Policy Admin as a commodity – where is the value in a digital transformation?

Our recent independent survey of insurance professionals found that 70% of respondents called for “significant investment” from their businesses in technology to drive distribution decision making. A further 56% testified that distribution is both their greatest opportunity and the biggest challenge they face.

Despite this clear indicator insurers still find  distribution a challenge, barely a week goes by without hearing plans for ‘business transformation’ or ‘legacy replacement’, with the solutions typically manifesting themselves as a replacement of the core Policy Administration System (PAS).

Interestingly, in contrast to this, our research detailed that 63% of industry peers feel that distribution channels alongside product specification should be the key differentiator and focus for insurers.

This has led us to question, are insurers actually solving the right problem and moving in the correct direction to tackle the challenges the industry is facing?

It is widely acknowledged that system replacement for insurers is a ‘sunk cost’, that a new shiny platform will not directly pay for itself. Nevertheless, most feel the need to jump on the transformation bandwagon, often deciding to invest in the ‘biggest and best’ choice of platform regardless of whether it is the most relevant for their requirements.

This decision is broadly understandable in a naturally risk averse industry, however our research found 86% of our respondents believe that a balance between product and channel effectiveness is the most important factor for future success.  This, combined with the suggestion that PAS’ are really a functional commodity makes us wonder if, indeed, insurers are focusing on the right issue?

Insurers now have access to multi-channel solutions across web, mobile and call centres but in many cases have implemented them in ways, fragmenting customer journeys.  Each of these different channels is often supplied by a third party with little or no genuine link to the underlying product making the speed to market and the control of product and pricing problematic.

If we accept that PAS itself will not drive financial return and is unlikely to solve the distribution challenge. Then, the question needs to be asked is: how do we connect our products with our distribution channels effectively? Consider the role and functionality of the PAS being scaled back with a more modular, integrated and cost effective distribution solution taking over some of the functionality and enabling rapid product and channel deployment.

Our research clearly shows the insurance industry’s desire to improve, particularly in the areas of product and distribution, and a strongly conveyed (80%) desire for innovation. However it also highlighted that when asked, the vast majority placed product and distribution as the key areas in which improvement should be made, leading us to speculate upon whether the industry is currently innovating in the right places?