“There has been a sustained interest in new policy administration systems,” says Donald Light, report co-author and director, Americas P/C Practice at Celent, adding that companies looking at PAS replacement fall into three main categories. About one-quarter—typically bigger companies—still have homegrown, mainframe, COBOL systems. Another half is dealing with legacy vendor packages that often have been highly customized. The remaining quarter have multiple contemporary systems and are looking to consolidate to a single platform and upgrade in the process.

The Goals of Agility

For some commercial insurers, the time has simply come for a PAS upgrade. “The 'green screens' are still around, although they are becoming less common,” Light says. “What is more common is that carriers have a 'webified' front end for users, but the processing of the system is based in legacy code that is difficult to maintain or change and is impeding their ability to be agile.”

Union Mutual of Vermont Companies (UMVT) is in the final stages of replacing its 25-year-old PAS platform. “Our legacy platform is a green-screen, AS/400 COBOL system we've had since 1988,” says Gary H. Ouellette, vice president operations, technology, and enterprise risk for UMVT. “There is no vendor support and we were finding some serious issues with COBOL compiling. It was also very difficult front-ending the legacy platform to the agents or making it look like it was modernized.”

UMVT launched the ISCS SurePower Innovation PAS in January 2012 after an eight-month installation, beginning with businessowner lines. Although to a large extent it was simply time for a system upgrade, the insurer also had an eye to agility.

“We had identified a number of ease-of-doing business and internal efficiency initiatives, such as online endorsement processing and delivering greater web capability to agents,” Ouellette said. “We realized that the cost and timeline of trying to build those out on the legacy system was encumbering, not only in additional manpower in IT, but in doing the architectural and design processes around the system because it was no longer supported by the vendor.”

“There's nothing wrong with a mainframe-based system, but there is very little innovation taking place in the market from a vendor standpoint on that platform. Therefore, you're limited to building system capabilities yourself, which is not where we wanted to be on a go-forward basis,” says Piyush Singh, CIO, Great American Insurance.

Great American is in the midst of an architectural transformation initiative, going division by division. Although Singh declines to name specific platforms that are involved, he says that agility is a key factor in the selection of applications. “As new business needs and delivery methods, such as mobility, evolve, we need a foundation that will be able to move with that change,” Singh says. “We need platforms that will put us in a better state from a foundational architecture standpoint while continuing to provide business with the evolving services and capabilities it requires.”

Agility in commercial lines PAS falls into three main areas of emphasis: business processing, marketing, and systems development and deployment.

Agile Business Processing

In the diverse and complex world of commercial lines, a key business challenge is getting the right price for the right risk. How carriers meet that objective depends in large part on the business they target.

“There's been a lot of emphasis on straight-through processing in small commercial lines,” Light observes. “It's nothing like the level [of straight-through] in personal auto or homeowners, but having the policy admin system provide exception-based or even no-human-touch processing from start to finish is getting easier with modern approaches to rule sets, automated process flows, and automated access of information.”

However, much of commercial lines involves larger accounts that don't lend themselves to commodity processing. Celent's “Top 11” features of advanced PAS functionality (see sidebar) include several areas of business processing agility for non-STP accounts, including automated alerts and dynamic interviewing, that can speed accounts to the finish line.

“For larger commercial, agility [in PAS] is about the ability to change workflow and processes to reflect the different characteristics of complex risks,” Light explains. “That starts when a policy comes in. Getting that application prepared to the point of pricing and decision-making as efficient and agile from a technology point of view is important.”

Anil Chitale says that in the area of decision support, information-sharing and collaboration technologies are key features of a modern PAS that commercial carriers seek. The objective is to streamline the lengthy information-gathering phase that has traditionally characterized larger commercial lines.

“With the exception of commodity products in commercial lines, you need to do collaborative underwriting,” says Chitale, senior vice president and P&C division leader at MajescoMastek.

“It [underwriting] is an intensive, back-and-forth process between the underwriters and the agents submitting the application,” he explains. “You need systems to adapt, that have provide a collaborative environment such as the ability to chat, attach documents, and have automated notifications.”

Sentry sought several business agility goals with its implementation of Guidewire's PolicyCenter for its trucking business. PolicyCenter replaced two separate systems that had been used by agents and underwriters, respectively, depending on the size and characteristics of the policy being processed.

“From an agents' standpoint they can now enter all business into one system,” explains Kevin Lang, Sentry's IT director. “That also helps drive consistency across product lines by putting rating and forms management under one system instead of two.”

Sentry was able to provide “no-touch” underwriting on some accounts and increase overall speed-to-issuance on all accounts through scorecard rating. Using data from third party and internal sources, such as financial reports, credit scores, and motor vehicle information, along with information captured during the quote process, Sentry can present the agent with a price on many risks without requiring underwriter involvement.

“In the past, we relied on underwriting adjustments a lot in our pricing, but you can't do straight-trough processing with that approach,” Lang says. “Our scorecard lets us get the right price up front and lets underwriters use manual credits and debits as the exception rather than the rule.”

Underwriters and agents can see the rating scorecard along with the inputs that drove that score, identifying areas of concern that drove the price up. “It's given both underwriters and agents tools to collaborate,” Lang says. “It's helped us be more granular in our pricing and faster in our policy issuance as a result.”

The system also incorporates rules-based workflow and decision support for accounts that need underwriting referral. “In the past, if business needed underwriting review, agents would send in the application, it would be keyed in, there would be an [electronic] 'route slip' process to review it, and it was up to the underwriter to recognize things to look for. Now there is guidance about additional underwriting questions that need to be answered, referrals for reinsurance, and so on,” says Lang. Cases can also be elevated for authority considerations and managers can monitor workflow.

Also essential to agility, the Guidewire platform provides process management and design capabilities that allow Sentry to modify workflows through configuration. “In the legacy environment, we didn't have that configuration framework. Any process change required a lot of coding to get workflows to trigger correctly,” Lang says.

Marketing Agility

“A PAS that does not allow insurers to model and dynamically prototype products through some type of a configuration function severely limits market agility,” says Frank Petersmark, CIO advocate with enterprise architecture consultancy X by 2. “Insurers need to quickly create 'me too' products to match competitors, and they need the ability to model 'what if' products for first mover advantage in the market.”

RLI Corp had been using a rating engine from Duck Creek, acquired by Accenture in 2011, for many of their product lines. In 2010, the insurer launched its Professional Services Group to target businesses such as law firms, brokerages, and other firms. RLI looked within its existing systems portfolio for a platform that could serve the new group and chose to extend the PAS capabilities of the Accenture Duck Creek platform.

“We needed 'just-in-time' technology,” says Murali Natarajan, vice president, information technology, RLI Corp. “We needed to get a product to market quickly and we needed technology that could move at the same pace as business. The Duck Creek platform helped RLI accomplish that.”

RLI's goal is to have four professional products—workers' compensation, commercial auto, businessowners, and excess liability—in all 50 states with a technology platform that can keep up with rate, form-filing, and other bureau changes. Today the system supports workers' compensation business in 47 states, and the remaining lines in 28.

“Following the initial deployment, we were able to achieve economies of scale through the use of templates,” Natarajan says. “It takes about one week per state per product to deploy today—it's gotten to be almost like an assembly line.”

Templates also enable market agility at Meadowbrook Insurance Group, which upgraded its Instec Quicksolver platform to the latest version in October 2012.

“As we deploy a new coverage or a rating algorithm, we are able to leverage what we've done in the past. Even though a new coverage may not be exactly like another, we can roll it out much more quickly than starting from scratch,” says Mark Sundquist, IT manager, Meadowbrook Insurance Group.

Celent identified that the ability to design and manage product-specific rules and forms is a key feature of a modern commercial PAS. Light adds that true marketing agility requires putting the power of design—as well as changes to rates, rules, and more—in the hands of the business.

“It's much faster, and often much easier, to have a business analyst or underwriting or product manager handle those changes,” he says.

“We can already make some changes to the ISCS system using business analyst resources,” Ouellette reports. “There are XML tables that can be accessed and different levels of configuration that can be moved to production.”

A 2013 installation of ISCS's “Power Tools,” a configuration workbench, will expand those capabilities even more. “We will really be looking to create a repeatable process that allows the business analyst community to exclusively handle all the rates, rules, forms, type of configuration work, which for us is what it takes to run the insurance enterprise,” Ouellette says. He projects this will reduce the time to make changes by 30 percent and will save up to 40 percent on resource costs.

UMVT is currently live on the ISCS system for businessowner, personal auto, home, and umbrella, accounting for about 96 percent of its companywide premium. The insurer is in the process of moving remaining lines—dwelling fire, business auto, and commercial umbrella—to the platform as well.

“We now have a platform that offers internal staff a fully modernized data repository, full document imaging and automated workflow, and that supports a true, 24/7 portal for our distribution channel, adjusters, and insureds,” says Ouellette.

Business-level configuration is playing a key role in speed-to-market agility at Sentry as well. “Previously if there were rate changes, they were sent to IT where we made the changes, worked with the business area to test the changes, and moved the changes to production,” Lang says. “With the new system, the business can go into the rating engine, update rates and algorithms, and promote the rates. It's moved flexibility to the business and helped them respond faster to market conditions.”

Systems Agility

Part of the interest in commercial PAS upgrade is driven by the fact that modern architecture has made the upgrade process more palatable.

“Making upgrades from older to newer releases quicker and less expensive is something we've seen all the policy admin vendors work on,” Light observes. “To take the configuration and customization done on an early version, unplug it from the main body of the system, and plug in those changes to a new system is much easier now than it has been in the past. It is still a lot of time and work, but the amount of resources that are needed is substantially improved compared to a few years ago due to how the architecture is enabled in modern platforms.”

Meadowbrook saw the architectural benefits to agility in its upgrade, a four-month effort. “One of the nice things about this particular system con

version in contrast to others I have been through is that when Instec upgraded to .NET, they designed the system to use the existing objects and the existing database. There was not a lot of rewriting of code to make the jump,” Sundquist says.

“The new architecture also allows us to leverage web services to bring in more underwriting information such as geospatial data, motor vehicle, Polk [automotive] data—anything an underwriter feels is important, we can integrate seamlessly,” he adds.

Sundquist believes the new platform is more adaptive to the changing needs of its agent base. Currently the system is accessed by agents via a Citrix-based connection—the same method as the previous version. However, Meadowbrook is exploring different means of web-based system delivery.

“With its .NET architecture, the Instec system is a rich Internet application that we can offer to agents via the web. As we start to look at the deployment of agent portals, the fact that Quicksolver is browser-based allows us to do more point-of-sale and mobility applications for agents,” he says.

At RLI, the Accenture Duck Creek platform fit well with RLI's service-oriented architecture (SOA), which the company has been developing since 2007. By connecting applications through a centralized enterprise service bus (ESB), RLI's SOA avoids creating the web of point-to-point integrations common in the industry, blamed for inhibiting both systems and business agility and making it difficult to upgrade systems and components over time.

“Our goal within our SOA is to create an event- and message-driven architecture,” Natarajan says. “The objective is to have the right message delivered to our ESB at the right time, so we can fire off different processes downstream. Duck Creek gives us that capability.”

Great American has also been on the journey to SOA for several years as well. “SOA gives us the flexibly to be nimble for the long haul. Every system is connected to an ESB so that everything talks to each other through canonical XML,” Singh says.

“The key to enterprise agility for us is SOA,” Singh adds. “It allows us to connect various applications in a nimble fashion and easily replace applications that are no longer viable, while keeping functionality and user experience the same from the end-user standpoint.”

Becoming Agile

Agility in commercial lines involves bringing new products to market faster through modeling and prototyping; changing rates and rules without involving IT; providing automated information gathering and underwriting decision support; launching new system capabilities quickly and when the business needs them.

“All of these capabilities address agility and should be table stakes for competitive carriers. For carriers that can't do this, the way to fix it is to implement one of several modernized PAS platforms available in the market today,” Petersmark says.

“Of course this is easier said than done, as PAS modernization is non-trivial for carriers both in terms of financial and resource commitments,” he adds. “However if they don't do this, their overall agility in their chosen markets will continue to be quite limited.”