Policy AdministrAtion
r Ates
BLOGS
BEST
Hidden P&C Policy
Admin Project Costs
and Challenges Revealed
from: Joe McKendrick,
March 22, 2012
topic: How Allstate
Crowdsourced a
Vexing Data Problem
Large insurers are spending nearly three times more ($23.5 million) on
policy administration system (PAS) projects than midsize insurers ($8.7
million), and both allocate around 50 percent of that for internal services.
This data comes from a Novarica report, “U.S. P&C Policy Administration
Projects: Averages and Metrics,” which also reveals that insurers that have
completed such a project have experienced improvements of more than 25
percent in speed-to-market and data accessibility.
The report is based on a survey of 37 P&C insurers— 11 large insurers
(over $1 billion in premiums) and 26 midsize (between $100 million and $1
billion in premiums)—that have completed policy admin projects within
the last 10 years. The vast
majority of P&C PAS proj-
ects included several other
components—agent portal,
rating engine, underwriter
workflow, billing, claims,
etc. Large insurers typically
completed their initial roll-
outs within 20 months and
their full projects within
40 months. For midsize
insurers, rollouts were
generally faster, but more
than one-third of the full
projects took longer than
40 months.
When it comes to results, Novarica analyst and report author Chad
Hersh was most surprised with the satisfaction surrounding speed-to-mar-
ket payoffs: “Vendors make many promises around speed-to-market, but
the survey results indicate that the results are being delivered.”
The biggest challenges insurers noted? Change management, communi-
cation and fear of change—all relating to internal culture.
The year 2011 was the second most costly for
insured losses and included the highest-ever level of
insured earthquake losses. According to a report from
Marsh, this was the key driver of the rise of global property insurance rates in the first quarter of 2012.
The report, “Global Insurance Market Quarterly
Briefing: Q1 2012,” indicates that global property
insurance rates continued to firm in the first quarter
of 2012 despite the absence of major natural
catastrophes.
In countries affected by losses, rates for catastrophe-exposed risks continued to increase at a higher
rate than risks with no catastrophe exposures. In the
United States, rates for catastrophe-exposed risks
generally increased between 10 and 20 percent,
while property accounts with no catastrophe exposure typically rose by up to 10 percent.
“In the U.S., the property market continues to be
in a state of transition with insureds more likely to
experience rate increases than those renewing with
flat or modest rate decreases. We believe that this
trend will continue in the short term, with the average rate of increase continuing to rise month over
month,” said Dean Klisura, U.S. risk practices
leader, Marsh.
distribution
One-in-Five Shop at Work for Life Insurance
A study of Americans’ buying habits
found that nearly 20 percent of Americans shopping for life insurance went
through their place of work, according to
LIMRA.
The firm’s research notes that of
those shopping at work, 75 percent actually purchased life insurance products
through their employers. A full 30
percent of workplace shoppers said they
shopped simply because the product was
offered to them at work.
According to LIMRA, life events—such
as changing marital status or having or
adopting a baby—are likely triggers that
drive people to shop for life insurance in
the open market. In the workplace, the
same holds true—a change of marital status
or a new baby round out the top three reasons consumers shop for life insurance.
“More and more people are turning
to their place of work to get the financial
products they need,” said Kim Landry,
analyst, LIMRA Group Product Research.
“Clearly, the convenience of having the
resource at their place of work coupled
with the feeling of security felt by working
with someone their employer has (implic-
itly) approved, are drawing consumers to
this channel.”
Workplace shoppers also tend to be
younger than those who shop through
other channels; they have higher average
incomes than other shoppers and tend
to have more investable assets, added
LIMRA.
... Will crowdsourcing work
in the insurance industry?
Allstate put the concept to the
test by recently conducting a
crowdsourcing competition, in
which it sought to gain better
insights into the relationship
between bodily injury
liabilities and vehicle types.
The competition was
administered through Kaggle,
a site that posts competitions,
and opens up organizations’
complex data problems to
scrutiny by an open network
of data scientists. A $10,000
prize was awarded by Allstate
at the end of the competition.
Ultimately, 202 players,
competing as 107 teams, submitted 1290 entries. The winning entry was 340 percent
more accurate than Allstate’s
existing method for predicting claims based on vehicle
characteristics. Although the
competitors developed their
algorithms based on coded
data, Allstate now has predictive insight on exactly which
characteristics of a vehicle
translate into increased risk of
bodily injury insurance claims,
and can apply that insight to
its product and pricing
strategies.
Crowdsourcing offers a
compelling business case for
insurers—as well as other
types of companies—seeking
cost-effective ways to expand
innovation and problem-solv-ing efforts.
Join the conversation:
http://www.insurancenet-
working.com/blogs/
ec v rs tio :
ttp/w .inu n e
g om b gs/
