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Ready for Replacement?

Insurers might be looking for ways to trim expenses throughout their operations today, but it's still full speed ahead for policy administration projects.

By Michael P. Voelker | Updated on May 31, 2009

Insurers might be looking for ways to trim expenses throughout their operations today, but it’s still full speed ahead for policy administration projects.

A 2008 study by research firm Datamonitor found only 20 percent of carriers had “no plans” to upgrade existing policy administration systems over the next three years. The rest planned to consolidate, reengineer, or replace systems, with nearly 25 percent of companies planning a total replacement based on a vendor- or in-house-developed platform.

“Even with the state of the economy and marketplace, I continue to hear from vendors the pipeline is full and they are closing deals. From carriers, we hear they are shopping to replace their policy administration systems,” says Deborah Smallwood, founder of SMA, an insurance strategic advisory and analyst firm.

“This activity speaks to the industry’s maturity and financial stability in weathering economic downturn in comparison with the reaction earlier in the decade,” she adds. “Legacy replacement has stayed at the top of the list of business initiatives, so when the market flips, carriers believe they will be in a better position to compete effectively and efficiently.”

To some extent, inertia is driving this trend–policy administration replacements are large undertakings, and a project in motion tends to stay in motion. However, companies see policy administration rehabilitation as a strategic decision. “They really believe it’s absolutely critical to have new policy administration and new rating to compete,” says Smallwood.

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