Our Legacy, Life Insurance Policy Administration System(s) – Where Do We Go From Here? (Part 1)

Ernst & Young noted in their 2013 Canadian Life Insurance Outlook, “Many Canadian life insurers continue to use legacy systems that require significant resources to operate. In addition, these systems are not flexible enough to provide the kind of business and regulatory information required for strategic, operational and compliance purposes”.

While known by a variety of different names – policy administration systems, back office systems, and “&=+%@#” (you get the point) systems, they remain the administrative backbone of all life insurance companies.  However, legacy systems are a significant budget line item for ongoing maintenance expenditures (year after year after year) and, as one Senior Executive once told me, they restrict your product suite.

I cannot tell you how many times I have heard “…our system can’t handle that”.  The result?  Missed opportunities and inhibited growth!

Many companies struggle with decisions around what to do with their aging policy administration system(s).  However, such decisions, with their operational and financial implications, must be made within the context of a 3 – 5 year strategic and operational planning cycle.   And there are no shortage of issues that need to be considered – including but not limited to:

  • Maintaining the status quo (while always an option, it demonstrates a lack of leadership when problems are just punted into the future for another person to handle)
  • Upgrading versus replacing
  • Building  a fence around existing system(s) and deploying a new system for new opportunities
  • Converting now or later…or not at all
  • Licence fee – based system or Software as a Service (SaaS)   (NOTE – SaaS, while in the emerging phase, must be given serious consideration)
  • Impacts on peripheral systems
  • Outsourcing closed blocks of business to BPO providers and reallocating resources to a new, more flexible system in support of open blocks and emerging opportunities.  Again, take a serious look at a SaaS environment.
  • Change management
  • Expectation management
  • Determining which policy administration system (of the roughly 25 systems available in Canada) best meets your needs – we can help you do that!

Critical success factors?  Internal alignment, extensive planning, ongoing communications, and the setting (& ongoing management) of expectations are big ones for me.

I would love to hear from you about your:

  • Experiences – the good…the bad…the ugly
  • Critical success factors

Leave your comments below!

2 comments on “Our Legacy, Life Insurance Policy Administration System(s) – Where Do We Go From Here? (Part 1)
  1. One important aspect in evaluating what to do about legacy systems is whether the new policy admin system is just a tool, or will the vendor and their policy admin product become valuable partners and a resource to upgrading the company systems, efficiencies and processes. The service and on going support after the sale are equally as important.

    • mikenurse says:

      The goal is to become a long-term strategic partner. In the absence of an account management system that has the dual role of dealing with operational issues and working with the customer on issues of a strategic nature, then the vendor will be nothing more than that – a vendor. In my experience, most companies fail to deliver on the strategic elements.

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