Policy Administration Systems (PAS) replacements are top of mind with a large number of P&C insurers. A recent report from PwC suggests only 10% of organizations which have undertaken such projects have realized full business benefits.
Our Question: Given all the challenges inherent in running a business and embarking on large projects, are these good enough odds for organizations to proceed? We’d like your thoughts.
What PwC Finds
The PwC report – Eye on the Prize – notes that “only 30% of policy administration projects meet the traditional definition of success in terms of time, budget, and scope delivered. And of that 30%, we observe that less than one in three realizes the full business benefits.”
For the balance, 50% of the projects were completed, but with cost/schedule overruns and without fulfilling all of the original benefit requirements. Twenty percent of the projects were marked ‘Failed,’ meaning they were either abandoned or cancelled.
What Are the Obstacles?
PwC notes that PAS projects are so large and important that they need to be considered ‘programmes’ – enterprise-scope initiatives that require tight coupling of multiple business units to business strategy and close coordination of a number of subordinate, cross-organizational projects. PwC separates the common obstacles to success into two major categories:
- Inability to design, mange, and govern the program, which includes
- the inability to staff critical program roles in a timely fashion,
- resistance to change by users,
- ignoring integration requirements until after the project is launched,
- insufficient testing, and
- lack of effective control over scope, time, and budget.
- The programme’s ability to deliver business benefits, which incorporates
- inadequate attention to changing demands of users,
- lack of alignment of underwriting, rating, and organizational strategy,
- inability to meet data needs,
- insufficient attention to forms and documents, and
- failure to address data quality and data migration issues.
What Can Be Done?
PwC provides recommendations and best practices to mitigate risk. The recommendations for delivery of functionality include:
- Customer and Agent experience: Improve customer and agent interaction through the use of consistent user interfaces and workflows across key systems (e.g., policy, billing, claims).
- Underwriting/Rating: Align the program’s tasks to meet the carrier’s goals for underwriting and pricing automation.
- Data and Analytics: Plan for the analytic needs of the data early in the process to prepare for information demand and avoid expensive rework later. Identify legacy data quality issues early, and develop custom rules and scripts to fix this data prior to migration.
- Forms and Documents. Consolidate and standardize forms where possible to reduce development effort and decrease future business and IT maintenance.
What is Realistic for Organizations?
While these and other recommendations in the report are excellent, they do add overhead to what is already a large project. Time and budget considerations will put significant pressure on organizations to move forward with a less than perfect program, or risk doing nothing at all.
PwC’s report adds an analysis of best practices from several organizations which provides a reality check with ratings of ‘Leading”, ‘On Par’, and ‘Lagging’. The report also provides commentary on organizations’ project management maturity and capability to use Agile project management methods. These data suggest that there will be some challenges to many organizations which will have to make judgements on what represents a ‘good enough’ approach.
What Does This Mean? And What Do You Think?
Technology is not magic. As good as modern systems and agile approaches are, they will not fix all problems with current insurance companies’ systems and operational environments. Reports and recommendations by PwC and other analysts/consultants can be helpful in focusing organizations’ attention on what can be done, what risks exist, and what are methods to concentrate efforts to mitigate risks when (or if) undertaking ambitious programs such as policy administration systems replacement.
One key element is expectation management. If stakeholders expect perfection, anything less will be a disappointment.
So, what do you think? Is the 10% headline a surprise to you? If you’re in the middle of a PAS implementation, does the PwC analysis match your reality? And, most significantly, is good enough better than nothing at all?
Share your thoughts below.