exl white paper - why pas implementations fail

70% of policyadministration system

implementationsfail

10 best practices to beat the odds

An EXL whitepaper

Written by

Aditya ChaturvediSenior Assistant Vice President [email protected]

Alexander KloubekVice President,[email protected]

1 © 2016 ExlService Holdings, Inc.

This statistic may be shocking considering

how vital these systems are to a carrier’s

ability to successfully execute core policy

processes, capitalize on new market

opportunities and retain their existing

client base.

While PAS platform transformation is

becoming increasingly necessary for

most large and mid-market property

and casualty (P&C) firms, the actual

transformation journey typically faces a

number of major difficulties. Complications

include escalating implementation costs,

mismatches between the expected

system functionality versus what is actually

delivered, user acceptance challenges,

schedule overruns and adverse customer

experiences.

In worst-case scenarios, the entire program

falls significantly short of planned or

expected benefits.

Based on current industry trends, PAS

platform transformations will continue

being a crucial priority for both mid-size

and large carriers. Expected benefits

include improved speed-to-market,

enabling newer sales channels, improved

operational efficiency, improved customer

experience, higher rates of customer

retention, as well as better utilizing

analytics for data-driven decision making.

Because of these drivers, it is no surprise

that over 120 new PAS implementation

projects start each year in North America2.

Even though policy administration system (PAS) platform transformation has been a hot topic within the insurance industry for some time, 70% of PAS implementations fail to deliver on their objectives, either in terms of cost, speed of implementation or, most challenging of all, the desired business benefits.

[ 70% of PAS implementations fail — 10 best practices to beat the odds ]


start an implementation is often based on

a very specific problem, rather than the

need for an overall system or organization

reboot. Carriers may find themselves

well into a tactical system update or other

minor technology interventions before key

decision makers realize that a total system

replacement may be necessary.

Even when the process starts out well

unexpected hurdles may arise during the

course of the implementation. Carriers

often face changing goalposts, scope

creep and budget overruns for the project,

as industry best practices and the

regulatory & compliance landscape

change. Another common source of

significant scope creep is jumping straight

to detailed requirements gathering

without defining the overall business

vision

of the target operating model the PAS

platform is expected to support. A failure

in communicating the broader vision with

the development team(s) may cause them

to produce architecture dissociated from

project goals, resulting in delays and/or

failure in user acceptance. If employee

concerns are not addressed early on in

the implementation, staff members may

become worried whether automated

processes or other functions will make their

jobs obsolete. This may cause a distracted

workforce and loss of project support.

Even if carriers make it to the end of the

program, they may

realize that multiple

38% of all insurance firms intend to adopt

or replace their PAS before 20171, with 60%

of P&C carriers developing new platform

systems or major enhancements to existing

systems within 20163.

If a carrier wants to beat the odds and

successfully transition from a function-

oriented legacy system to an enterprise-

wide platform, they must understand the

challenges and best practices associated

with PAS implementation.

Mind the gaps — 10 reasons why most PAS implementations failBefore beginning a PAS implementation,

carriers must first examine why so many

PAS implementations fail. The drive to

PASimplementationsfail



unforeseen requirements are missing due

to a lack of initial planning. Frequently, this

triggers an iterative cycle of scope changes

leading to additional requirements and

so forth. Such cycles at a late stage often

result in widespread project fatigue among

employees.

Carriers can avoid these mistakes

by focusing on the 10 reasons PAS

implementations are most likely to fail. The

graphic illustrates the steps and processes

necessary for a successful PAS

implementation. The items in orange

represent areas that are most commonly

overlooked or improperly managed

throughout the program lifecycle. These

commonly overlooked gaps make or break

a program, but can be avoided through

strategic planning and decision making.

Programmanagement

Design &architecture

Requirementsmanagement

Changemanagement

Configuration &customization

Testing &training

Benefit validation & feedback loop

9

8

7

5

64

31

2

Businesscasemanagement

Benefitquantification

Planning &scheduling

Resource/vendormanagement

Mobilization &execution

Governance &change control

Currentstateassessment

Modelattributescomparison

Targetoperatingmodel design

Targetarchitecturemodel design

Rating andunderwriting

Customerexperience

Policyadministration

Reporting &analytics

Forms &letters

Datamigration

Maximum impact on program success

Changestrategy

Changeplanning

Stakeholderanalysis

Communicationplanning

Execution ofchangestrategy

Applicationconfiguration

Applicationcustomization

Integrationwith othersystems

Forms &letters

Integrationtesting

Usertesting

Performancetesting

Producttraining



Carriers should also examine what their

goals are for PAS implementation. They

should discuss how much they expect to

reduce the organization’s costs or increase

its profits. The reason for any new functions

to be designed should be another topic of

focus during this stage. For instance, if the

carrier is implementing an auto-quoting

system streamlining the manual

underwriting process, what is the expected

value increase in new business premium?

Committing the time, research or external

advisory costs to answer these basic

questions can help a carrier set reasonable

and specific goals at the start.

Carriers can often begin to define success

by looking at their competition. They should

examine how much their competitors

save after PAS implementation, what

operational efficiencies can be achieved, as

well as establish direction as to where and

how they will realize increased revenue.

Oftentimes, revenue increase goals are

created without a clear understanding

of how the PAS platform will drive this

revenue increase across channels,

geographies and customer segments.

Policy administration system features can

be overwhelming, especially when

comparing multiple systems side-by-side.

The temptation to use every feature and

functionality of a new application is high,

but it may not be the best choice for the

entire enterprise due to other interlinked

applications and systems currently in

use. Carriers must take a holistic view of

which combination of features across all

1. Planning and schedulingA policy administration system

is only one component in the

enterprise-wide ecosystem of

applications, processes, and interfaces.

PAS platform transformation success is

dependent on identifying, planning and

implementing all the necessary changes

across the entire ecosystem in a logical

sequence during the transformation

program.

During planning and scheduling activities,

it is critical to set clear goals to define what

a successful PAS implementation will look

like upon completion. Despite seeming

like an obvious foundational pre-requisite,

countless PAS implementations launch

without clear metrics and benchmarks to

define their overall success.



Carriers should also explore innovative

pricing mechanisms to give a vendor

“skin in the game”. There is no one-

size-fits-all approach when negotiating

a price. Traditional models such as

“implementation costs + license fees”

do not create any incentive for the PAS

platform vendor to identify creative

solutions for the carrier’s problems, or

accelerate implementation timelines while

meeting the business objectives.

During the planning phases, carriers must

decide how and when they will roll out the

new system’s features. Large-scale “big

bang” implementations are more likely to

suffer from scope creep and expectation

fatigue. This can be countered by showing

tangible, visible progress iteratively to

the user groups to drive engagement

and build positive momentum towards

the PAS implementation program. Real-

world implementations show that using

a modularized approach works best, as

it helps to deliver tangible, incremental

gains that are quickly implemented. This

approach creates user buy-in and allows

for tweaking upcoming releases based on

actual user feedback.

enterprise applications would be the best

fit for their specific needs and goals.

Carriers should select a platform vendor

only after building a concrete vision for

their target operating model and defining

objective expectations and measures of

success from the PAS transformation.

Selecting a vendor is arguably the largest,

most significant predictor of a program’s

success. However, this step is often given

only a cursory or technology-oriented

consideration due to existing vendor

relationships. A carrier’s default vendor will

likely try to fit the carrier’s needs into the

solutions it sells, rather than helping them

find the optimal solution meeting their

needs. Hence, independent and unbiased

expertise is absolutely vital to making the

correct decision.

...independent and unbiased expertise is absolutely vital to making the correct decision.



Even when this is successfully accom-

plished, the project can be thrown off

course when any stakeholder requests

a change to scope, features or controls.

Without clear change control criteria,

scope creep can become debilitating and

drive the entire program towards failure.

Program managers will need to walk the

frustrating tightrope of making judgment

calls without access to the tools necessary

for making clear decisions, locking them in

a constant struggle to balance the program

budget and schedule against the benefits

of implementing the desired changes.

Creating a clear blueprint for governance

and change control procedures and

securing buy-in from key stakeholders

at the onset can help carriers avoid such

pitfalls and significantly increase the

likelihood of program success.

3. Target operatingmodel design

The target operating model

is a crucial link between the

carrier’s business vision and its

realization through the PAS transformation

program. The target operating model

(TOM) lays out how the business wants to

organize itself and manage its resources, as

well as the tools it will utilize in the future.

Without a robust and comprehensive TOM

that addresses the unique challenges

faced by the carrier, embarking on a PAS

transformation program is very likely to

result in catastrophic failure.

Carriers should not hesitate to seek

external expertise during the TOM design

process.

2. Governance andchange control

Even if a carrier’s project

plans are robust and

detailed at the onset, ad hoc

governance and change control systems

can obliterate forward progress at the

desired pace very quickly. When defining

program governance procedures, carriers

need to identify all possible internal

(operations, underwriting, finance, HR, IT,

legal, compliance, marketing, etc.) and

external (agents, brokers, policyholders,

etc.) stakeholders in the program,

determine their rules of engagement,

perform a detailed impact analysis for all

stakeholders and understand the optimal

processes and timing for their engagement.



Alternatively, consider campaign

management. Carriers need to transcend

traditional marketing channels via agents

and brokers in order to aggressively

compete for market share. The TOM needs

to consider the various modes of running

direct marketing campaigns that are being

developed and implemented in the market

today. External expertise can be a very

crucial differentiator in ensuring the new

TOM can deliver on the business vision.

4. Target architecturemodel design

The target architecture

model sets up the technology

infrastructure that will ultimately

support delivery of the TOM and ensures

the PAS is capable of achieving the

expected business benefits. For example,

the system chosen for handling workflow,

document management, and invoicing

functions should be capable of achieving a

pre-defined set of performance standards.

The target architecture model design is

often inaccurately viewed as a specialized

task managed by the technology

leadership within the carrier organization.

This can cause a significant disconnect

between the carrier’s expectations and

the implemented architecture. That

disconnect can result in sub-optimal

infrastructure incapable of achieving

the desired interactions between the

program components. The architecture

model needs to be able to respond to

Utilizing knowledge of industry best

practices is critical for ensuring that the

output from this exercise is not obsolete at

the outset or will not result in competitive

advantages in the marketplace. For

example, carriers may aim to expedite and

streamline the policy document delivery

process by envisioning e-delivery channels

(e.g. PDF documents being emailed to the

broker). However they may need external

assistance to determine the optimal

delivery timeframe between the commit-

to-buy decision being made and the actual

policy document being issued. Without

this insight, they might end up restricting

themselves to the speed of document

delivery that a vendor proposes, rather than

what they really need to be competitive.



However, to accurately define and measure

customer experience, carriers must know

the expectations of their customers. For

example, customers may wish to see all

the relevant questions upfront during the

quoting process, or prefer to be asked the

questions in distinct, easy-to-understand

stages. They may have different preferred

methods of contacting the carrier, such

as through a website or by phone. These

are details that are often overlooked or

never thought of at all, with the existing

functionality or look and feel of the chosen

application being taken as the default

option. Inevitably, such implementations

lead to significant negative customer

feedback when launched.

Customer journey maps are one of many

powerful tools available to carriers for

mapping all of the customer touch-

points during the business lifecycle.

They are also useful in identifying crucial

customer “moments of truth” during

the entire lifecycle of their interactions

with the carrier. This allows for focusing

the program budget and resources on

optimizing the overall customer experience

at points that matter to the customer

instead of trying to improve every aspect of

the customer’s experience which may not

yield tangible benefits.

the performance demands of the TOM.

Many PAS implementations have resulted

in a working application being deployed

which has significant performance lags,

or availability and reliability concerns that

result in acceptance failure.

5. Customer experienceRating and underwriting are

often seen as the main focus of

customer experience. While those aspects

are important, they are also some of the

relatively easier parts of the program to

define and implement due to their tangible

nature and being driven by mathematical

formulas that can be defined and

implemented with precision.



The abundance of third-party data

resources reduces the carrier’s

dependence on their own internal data.

Digital information from social media

accounts and various devices including

smartphones and computers have become

a major resource for insurance companies

seeking behavioral insights.

A new PAS implementation allows carriers

to glean all sorts of trends from the

data they currently have, but only if they

have the capability to mine their data

intelligently. Using home insurance as

an example, a carrier may determine that

they can achieve higher profitability from

homes that are located at cross-roads

or intersections due to higher visibility of

the property resulting in lower rates of

vandalism and burglary. However, such

nuanced outcomes are nearly impossible

to discover without the right data being

captured and the analytical tools being in

place to identify insights.

6. Reporting and analyticsTo remain relevant, a carrier must

understand the growing role of

analytics and reporting to all lines of

business. Carriers are investing heavily in

technology and data, hoping to improve

various areas including underwriting

new risks and influencing users’

behavior.

Customer Journey Map

Th

inki

ng

Jou

rne

yFe

elin

g

Realization Awareness Investigation Exploration Joining Participation

High engagement

Moderate engagement

> Realization observation 1> Realization observation 2> Realization observation 3

> Awareness observation 1> Awareness observation 2

> Investigation observation 1> Investigation observation 2> Investigation observation 3 - Investigation sub observation 1 - Investigation sub observation 1

> Investigation observation B - Investigation sub observation B2

> Exploration observation 1

> Exploration decision 1

> Exploration decision 1 - Exploration decision A

> Exploration decision 2

> Joining observation 1> Joining observation 2> Joining observation 3> Joining observation 4> Joining observation 5> Joining observation 6> Joining observation 7> Joining observation 8> Joining observation 9> Joining observation 10

> Participation observation 1> Participation observation 2> Participation observation 3



change effectively increases the return on

investment (ROI) for projects more than

300%. This data speaks volumes to the

importance of having a comprehensive CM

plan in place for handling both system and

personnel changes.

Regardless of the presence and availability

of strong CM practitioners within the

carrier’s own organization, choosing a

vendor that understands the value of

change management and practices

effective change management techniques

is especially crucial when a carrier is

asking their entire organization to adapt

to significant changes in how they work.

Without an effective Change Management

Plan, team members and business

resources will fear for their jobs, or be

concerned about the significant disruption

to their daily work due to the new

processes and tools being implemented.

This kind of work environment can quickly

become toxic and result in program failure.

A comprehensive CM plan should also

include a robust release management

strategy for new functionality to manage

staff expectations. For example, during

early releases of the PAS platform,

current users may notice missing features

that were still being built and be more

concerned about their absence than the

new capabilities they have been provided.

Communicating the roadmap of what is

to come in the future with the associated

timelines will go a long way in allowing

users to focus on maximizing the benefits

from the features on the

new platform as they get

released.

Most PAS platform alternatives in the

market today will have some analytics and

reporting capabilities built in. However,

carriers must lay down the framework

for any reporting or analytical needs

early in the process. These reporting

requirements must be tied back to the

target operating model and the business

vision to ensure that the carriers are

capturing the information they need to

make good business decisions and look at

the captured data in meaningful ways.

7. Change strategyAccording to a recent McKinsey

study4, projects with excellent

change management (CM) strategies are

six times more likely to meet or exceed

project objectives. In addition, managing



opinion regarding how the system should

behave. It is important to keep in mind that

the user base that will test the system will

often consist of actuaries, salespeople

and underwriters rather than testing

professionals.

Before letting any personnel test a new

system, carriers should provide staff

members with the necessary tools and

training to ensure there is a common

understanding of the expectations and

objectives for the testing being conducted.

Knowing what the testing stage aims to

accomplish and having a clear roadmap for

defect reporting, triage and remediation

is another prerequisite that seems too

obvious to merit a specific mention, but

many PAS implementations get stalled

during this critical phase due to a lack of

this clarity. What makes matters worse is

the natural tendency for all stakeholders

in the process viz. business users,

requirements analysts and developers

to point towards each other as being

responsible for the defects instead of

working cohesively to understand the

underlying issues and addressing them

as a group. A well-documented and

agreed testing plan which includes the

aforementioned components as well as

acceptable levels of defects at various

criticality levels can go a long way in

fostering the collaboration which is vital to

a successful testing stage.

Prosci’s® ADKAR® model is a very robust

Change Management framework that

carriers can leverage to ensure they build

and implement a Change Management

strategy that meets their needs. This

framework aligns well with the typical

program implementation cycle, and

enables a systematic and iterative

approach for change management.

8. User testingIn theory, testing a system to

see if it meets all requirements

should be easy considering the plethora

of tools and techniques that are available

today. However, the program can stall

if testers don’t know what to look for, or

don’t understand the difference between

true defects and their own preference or



or simply being no longer required to do

their manual tasks due to new automated

systems and/or processes are strong

demotivating factors for any group of

users. It is critical to address these

concerns throughout the lifecycle of the

implementation program by using

appropriate change management

mechanisms designed to create an

environment of eagerness and positivity

towards the new system and processes.

Once this is accomplished, the actual user

training can proceed on a significantly

more productive trajectory.

The training curriculum should reinforce

the purpose and benefits of changes, and

be designed from a process perspective

rather than focus on application features

or screens. Trainees are likely to benefit

from understanding how they can execute

their day-to-day processes in the new

system, rather than how every screen in the

application works.

Carriers should not treat training as

an afterthought or academic exercise

necessary to start user adoption of the new

system and processes. Without a clear

idea of what they want their employees

to learn, training sessions can create

frustration and resentment. Change is

hard. The more comfortable employees

feel with a new system, the more likely they

are to accept it.

9. Product trainingFor any PAS Transformation

program, the “rubber hits the

road” when the new application and the

associated processes and procedures

are rolled out to the user community.

With a majority of the user community

being quite familiar with the previous

processes and systems, the resistance

to any sort of change is usually very high.

This is exacerbated by the relatively long

tenure of insurance industry employees,

where it is not uncommon to find users

performing essentially the same role for 15

years or even more. Like most other similar

examples, this resistance to change is also

typically driven by the fear of the unknown.

Concerns about reduced productivity,

being replaced by less experienced staff



a change occurs in the program, or fail to

define the benefits at all.

An iterative approach to implementation

mitigates or eliminates these issues.

Business users can evaluate feature

implementations, and request changes

to address their precise needs. As each

subsequent module is implemented, the

expected business benefit realization

can be measured, and any required

corrective steps can be taken to ensure

the implementation continues towards

its planned benefits and goals. Carriers

should consider using an Agile-based

iterative delivery approach to enable

sequential staged implementation and

solicit feedback. Even if they have

reasons to not adopt the Agile model of

application development in full (and many

circumstances make it impractical to do

so), carriers can still benefit from adhering

to the philosophy of tackling problems in

smaller bite-sized pieces.

10. Benefit validation and feedback loop

While the benefits of a more

efficient, smarter, and robust

PAS seem obvious, it can seem difficult

to quantify and truly validate the

business value derived from such an

implementation.

One key reason is that the business needs

rarely remain static over the course of

a multi-year implementation program.

Project requirements and goals may shift

several times during the development

phase. External and orthogonal factors

may impact the ability of the project to

deliver as per originally stated objectives.

The real problem occurs when carriers fail

to revalidate the business benefits against

new program objectives whenever such

Industry challenge

of large PAS transformation

programs struggle to meet

desired timeline and budget

expectations

70%

For programs that do meet timeline and budget expectations

do not yield expected business value or ROI

programs actually deliver the projected

business value, leaving

a significant negative

impact on the business

of all PAS transformation

As a result,

>67%<10%



References

1. CEB TowerGroup Survey

2. Celent “Deal Trends in Property/Casualty Policy Administration Solutions” 2011 North American Edition

3. Datamonitor Survey

4. “Change Management That Pays,” McKinsey Quarterly, 2002

[ 70% of PAS implmentations fail — 10 best practices to beat the odds ]

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