Recent studies by research and advisory firm Novarica show that 25% of US large P&C insurers and 40% of midsize P&C insurers are either in the middle of a policy administration system replacement project or are planning to begin one in 2012. Novarica has unveiled a new study of 37 recent cases that shows why–more than half of P&C insurers that have implemented new policy administration systems report improvements of more than 25% in speed to market and data accessibility, as well as gains in business user satisfaction, distributor service, and reduced technology risk.
Novarica’s new report, US P&C Policy Administration Systems Projects: Averages and Metrics, was unveiled this week at the Core Systems Summit in Chicago.The report is based on information provided by 37 P&C insurer cios that have performed recent policy administration systems projects.
“P&C insurers are replacing their core policy administration systems at an unparalleled rate, and these findings underscore why,” said Chad Hersh, partner at Novarica, who presented the study’s findings. “All of insurers’ core business issues–speed to market, distributor service, efficiency, and data analytics– eventually come back to core policy administration systems.”
Among the key findings of the study were:
-The average PAS project total cost (including internal costs) at a midsize insurer was $8.7m. At a large insurer, the average total cost was $23.5m. Roughly half the cost was internal staff, while license and software was less than 20% of total project costs.
-More than 85% of recent projects involved conversion, not additions of a new system. The majority of P&C insurers converted policies on renewal rather than prior to launch.
-The vast majority of P&C PAS projects include other components beyond core PAS such as agent portal, rating engine, underwriter workflow, billing, claims, reinsurance management, document generation, and business intelligence/reporting. Large insurers’ projects included 4.8 of these additional components on average, while midsize insurers’ projects included an average of 5.5.
-Most large P&C insurer PAS projects completed their initial rollouts in less than 20 months, and their full projects within 40 months. Midsize insurers’ initial rollouts were generally faster, but full roll-outs took more than 40 months for more than 1/3 of recent projects.
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