Understanding How a PAS Would Reduce Operational Costs

How a Modern PAS Reduces Operational Costs for Insurers

The adoption of modern Policy Administration Systems (PAS) has become a strategic imperative for insurers aiming to streamline operations and enhance overall efficiency. These systems can impact ongoing costs in a number of ways:

1. Streamlining Administrative Processes:

One of the primary advantages of a modern PAS is its capability to automate and streamline various administrative processes. Tasks such as policy issuance, premium collection, and claims processing can be efficiently handled by the system, reducing the need for manual intervention. This automation not only accelerates the entire process but also minimizes the risk of errors, leading to a notable reduction in administrative expenses.

2. Improved Data Management:

A robust PAS incorporates advanced data aggregation and transformation capabilities, enabling insurers to manage vast amounts of data seamlessly. By centralizing data storage and facilitating quick access to relevant information, insurers can mitigate the costs associated with data fragmentation and inefficiency. This enhanced data management not only boosts operational efficiency but also aids in strategic decision-making.

3. Enhanced Customer Service and Retention:

Modern PAS enable real-time data delivery and API connections to state-of-the-art digital sales and service solutions. These capabilities enable streamlined customer interactions which have lower associated costs while improving service delivery. Enhanced customer service leads to higher satisfaction and retention rates, reducing expenses related to customer acquisition. Satisfied policyholders are more likely to renew policies and engage in long-term relationships with the insurer, translating into a tangible financial benefit for the company.

4. Regulatory Compliance and Risk Mitigation:

Navigating the complex landscape of regulatory compliance is a significant challenge for insurers. A modern PAS integrates compliance features, ensuring that the insurer adheres to industry regulations and standards. Capabilities such as automated audit trails, compliance reporting and document management reduce manual activity, lower costs and minimize the risk of non-compliance and associated penalties.

5. Scalability and Flexibility:

Traditional systems often struggle to adapt to the evolving needs of insurers. A modern PAS provides scalability and flexibility, allowing insurers to expand their operations without significant infrastructure changes. This adaptability minimizes the costs associated with system upgrades and replacements, providing a cost-effective solution for insurers looking to grow their business.

Understanding How a New PAS will Impact the Insurer’s Costs

While many vendors will make general statements about their solution’s ability to reduce costs, the best way to find out the truth about their claims is to see how well they understand your specific costs.

Question: How can this system help reduce my per policy Cost of Operations?

Follow-up with:

List the costs you can impact and describe how they will be affected.

Having clarity around this question will demonstrate if a vendor has done some homework to accurately understand your cost drivers. For instance, do they understand whether you are currently hosting your own data center or outsourcing your IT processing?

It is also critical, when considering investment, to understand whether costs change before and after go-live. Ask the vendor for examples of costs both before and after implementation so that you can determine if there is consistency in pricing going forward. You don’t want to take ‘sweet deals’ offered before you go-live that may lock you into a vendor relationship that gets more expensive after the launch.