Insuring the Future with Policy Administration Systems

Learn how Policy Administration Systems (PAS) extend beyond everyday operations into strategic advantages for insurers with insights from DataArt's specialized implementation expertise.

Insuring the Future with Policy Administration Systems

Policy Administration Systems (PAS) are essential for any insurance company. They act as the backbone that supports daily operations and enables the development of competitive products and enhanced customer experiences. In the fast-paced insurance market, PAS is crucial for operational needs and an insurer's ability to innovate and stay competitive.

Whether it's for an emerging Managing General Agent (MGA) startup or an established enterprise, PAS holds critical importance. For startups, setting up a robust PAS is a foundational step for effectively entering the market. For established enterprises, PAS is an integral part of their complex infrastructure, which can evolve into legacy and fragmented systems. Such systems present challenges to growth and innovation as they mature.

The state of the core platforms profoundly affects an insurer's ability to meet market demands, including operational efficiency, personalized services, customer-centric experiences, data-driven decision-making, and quick product launches with minimal time to market.

In this article, we aim to explore DataArt's expertise in implementing PAS solutions, beginning with a review of key concepts and considerations necessary for approaching such projects:

• Defining the primary functions and responsibilities of a Policy Administration System
• Outlining related services and business components that extend beyond policy administration
• Identifying the logical layer of Insurance Product Configuration
• Highlighting key considerations when implementing PAS solutions

Primary Policy Administration Functions

Policy Administration Systems are software solutions that manage the entire lifecycle of insurance policies, including tasks like policy issuance, underwriting, billing, and claims processing. These systems vary in their implementations, ranging from comprehensive, integrated packages offering a wide array of additional services out-of-the-box to specialized solutions focusing solely on essential policy administration functions, with the flexibility to integrate with related products.

The primary functions of Policy Administration Systems typically include:

1. System of Record for Insurance Policies: A PAS is the central repository for all insurance policy data, capturing details such as policy periods, risk details, coverages, limits, deductibles, involved parties like named insured and additional interests, which define policy conditions, influence its price and underwriting decisions.
2. Policy Lifecycle Management: PAS oversees all policy lifecycle processes, including quote creation and management, binding and issuance, post-issuance policy changes through endorsement transactions, renewals, non-renewals, expirations, cancellations, and reinstatements.
3. Rating Calculation: Essential to PAS functionality, rating calculation employs rules, rate tables, formulas, and algorithms for accurate premium assessment.
4. Underwriting Rules: PAS evaluates risk eligibility, approves or rejects transactions automatically or refers them for manual underwriting based on predefined criteria, tracks underwriting decisions.
5. Document Generation and Management: The system automates policy form generation and manages all policy-related documents tied to policy lifecycle processes.
6. Payment Schedules: PAS manages different payment schedules, including full upfront and installment plans, and automates billing elements.
7. Fee, Tax, and Commission Calculation: PAS calculates insurance policy fees, taxes, and commissions, facilitating financial transactions within the ecosystem.

Related Services & Business Components

The primary PAS functions outlined above set the stage for a comprehensive insurance platform, enabling a wider array of services and business components beyond basic policy administration. These services cater to specific business areas or functions and include:

• User Portals: Connect stakeholders such as policyholders, agents, brokers, underwriters, and operations staff, offering a self-service experience and automating internal processes.
• Customer Relationship Management (CRM) Systems: Manage customer interactions, track leads, and provide personalized services to policyholders. CRMs play a crucial role in enhancing customer satisfaction and retention.
• Underwriting Workbenches: Offer advanced risk analysis and modeling for thorough data analysis and informed decision-making.
• Claims Management Systems: Automate the insurance claim lifecycle from the initial loss reporting to the final settlement.
• Accounting and Financial Management: Cover general ledger management, accounts payable and receivable, expense tracking, financial reporting, budgeting, and forecasting, ensuring financial oversight and control.
• Business Intelligence (BI) and Data Analysis Tools: Offer insights into customer behavior, market trends, and business performance, supporting data-driven decisions.

These functionalities can either be integrated into a single, all-in-one system that includes policy administration capabilities or provided as distinct, specialized services from different vendors. Integration with the core PAS creates a modular and flexible insurance platform.

When selecting a PAS platform and building a holistic technology solution, a key strategic consideration is balancing the extent of prebuilt, out-of-the-box features against the flexibility to integrate with a variety of third-party solutions seamlessly. This ensures that the platform can be customized to meet specific business needs while maintaining the ability to adapt and scale.

Insurance Product Configuration

Policy Administration Systems (PAS) architecture usually consists of two distinct logical layers: Generic Platform Functionality and Custom Insurance Product Configuration. These layers work in unison to create a fully functioning system tailored to the specific needs of an insurance business.

The first layer includes generic platform logic and functionality, providing a base of common mechanisms and serving as a framework for custom product logic. This allows insurers the flexibility to build unique configurations and tailor the system to their specific requirements.

On the other hand, the second layer deals with custom insurance product configuration. Here, insurers embed their specific business knowledge into the system to align it with their unique product offerings, underwriting guidelines, and business processes.

This structure implies a division of responsibilities for both supplying and evolving a PAS solution:

• Generic Platform: The generic platform functionality is typically developed and maintained by well-established market platform vendors. These vendors continuously update the platforms by incorporating industry standards, regulatory updates, and technological advancements, benefiting all platform users.
• Product Configuration: Specialized implementation teams usually develop and maintain insurance product configurations. These teams might include external professionals, such as expert service partners who are experienced in customizing PAS solutions to align with specific business needs.

Key Considerations When Implementing Policy Administration System

Policy Administration Systems are critical components for insurance companies, acting as the backbone of essential operations and significantly influencing their ability to innovate and stay competitive. These systems are not just operational tools; they are strategic assets whose robustness and adaptability are pivotal in determining an insurer's success in meeting the evolving demands of the market and achieving sustained growth.

Implementing a Policy Administration System involves expertise in several key areas:

• Selection of the PAS Platform: Choosing the right one from the market, defining the future ecosystem's contours and principles, and aligning with the company's strategy, vision, and unique characteristics.
• Development of Product Configuration: Configuring specific insurance products within the PAS to reflect unique business knowledge and requirements, including initial design and implementation, followed by ongoing maintenance, regulatory adjustments, expansion and introduction of new products.
• Integration with Other Services: Integrating the core platform with other technology layers, specialized business components, and 3rd party services for a cohesive operational environment.
• Data Migration and Operational Transition: Planning and executing data migration and transitioning to the new platform, minimizing disruptions, and ensuring data integrity.

At DataArt, our expertise covers all these critical tasks. We have a proven track record in implementing PAS solutions tailored to our clients' needs, including creating product configurations, system integration, and managing smooth transitions. Our comprehensive approach ensures that insurance companies can fully leverage their policy administration systems to drive efficiency, enhance service delivery, and stay ahead in a competitive market.

Conclusion

To conclude, Policy Administration Systems are essential for the seamless operation and future growth of insurance companies. The implementation of these systems is a strategic investment, one that yields dividends through enhanced operational efficiency, customer engagement, and market responsiveness.

Originally published here.