One of the largest technology investments that will ever be made by an insurance company is replacing their back-office system of record. The policy administration system (PAS). The lore around these projects is deep and many a CIO has found that these projects rarely make heroes and can sometimes be career killers.
Against this backdrop, most of these projects ultimately succeed. The big questions revolve around time, cost, and scope. Did the project come in on time? Was the cost as predicted? Was the scope of the project as originally planned? These are the manageable levers that a project manager has in any project and certainly come into play in a PAS replacement.
This is all lead-up to the discussion of a recently published report: 2023 Global Health PAS Customer Perceptions. This is a companion report to the source report, published in December: Health Insurance Policy Administration System Vendors: 2022 Global ABC Vendor View. As part of the review of vendors, we essentially emulate the purchase process. We issue an online RFI, we do demonstrations, and we gather customer references. As part of the vendor review, we also issue awards for the best functionality, the best technology, and the best customer support. All of that is lead up to the most recent report, which takes that customer feedback in aggregate and looks at the view of the industry, rather than specific vendors.
It is an interesting view. We have done this report in the past, so we are able to look at the trend over customer perceptions from 2018, 2020, and 2022. Not all questions carried forward, but most do and it is an interesting view. While I won’t reproduce all of the information from the report here, I thought it would be interesting to share a couple key slides. A taste of the report, if you will.
The first focuses on cloud implementations. Note these figures are for all respondents, regardless of the length of time that the system has been installed. You can read this in different ways. The first is that half of the systems are still install on-premise. The initial reaction was that this number is fairly high. However, when you think it through, this means that half are not installed on-premise, which is a pretty significant percentage. A third are implemented in the public cloud. This is significant progress in the marketplace. In our discussions with insurers as recently as 2016 or so, a large percentage of insurers were still insisting they would never move to the cloud.
Another area of challenge for any system as large as a PAS system is upgrades. It continues to surprise those of us at Celent how many insurers are running PAS systems that are not current. Some are not only old systems but have not been upgrades in years. While the insurers are clearly losing out on new enhancements and features, they are also at risk for compliance issues addressed in newer releases. Many insurers attempt to cherry-pick upgrades which, in the long run, causes more challenges than it prevents. Which leads me to this next graphic:
In this graphic, we compare the scores from 2020 to the scores from 2022 on three upgrade metrics. The first is Ease of the overall upgrade. The second is the Speed of the upgrade. The third is the Cost of the upgrade. While the survey respondents and even the insurers do change from report to report, in aggregate, the scores are still meaningful. You can see in 2020, the scores were decidedly middle of the road. The scoring system is from 1 to 5, with 1 being poor and 5 being excellent. Over ease was just 3.35, speed was 3.48, and cost was 3.59. Not bad scores, at all, but not exceptional.
The scores from 2020 show measurable jumps. The lowest score of 3.81 is for speed, followed by 3.90 for cost, and 4.00 for the overall happiness. The lowest score in 2022 is higher than the highest score in 2020. That’s measurable improvement. Clearly there is still room for growth, but the direction is solid. Upgrades are a serious challenge and this level of improvement shows the investment being made by the vendors.
There is a lot more information in both reports. The review of so many systems is always a fun challenge. It requires a significant investment in Celent resources but the end result is a view of the vendor landscape that is critical for insurers considering a new system. Celent also leverages this information for consulting. We often consult with insurers and lead their system selection projects. As you can imagine, the amount of information we have far exceeds what can be comfortably included in a report. The information in the report is quite vast too, including the reference information by vendor.
In the market for a new system, in any of the lines of business we cover? Please reach out. We can help. For insurance, we have PAS reports for health, life and annuity, and property and casualty and our experts are here to help.