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Setting up priorities when selecting a Policy Administration System

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7 June 2009
Nicolas Michellod

Celent is publishing two reports reviewing Policy Administration Systems (PAS) and IT vendors in Europe later this year. The first one will profile solutions available in the general insurance sector and the second one in the life and pension sector. For insurers the selection of a PAS requires the analysis of different parameters that have all their importance. Prioritizing decision elements is a crucial task in order to minimize the risk of choosing an inappropriate PAS and to face ultimately time-consuming and expensive customization efforts. In the frame of recent discussions with European insurers, I have noticed that European insurance companies conducting business in multiple countries are also facing difficulties to decide between two strategic alternatives when replacing their existing policy administration systems:

- Implement a single application in all geographies where they conduct business, or

- Select one specific vendor in each geographical region.

Knowing that insurers have their own specificity and objectives in terms of future expansion and strategy, I recommend them to define and rank priorities around four major key decision elements when reviewing this important question:

Functionality: I recommend insurers to define functionality priorities. To do so and based on our PAS reports, they should be able to build their own functionality matrix. This exercise can particularly support them to identify which functionality elements are more important than others and how they can support their strategic objectives in the long run.

Technology: I consider that technological flexibility is an important factor insurers should clearly assess when making the decision to replace their policy administration systems. Therefore, I encourage insurers to consider technology factors when prioritizing their IT requirements.

Experience: Since replacing a policy administration system can require considerable efforts in terms of customization, choosing an experienced IT vendor is important. Therefore insurers should emphasize factors related to insurance business know-how and expertise when evaluating vendors.

Geographical expertise: The insurance industry in Europe can be very different from one country to another and understanding insurance business drivers and challenges affecting a specific region is a must for IT vendors offering their solutions and services in a dedicated European insurance market. Regardless of their size, I recommend insurers not to neglect local and small IT vendors having specific expertise and knowledge in dedicated geographies.

Choosing the best alternative represents a key challenge for insurers’ CIOs since this decision can strongly impact their company’s ability to achieve strategic goals in the long run and I hope that our PAS reports will be helpful to them.

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