The Seven Deadly Sins of P&C Policy Administration

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1 The Seven Deadly Sins of P&C Policy Administration At Adaptik, we live and breathe policy administration. We ve invested more than 60,000 days developing our PolicyWriter solution. We know how to do policy administration right, but we also know what can go wrong. These are the Seven Deadly Sins of P&C Policy Administration.

2 1 DEADLY SIN NO. 1 Treating policy administration like a set of unrelated business requirements Like policy processing, the creation of a back-end policy administration system is not linear. The worst thing a carrier can do when scoping a policy admin replacement project is divide it up into dozens of small pieces, work each to completion, then try to fit them together. This traditional approach to complex problem solving is not the right approach when it comes to building the technology to support policy administration. The requirements are simply too interrelated for this approach to work; it often leads to gaps or rigidity in the solution. Because of the often extreme operational demands found in policy administration, products, functions and features must be rationalized in multiple contexts, taking into account subtle nuances to ensure they work with other aspects of the system. Let s take the example of implementing a new product. Often, there are two project teams, one creating the product definition and the other creating the user interface. The product work is done first, and requirements are typically passed on to the UI team with little interaction. This traditional development system often results in an inefficient or awkward data capture workflow, falling well short of user expectations and the business case. That s why Adaptik s PolicyWriter suite was architected with iterative, agile processes at its core, allowing users to interact with the policy administration system as they define the requirements. This allows subtle refinements to be incorporated as the system is built, rather than at a more costly time down the line.

3 2 DEADLY SIN NO. 2 Designing a solution from within the context of a single product Insurance products are not created equal. They carry different structures, data capture processes and workflows. So it stands to reason that a policy administration system designed within the context of a single product will not easily accommodate the nuances of other products as they are added at a later time. Unfortunately, as a way to control scope, it s all too common for carriers to focus the development of an entire policy administration solution on the needs of a core product. The assumption is that focusing on a single product will provide a base understanding for other products and reduce development time. However, as products are added, the problems with this top-down approach become apparent. Wedging new products into unnatural paradigms creates costly inefficiencies for the development team and, in some cases, the end-user. Expensive coding, recoding and testing efforts are often required to provide an intuitive user interface,which prevents the carrier from leveraging the full capabilities afforded by the original design of the solution. Thus the original goal of the whole initiative architecting a flexible system capable of handling many different products is out of reach. By contrast, Adaptik s PolicyWriter suite approaches policy administration development from the bottom up. We start with the flexibility and adaptability needed for policy administration as a whole rather than the specific needs of a single product in mind. Such a broad-based approach makes the addition of products and functionality a simple matter of configuration that can often be accomplished in days or weeks a far less expensive and time-consuming process. When a system is architected to handle change any change from the very start, carriers gain the latitude to expand quickly and efficiently into new products and lines, without expanding their policy administration development efforts.

4 3 DEADLY SIN NO. 3 Assuming you ve designed the entirety of the product When it comes to the development of P&C policy administration systems, the old adage is that the most important requirement is the one you haven t thought of yet. It s been correct for years and it s still correct now. Policy admin systems take time to build, and they re designed to last for quite a while. That means it s inevitable that requirements will shift during the life of the system. Things change. Opportunities arise. And if an insurance carrier s system wasn t architected with change in mind, they ll be hamstrung in their ability to respond. A system cannot be designed to meet only the needs of the current product structure. Let s take the example of adding the option of trailer coverage to an existing personal automobile product. If the policy admin system was built inflexibly, changing the product becomes a major project... if it s possible at all. With a flexible, adaptable system one designed with the assumption that things would change it s a matter of simple configuration. Product specifications and options aren t the only requirements that change. Distribution methods are constantly evolving and expanding. And inorganic growth often necessitates adjustments throughout the policy admin system. An insurance software system built without these possibilities in mind can cause opportunities to be lost or squandered. That s why Adaptik s PolicyWriter solution was designed to anticipate and embrace product evolution to allow and support changing structures even ones that haven t been thought of yet. And when the time comes for a tweak, it s configuration not a full-scale coding effort.

5 4 DEADLY SIN NO. 4 Failing to recognize the impact of rule definition on system performance and maintainability At Adaptik, we ve been dealing with configurable systems since their inception. And in those years, it s become very clear that consideration needs to be given up front to the classes of rules that are required to support the uniquely complex demands of policy administration. Early on, configurable systems simply allowed users to create Boolean statements: If.., Then, Else. But it soon became clear that many processing scenarios required very complex rule definitions for this construct. In practice, these systems performed very poorly and became nearly as difficult to maintain, test and change as the legacy systems they were intended to replace. The next evolution of configurable systems brought scripting languages and CASE tools, which relied on the premise that performance could only be improved by converting user input into fast-processing code. While these systems performed better than their earlier counterparts, the code was not always optimized for each processing situation, and required developer skills and time to ensure the integrity of the applications. Again, the base concept of configuration was lost. for complex requirements. A policy administration platform must accommodate different types of rule processing situations with different rule constructs, potentially including special processing. Of course, configuring rules requires the same higherlevel thought as coding. If a solution only supports a single rule type, it s likely to perform poorly in the real world as it forces every situation into the same paradigm. The complex requirements of a policy administration system necessitate multiple rule mechanisms for multiple situations. That s why Adaptik s PolicyWriter solution was built with every eventuality in mind. It supports broadly specified rules that need to be applied and evaluated quickly, as well as fine-grained rules that need to allow for a high degree of specificity. At Adaptik, experience has taught us that multiple rule types must be used alone or in combination to provide high performance and maintainable support

6 5 DEADLY SIN NO. 5 Failing to anticipate the evolving landscape of solutions From predictive modeling systems to advanced forms, rating, underwriting and billing engines, to structured and unstructured third party data, the external services and data available to P&C carriers have never been better. But there s a catch. With traditional policy administration systems, it s extremely difficult and costly to integrate with outside systems. At a major carrier, it s common for it to cost as much as $250,000 each and every time a legacy policy administration system needs to be modified to connect to another system. And that s not the end of it. Those integrations are version-specific they need to be re-written every time a piece of software is upgraded. The result is major coding projects going on almost constantly, costing the company millions. When Adaptik was founded more than a decade ago, we recognized what a problem this was. Large insurance companies absolutely need to rely on the deep functionality offered by specialized systems and outside services in order to remain competitive. As external vendors evolve and improve, it makes sense for the carriers to be able to take advantage of their offerings and to do so quickly and efficiently. That s why our PolicyWriter policy administration solution was engineered with a comprehensive integration architecture in mind. It allows for seamless integration with any other internal or external system through configuration rather than coding in as little as a few hours. Imagine being able to point to a new third party data service or expert engine almost instantly, and upgrade any system without revisiting the integration points. That s the power of PolicyWriter. It s never been more important for carriers to be able to leverage outside systems and services to improve underwriting profitability and enhance customer experience. With PolicyWriter, they can resulting in improved customer service, enhanced data quality, reduced costs and increased profit opportunities.

7 6 DEADLY SIN NO. 6 Failing to anticipate a rules governance mechanism for managing changes A modern, configurable policy administration solution, like PolicyWriter, offer users unprecedented flexibility and adaptability. With their unique, rules-based configuration tools, nearly any change is possible all without an expensive, time-consuming development project. But simply deploying such a powerful tool isn t enough. Much thought needs to be given to changes and how they ll affect the holistic system before they happen. Rules-based systems should always include features for multi-threaded development and full traceability of all changes. A governance body is required to establish priority and direction of how changes should be implemented. Rule changes are often predicated on other rule changes; they build on one another, and sometimes the order in which they are introduced needs to be changed while one or more are in flight. This fact has created endless bottlenecks in traditional policy administration systems. Moving to a configurable system alone, though, doesn t automatically allow a carrier to clear such hurdles poor rules management capabilities in a modern system can also create bottlenecks and hidden costs. Without a proper governance body in place and the supporting rule versioning tools, product initiatives will inevitably need to be single-threaded, affecting the ROI of the system as a whole. At Adaptik, we think of modern policy administration systems as icebergs. At the top are the instantly recognizable pieces configuration, simple rules changes, lifecycle transactions for policies. But beneath the water line must sit a properly thoughtout architecture and process for managing the changes that are bound to be required. It s too often overlooked, but it absolutely needs to be there. If it s not, the effectiveness of even the most powerful, flexible policy administration solutions can be negated.

8 7 DEADLY SIN NO. 7 Failing to expect the unexpected In the past, policy administration systems were developed based on a carrier s requirements at a specific point in time. These requirements were determined and given to developers, who then worked to put the system into production. Typically, little thought was given to how often and in what ways these requirements might change over time. Of course, changes inevitably began to propagate once development was finished. And because traditional policy admin systems weren t equipped to easily accommodate change, both major adjustments and minor tweaks were slow in coming hampering initiatives at all levels. Avoiding such situations is at the heart of modern, configurable P&C policy administration solutions. Competitive companies must react to market demands almost instantaneously. That s why it s essential to allow for unplanned changes in such a way that facilitates timely, cost-effective reactions. the UI or switching third-party data service providers. Whatever the change, a policy admin system must be architected with response to both common and completely unexpected changes in mind. And that s exactly how Adaptik s PolicyWriter P&C policy administration solution was built. Eminently configurable, PolicyWriter was designed with the future in mind any future. Whether in the context of the initial implementation or long after production, it allows carriers to make any necessary change quickly, efficiently and inexpensively. Change happens. It could be a regulatory edict, the desire to limit exposure by suspending a particular product, a response to a disaster, an adjustment to

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