«Policy Administration Systems for General Insurers in Europe 2011 This authorised reprint contains material excerpted from a recent Celent report ...»
Catherine Stagg-Macey and Craig Beattie
Policy Administration Systems for
General Insurers in Europe 2011
This authorised reprint contains material excerpted from a recent Celent report profiling and evaluating 40 different policy administration systems. The full report is 250 pages long. This report was not
sponsored by RDT in any way.
This reprint was prepared specifically for RDT, but the analysis presented has not been chagnes from
that presented in the full report. For more information on the full report, please contanct Celent (www.celent.com or firstname.lastname@example.org. Reprint granted to RDT.
July 2011 Content 3 Executive Summary 4 Policy Administration Systems:
Definition and Functionality 9 Report Methodology 11 About the Profiles 12 RDT: Landscape Executive Summary This report is part of a series of reports on policy administration systems (PAS) in Europe, the United States, and Asia, and profiles many of the general insurance administration systems available in Europe today. An upcoming report will cover European policy administration systems in the life insurance industry.
This report is the fourth in Celent’s biennial looks at policy administration systems available to insurers in Europe. Since the first report in 2005, activity level has remained high among both insurers and policy administration system vendors. In the two years from January 2009 to January 2011, over 130 insurers licenced a new policy administration system.
This report profiles 40 policy administration systems in use for general insurance, with 20 full profiles and 20 limited profiles.
Several of the profiled vendors have issued a major new release since 2009 that: upgraded their technology platform; broadened their range of functionality; or did both. Essentially all vendors have made a major investment in enabling their solution to work in an insurer’s serviceoriented architecture (SOA) environment. Many solutions have also made important advances in usability and personalization—with benefits for new and experienced underwriters and service representatives. System administration capabilities for configuring products, rules, workflow, document management, and user interfaces have also improved—although, overall, these changes have occurred at a more modest pace than improvements for end users.
Copyright 2011 © Celent, a division of Oliver Wyman, Inc. 3
Policy Administration Systems:
Definition and Functionality Definition In one sense, the definition of a policy administration system is very simple: it is the system of record for all policies an insurance company has written. At this most basic level, a policy administration system is a repository of policy-level data related to objects of insurance, coverages, conditions, exclusions, duration of the policy, endorsements, beginning and end dates, and so forth. A permanent policy record is created at the time a policy is issued and includes the complete history of the policy through renewal, termination, cancellation, or reinstatement.
Core Processes In actual practice, an insurer uses a policy administration system— either by itself or closely integrated with specific point solutions—to execute a number of core processes, and relies on several types of supporting capabilities, as shown in Figure 1.
Figure 1: The Elements of a Policy Administration System
Product configuration: Specifying the rates, rules, and forms associated with a specific product or line of business.
Rating and underwriting: Rating is the process of calculating the rate that an insurer’s pricing algorithms indicate should be charged for a specific submission. (Rating for all but the most complex risks is normally done by a rating engine, which may or may not be a completely integrated element of a policy administration system.) Underwriting includes rating as well as the activities of modifying rates, quoting, negotiating, and issuing or renewing a policy.
Policy service: These are the activities that begin with issuance of a new or renewed policy and continue through the life of the policy, including endorsements, midterm adjustments, cancellations, etc.
Premium accounting: Calculating the gross and net written premiums as well as the earned premiums associated with a given policy; for use in financial reports, billing, reinsurance, commissions, and other systems.
Supporting Capabilities A policy administration system will have also have five supporting capabilities.
Data exchange and integration: Sending and receiving data to other internal and external systems at any point in the policy lifecycle (from configuration through termination/cancellation). Methods include offering and consuming services through EDI messages and more recently through Web services within an SOA framework, as well as a wide variety of other means including application programming interfaces (APIs) and other connectivity methodologies.
Rules and workflow: Designing, managing, and executing business rules (attached to products or processes) and workflow (person:person, person:system, system:system) during any activity or process. In a more modern policy administration system, rules (especially) and workflow (perhaps) will be externalized from the core code and from the presentation (user interface) layer.
Copyright 2011 © Celent, a division of Oliver Wyman, Inc. 5 Document management: creating, managing, and using a broad variety of documents, including policy content, forms, and correspondence.
Reporting: Designing, storing, and accessing reports ranging from simple lists to multidimensional calculated variables. In general, reports are used to monitor activities by a user and by all levels of management.
Analytics: Using various forms of statistical analysis to identify and present patterns of relationship and causation which an insurer can use to improve such functions as pricing, underwriting, and claims.
With the exception of data exchange and integration (which is inherently a requirement of any policy administration system), each of the other four supporting capabilities may be performed by a policy administration system itself; alternatively, the policy administration system may access other point solutions, or it may employ some combination of PAS and other point solutions.
Advanced Functionality A good modern policy administration system will provide most, although not necessarily all, of the advanced functionality. (Note: Each full profile in this report has a table summarizing whether the policy administration system in question offers these advanced functionalities, and if so, in what manner and in what form.) Midterm adjustments: Flagging when an out-of-sequence endorsement is made, and providing the ability to construct and calculate premiums for the corresponding in-sequence set of endorsements.
Automated underwriting (new business): Using rules and scoring methods to automate some (or more rarely all) of the tasks and activities from submission, quick quote, rate, quote, bind, and issue.
Automated renewals: Using rules and scoring methods to automate some (or, more rarely, all) of the tasks and activities in renewing a policy.
Premium and billing accounting: As described above, with the expectation that the policy administration system itself performs the calculations and directly feeds the receiving systems.
6 Copyright 2011 © Celent, a division of Oliver Wyman, Inc.
Additional End-to-End Components Celent has limited the definition of a policy administration system to include a set of core processes and key supporting capabilities. But vendors don’t limit themselves in the same way, and many have attempted to build out some or all of the end-to-end components that an insurer might need. Some insurers are just looking for a best-ofbreed PAS to work with other core systems already installed, but, more commonly in Europe, insurers may be looking for vendors that can offer solutions for parts of their insurance operations.
Some of the additional end-to-end components defined here are also listed as core processes of the policy administration system. This is not a contradiction; a vendor might bundle a component with its PAS (for example, a billing system), but also consider it (and also sell it as) a separate, stand-alone product. Alternatively, a vendor might provide a basic level of functionality in one area, but also have an upgraded, higher cost product or an ISV partnership with a different vendor to provide an advanced solution (e.g., rating).
(Note: Each full profile in this report has a table summarizing whether the vendor in question offers these additional end-to-end components and whether the components are part of the base offering or sold as a stand-alone system.) Product Configuration: Also a core process of a policy administration system, product configuration as a component might have robust tools for managing content (forms) and rules throughout the lifecycle of a product.
Rating: A stand-alone rating engine should be capable of handling complex pricing algorithms, and should integrate easily with various policy administration systems.
Underwriting: Like rating, underwriting has a place both inside and outside of the PAS. Stand-alone underwriting systems give an underwriter a robust underwriting desktop and can manage complicated workflow between multiple systems.
Billing: A billing component will support a broad set of billing methods, such as direct and agency bill, as well as various present and payment options, and configuration capabilities.
Commission Management: A commission system calculates, reports, and tracks compensation structures and commissions payable to producers. It needs to integrate with several Copyright 2011 © Celent, a division of Oliver Wyman, Inc. 7 systems to handle this effectively, but a true system can manage more complicated commission rules and do better incentive planning.
Reinsurance Management: Insurers that just need basic tracking and gathering of reinsurance data will typically be satisfied with adding a few fields to their policy administration system. A full reinsurance component should support the reinsurance aspects of underwriting and claims, with a strong premium and commission calculation engine.
Business Intelligence/Analytics: Most systems have some form of reporting. A true BI/analytics tool allows the management of data marts, detailed ad hoc reporting, customized dashboards, and complex data analysis—not just for the policy administration system but for all an insurer’s data.
Claims Management: A fully functional claims system will record and support all steps in the adjustment process from first notice of loss to final settlement. The claims systems will exchange data with a broad set of internal and external systems as well.
Criteria for Inclusion Celent’s objective has been to include in this report as many as possible of the leading general insurance policy administration systems being used or actively sold to European insurers. In a few cases, vendors have not been included in this report at their request.
This report contains two types of profiles: full and limited. The topics covered in both types of profiles are broadly similar; however, full profiles are written with more detail and include comments from reference insurers. Additionally vendors with full profile policy administration systems are included in the Celent ABCD Vendor View;
limited profile vendors are not.
In total, 48 systems from nearly as many vendors were considered, and those vendors were asked to review the inclusion criteria before responding to Celent’s request for information (RFI).
The four key criteria were that each system must have:
At least one new sale to one European insurance customer within the last 24 months.
At least two European general insurance customers, at least one of which must be an insurer.
Support for and live implementations of at least two lines of business.
Participation by at least one reference customer.
These criteria were designed to maximise the number of systems that can be reasonably expected to remain available (and viable) based on vendor size and strength, maturity of each product, its client base, and other important factors.
Some vendors elected not to participate for competitive reasons, and others determined that they could not meet the eligibility criteria after all.
Copyright 2011 © Celent, a division of Oliver Wyman, Inc. 9 Twenty profiles are included in the “Limited Profiles” section, since they did not fully meet the criteria for a full evaluation but did provide significant information about their offerings.
Evaluation Process Celent sent a detailed RFI to a broad set of policy administration system vendors. After receiving completed RFIs, each vendor provided a briefing and demo for Celent concentrating on usability and functionality for everyday users, and rules, tools, and connectivity issues for IT or administrative users.
Celent also asked two to three references provided by each vendor to complete a survey and/or an interview to obtain their view of the system’s business and technology value.
Both the RFIs and the reference surveys provided quantitative and qualitative data. Vendors had an opportunity to review their profiles for factual accuracy but did not influence the overall evaluation or the placement in the ABCD vendor view grid. Celent of course has retained final authority over the content of the published profiles. Some of the vendors profiled in this report are Celent clients, and some are not. No preference was given to Celent clients for either inclusion in the report or for the subsequent evaluation.
Not all data gathered from the detailed RFI, vendor briefing and demo, and reference surveys/interviews has been included in each profile.
Rather, Celent has attempted to capture key points and values about each vendor at an appropriate level. Unpublished information remains in the Celent knowledge base and is available to Celent’s subscription or consulting clients.
10 Copyright 2011 © Celent, a division of Oliver Wyman, Inc.About the Profiles
Each of the profiles presents information about the vendor and solution; professional services and support capabilities; customer base;