Three things are common for a majority of humankind nowadays: life, death, and life insurance. So, what really is life insurance? Technically speaking, it is a contract between an individual and an insurance company. The contract stipulates that the company will pay a fixed sum called ‘benefit’ to the listed beneficiaries upon fulfilment of certain conditions. These conditions usually include death, or fulfilment of policy period.

Like all other industries, the insurance is also seeing a sea change. Now, most of the work is carried out by software called Policy Administration Services (PAS). Policy administration systems (PAS) is the core foundation which supports an insurance company’s digital technology strategy. Loosely speaking, policy administration can be defined as complete life cycle management of various forms of insurance policies. Such systems are used to perform several core policy processes like rating, quoting and underwriting. PAS hosts all the policies written by insurance companies.  Various types of systems for different types of policies are collectively referred to as Policy Administration Services (PAS).

System of a system

Insurance is an ancient system. Records for insuring ship cargoes have been found across all ancient civilizations including Greece, Rome, and India. The 1666 great fire of London saw the emergence of companies providing insurance against fires. The first company offering life insurance, Amicable Society for a Perpetual Assurance Office, was set up in 1706 in London, UK. From thereon, the industry continued to grow. In this century, post World-War-2 economic boom proved to be a big driver for the industry’s growth in the US. However, the surge in liability cases during the 1980’s created a crisis. The crisis arose out of rising premium prices coupled with non-availability of insurance for various liabilities. This crisis resulted in several insurance companies getting bankrupt, and many fleeing the country altogether.  The industry has seen several such ups and downs, and is constantly evolving.

A big part of the evolution is seen in how the industry operates on a daily basis. Like all business ventures, the insurance industry was also paper driven. Heaps of files were a common sight of any office.  However, after introduction of computers, most of the workload has gradually shifted from humans to computers. Nowadays, software can handle various functions with more efficiency, and the records are easier to find. This is just one of the benefits of automation. The bag-wielding person pestering you to buy a policy is now a thing of the past. However, to paraphrase the play by Arthur Miller, the salesman is not dead, he has just shifted his marketing methods. He is now better organized also now, thanks to software and progress in artificial intelligence and machine learning (AI-ML). Let us take a look at how things have changed with introduction of PAS.

Types of PAS

Although insurance is a catch-all term, the industry includes various types of policies for different time periods and aimed at different classes of people. Different insurance formats are administered by different types of PAS. The Life insurance and Annuity or L&A platform mainly involves individuals investing sums to receive steady income either after the insurer’s death or after a fixed point in the future.

The second platform deals with Property and Casualty insurance. It is commonly known as P&C Core Insurance platform. These broadly focus on company employees, customers, and partners. However, all systems consist of some core components which are common to both the platforms.

Anatomy of a PAS

All insurance systems have one common function. Both types of systems contain the complete record of a policy, including creation, renewal, and restatement. They also include support for reporting and analytics to check performance indicators and ad-hoc analysis. They also include portals and apps to help with functions like self-service and billing. All systems provide support for quoting, issuing, and renewing of policies.  In other words, the platforms include features for both administration and for the clients. However, product offerings differ as per the segment the vendor caters to.
However, some features are common to both platforms, and vendors are incorporating new technologies.  The vendors are now increasingly incorporating business intelligence and machine learning for claims and underwriting. With an increased scope on digital ecosystems, vendors are opting for more open platforms for integration with a wider range of third-party systems.

Integration is the future

Integration plays a key role in enhancing the platforms’ key capabilities. Integration makes maintenance and software updates easier. Integration also makes sharing algorithms, products, and processes easier. Moreover, the system can access and process greater amount of data from various channels. The vendors are also putting in more capabilities to add to the value chain.

To achieve this, software vendors are now partnering with other developers to turn their solution into a platform by adding capabilities like BI, IoT, digital advisors and chatbots. They are also taking to newer technologies like cloud computing and SaaS (Software as a Service). However, companies either opt for cloud or prefer on-site access, depending upon their needs. However, while many capabilities appearing to be similar for both, there are key differences including degree of flexibility offered, software architecture, ease of access etc. Companies choose vendors taking into account all criteria.

This is our last stop before we explore this world in details. Don’t be left standing on the platform. Hop on!