping through the business, the particular problems legacy core systems pose in the region, and what to look for in a modern solution.

Q: Mauricio, what changes have you seen in the insurance community over the past year?

The pandemic has had a profound effect on the region and insurers have been affected as much as any other business. We’re now one year into this new, remote reality and the changes we’ve undergone are starting to become permanent.

Now that staff and producers are working at a distance–it’s critical that the experience be optimized. Insurance companies absolutely need a consistent and robust CX strategy based on digital transformation. In short, this is a world in which great customer experience has become mandatory.

Data needs to be centralized and made easily accessible. Paper needs to be eliminated once and for all, along with all of the touches that go along with manual workflows.

Processes need to be streamlined and automated. New digital methods of marketing and conducting a sales process need to be implemented to reflect the fact that traditional sales and service, which used to happen largely face-to-face, and often at an agency, are no longer possible.

All of this requires modern, integrated digital solutions at every stage of the policy lifecycle—from an insurer’s policy admin systems (PAS) to agent sales and service software to customer portals.

Q: Policy administration systems are a core functionality for carriers. What are the specific problems with some PAS being used by carriers?

One of the biggest issues we’re seeing around the region right now is with carriers who are saddled with policy admin systems that, while not exactly ancient, are failing to deliver on the needs of the business.

In some cases, the problem is that carriers have systems created by a vendor who hasn’t and can’t keep up with the pace of PAS development over the last 5-10 years. And this is causing all kinds of challenges.

The upgrades and development that carriers expected when they invested in these systems just aren’t happening. And, over a long enough time period, this means your system stops being ‘modern’.”

When a vendor stops committing time and money to the development of their solution, it hurts the clients. They end up with core systems that are unable to develop products at the same pace as their competitors. They have trouble integrating new sales and service tools. The ability for the carrier to respond to all manner of market changes can be greatly diminished. It puts carriers in a bad position that only gets worse over time.

Even when PAS upgrades are introduced, in some cases, they have to be done manually, client by client. Not only is this time-consuming, but it means there is variation between capabilities of different carriers on the same PAS. Not all carrier clients would benefit from the upgrade at the same time.

Q: How does that affect the carrier-vendor relationship?

One of the biggest issues for carriers is getting stuck in a relationship with a vendor who isn’t providing top class responsive service. The problem is particularly acute because it can be difficult to unwind those relationships—so much time, effort and money has already been invested. But, really, continuing in a partnership where service is lacking is not an option.

Some of these vendors really handicap a carrier right from the start because they don’t make it easy for the organization to take over configuration changes and become autonomous.

Carriers become firmly tied to the partner because every little adaptation requires code changes that must be done by the vendor. The client never really gains control over their modernization projects. The whole concept of transformation is out of their hands in a sense.”

Again, this slows speed to market compared to a carrier’s competitors. They can’t realize the benefits that were defined when PAS implementation began.

Q: What should carriers consider when looking to modernize their core systems?

I think one of the first, most important things to keep in mind is that a new digital insurance platform is an investment in the next 20 years for a carrier. The old core systems lasted for decades.

The decisions made today about modernization of the core infrastructure, will resonate for the next twenty or more years—it’s a generational change. And, this makes the choice of a vendor to partner with, supremely important.”

The implementation and management of a new solution cannot fail, and has to be fully supported over that extended time frame. You really are entering into a long-term relationship with whichever partner you select.

Q: So, what do carriers need to look for in a potential PAS partner?

I’d start with asking yourself, “Is this a strong company?” By this I mean, is it a startup that’s unproven, or a large player that’s firmly established? What is its expertise and experience in the region? Is the company growing, stagnant or shrinking?

The vendor you choose to partner with has to have a strong implementation methodology. They have to be able to integrate seamlessly with your existing internal systems, and all the third-party systems you need to help manage the policy lifecycle.

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Q: What about the solution itself—the PAS? What should carriers be looking for?

A modern PAS solution needs to work for all your products and be flexible enough to accommodate those you will develop in the future. It must enable you to streamline workflows and increase speed of application processing.

Today, clients, advisors and distributors expect to have access to data whenever and wherever they want. And, so your PAS needs to be able to work with modern APIs to communicate and exchange data with other solutions. And do it in real time.

Q: What features of a modern PAS are most important right now?

You need a solution that is configurable by your own people, so you can make product changes as fast as possible. We’ve seen how important this is in situations like having to adapt to new regulations like IFRS 17. And of course, it gives you flexibility to react when the unexpected happens—like COVID 19.

A rules-based system means you will never have to touch the source code. Changes can all be made by modifying the configuration layer. And that accelerates development, taking product development time down from as much as a year to just a few months or weeks depending on the scale of the changes.

A modern PAS needs to have a strong interface layer. The core solution needs to connect with other company systems as well as 3rd party solutions. It needs to integrate with the entire eco-system. This really makes it more than a mere data repository.

Q: How do you future proof your core systems and make sure you get the most ROI possible out of them?

First of all, you need to try and get a good read on the long-term potential of the system and make sure you can expect the vendor to undertake continuous development of the platform. This has a lot of obvious benefits—like making sure your modern system remains modern for years to come, helping to maintain your competitive position.

An evolving platform that will be useful for years to come is also the best way to generate a positive ROI over the long term. It enables you to spread your investment out over 10-20 years rather than just the next 3-5.

It’s also critical to find a scalable solution that can grow with your business. A new PAS solution that has only been implemented on a small number of policies isn’t guaranteed to work on millions.

And, keep in mind that one of the most important benefits of insurance core system transformation should be to free your organization up to focus on what’s most important. You don’t want to have to be responsible for updates, maintenance and security. That means finding a SaaS solution which provides configuration and maintenance services. It’s about reducing your IT footprint and involvement.

The solution should be hosted by the vendor in your preferred cloud to decrease operations cost. It should be maintained by your vendor partner—who should be able to guarantee solid service-level agreements.

And, the vendor should be able to provide comprehensive training so that your staff can take control and work autonomously right from launch.

Q: Any final advice for LATAM carriers facing legacy system challenges or engaging in a PAS modernization project?

Yes. One thing that’s important that we’d didn’t touch on is, your PAS partner should also have in-house data migration capabilities to enable you to get off your legacy systems and realize the full ROI of your modernization project—regardless of the source or target systems involved. You don’t want to have to engage another vendor to take care of this side of the project. It will slow the implementation and introduce risk into the critical path.

I think to recap, I’d say, you need to find the best implementation partner. Success is most likely when you identify a team of true experts who have completed many modernization projects and have a proven methodology, processes, custom tools and the experience to get the implementation done right and on time.

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