Total Price or TCO Implementing and Maintaining a 2015/Sessions/TECH/473I… · •Predictive...
Transcript of Total Price or TCO Implementing and Maintaining a 2015/Sessions/TECH/473I… · •Predictive...
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Total Price or TCO – The Value of Implementing and Maintaining a Modern PAS
Ward Group
CapSpecialty
OneShield
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
AGENDA
Introductions & Why Total Cost of Ownership Focus
Ward Group TCO Study Findings
Panelist Response to Industry Impacts, Transformation,
TCO & Value
Audience Q&A
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
INTRODUCTIONS
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
TODAY’S SPEAKERS
Jeff Rieder, Partner, Head of Ward Group
Brian Rohrer, Head Application Development, CapSpecialty
Tim Steele, SVP Product Management, OneShield
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
TOTAL COST OF OWNERSHIP STUDY
OBJECTIVE: Gather and analyze data on the true ongoing
costs of maintaining your modern PAS focusing on:
• Self-sufficiency capabilities
• Business agility
• Maintainability
• Cost benefit analysis of upgrades
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Key Themes
The outlook is positive
• Heavy investments in systems and expansion plans (products and
geography)
• Still, many emerging external trends are affecting strategies
Still a legacy based industry not aligned with goals
• Age of systems
• Not meeting business and customer leads
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Key Themes
Companies with a modern system are seeing advantages
• Speed to market (products and states)
• Quote / issuance / expert underwriting capabilities
More than $ - there is a cost of being not on current systems
• Technology costs need to be weighed against costs of not enabling
business
• Legacy retirement strategies also have negative impact
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Industry Challenges and Initiatives
Challenges facing the industry
• Keeping up with technology and managing associated costs
• Where is growth going to come from after pricing initiatives exhausted
(flat PIF growth)
• Managing total exposure and having adequate reinsurance related to
recent CAT activity
• Keeping pace with evolution of data analysis and predictive analytics
• Diminishing returns with improved results
• Personal auto product and pricing strategy – Telematics / UBI
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Industry Challenges and Initiatives
Top initiatives
• Strategic planning around distribution strategy – evaluating alternate
distributions, strengthening key agency relationships, and renewed
focus on terminating unprofitable agencies
• Enhancing customer experience is a focus of carriers encompassing
all touch points in lifetime of relationship
• Core system replacement and legacy retirement
• Predictive analytics projects continue in underwriting, but now span
rest of company including claims, agency management, marketing,
telematics, and premium audit
• Aligning company structure to future strategy – includes span of
control review
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
How is the Industry Performing?
Return to underwriting profitability
Capitalize on improving economy / push growth
Distribution channel management
Leverage technology investments
Data analytics for informed business decisions
Managing regulatory reform
Mixed
Needs Work
Unknown
Mixed
Source: Ward Research Center PAS Total Cost of Ownership Report
What we learned in the study…
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Participant Profile – By the Numbers
29 Participants in study
$869M Average GPW per
company
2.5 Policy Admin Systems per
company
$382M Average GPW per
system
222,000 Policies supported per
system
18 States supported per system
10 Products supported per
system
663
509
294
40
343 322
Premium PerSystem (mms)
Policies PerSystem (000s)
Multiline Commercial Personal
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Age of Systems (Years)
Average age of systems is 17.2
years, with expected 8.4 years of
remaining life.
Legacy systems were 21.8 years
old, with only 5.1 years of
remaining life expected.
Only 30% of companies
responded they have updated their
legacy systems.
Additionally, legacy systems were
significantly deficient in upgrades,
which may cause even greater
disparity on capabilities to modern
systems!
17.2
21.8
4.2
8.4
5.1
17.7
8.5
14.0
1.4
Overall LegacySystems
ModernSystems
Years in Production
Remaining Life
Years Since UpgradeSource: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
50%42% 42%
35%
12%4%
0% 0%
19%27%
23%19%19%
27%35%
46%
Policy Administration Claims Billing Enterprise
Vendor Custom Developed Not currently replacing, but within 2 years No plans to replace
New System Implementation
62% of companies are participating in a policy administration system
implementation and 46% of companies are implementing a new claims system.
New system projects remain a high priority item for insurance carriers. As
companies achieve some moderate growth, they are looking to start or escalate
their systems projects.
In 2012, companies were starting new system projects. In 2013, many of those
projects are entering development and integration of the initial location. There
are also a high percentage of companies planning system replacement within
the next two years (27% for claims systems and 23% for billing systems).
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
2013 Spending Changes - By Function
0% 20% 40% 60% 80% 100%
Finance
General Counsel
Billing and Collections
Commissions
Audit
Personal UW/Processing
Agency/Broker Mgmt
Commercial UW/Processing
Actuarial
Human Resources
Claims Administration
Marketing
Product Development
Information Technology SignificantlyLess (-15% orless)
ModeratelyLess (-3% to -15%)
About theSame (-3% to3%)
ModeratelyMore (3% to15%)
SignificantlyMore (15% ormore)
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
6%
44%50%
Budget StatusUnder Budget /Timeline
On Budget /Timeline
Over Budget /Timeline
35%
65%
Timeline Status
System Expense – Policy Administration
Comments:
Personal lines carriers are more likely to be over budget (80%) and timeline
(100%) than commercial carriers (36%, 50%) respectively
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Systems Expense
0.97 1.04 0.82
0.31 0.35
0.21
0.38 0.39
0.35
1.66 1.79
1.38
Overall Legacy Modern
Cost per System (mms)
Company Staff Consultants Maintenance
Modern systems required 23% less to maintain per system.
However, due to less premium actually moved to the systems, expenses relative to premium were higher on the new systems.
If the average modern system had the full premium of the average legacy system, expenses relative to premium would drop from 0.58% to 0.31%.
Overall, the average company used consultants to support systems - 22% legacy and 14% modern systems of their total resources.
0.26% 0.23%0.35%
0.08% 0.08%
0.09%0.10% 0.09%
0.15%0.44%0.40%
0.58%
Overall Legacy Modern
Cost per System (% GPW)
Source: Ward Research Center PAS Total Cost of Ownership Report
A Lasting Legacy…
48%52%
Legacy Systems
Ongoing System Sun-setting
Although the average legacy
system was 21.8 year old, only
52% are in process of being
sun-setted.
Legacy systems can be difficult
to retire completely due to the
amount of premium, states and
lines of business affected. The
average legacy systems also
supported nearly 2.5 times
more products than the
modern systems.
Source: Ward Research Center PAS Total Cost of Ownership Report
The value is in business benefits
of technology improvement…
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Speed to Market
Important to consider market
benefits when develop cost /
benefit analysis for business
case to replace legacy
systems
Chart shows IT time and costs
to develop new product and
state
Modern systems were
moderately to significantly
faster and less expensive for
IT departments to introduce
new states and products78%
58%
82%
82%
59%
48%
67%
48%
63%
51%
71%
58%
0% 20% 40% 60% 80% 100%
Product CostsUnder $250k
Product DevelopedUnder 6 Months
State CostsUnder $250k
State DevelopedUnder 6 Months
Overall Legacy Modern
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Functional Productivity Improvement
Only Personal Processing realized decrease in
expense ratio
Claims improvement driven by new claims
systems and centralization / consolidation of
headcount
Commercial and Personal Underwriting
improvements in automation and predictive
analytics. Also benefit from higher retentions with
high percentage of automated renewals
Commercial and Personal Policy Processing
realizing benefits of automation, particularly
through streamlining agency interface and more
automated renewal processing (both eliminating
duplicate entry)
Billing and collections, on-line payment systems
and automated payment processing contributing
to billing productivity gains
0% 10% 20%
Billing
PersonalProcessing
CommercialProcessing
Claims
Commercial UW
Personal UW
Productivity Improvement per Policy or Reported Claim from 2008 - 2012
Source: Ward Research Center PAS
Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Functional Productivity Improvement
$6,290
$9,806
$11,497
$13,918
Multi-Line Work Comp
Average Premium per Commercial Lines
Underwriter
Overall High Performer
Commercial multi-line top
quartile performers averaged
82% more premium per
underwriter than overall
benchmark group
Mono-line work comp top
quartile performers averaged
42% more premium per
underwriter than overall
benchmark group
Automation provides capacity
to work more efficiently
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Functional Productivity Improvement
Top quartile performers
averaged 70% more
premium per underwriter
than overall benchmark
group
Automation provides
capacity to work more
efficiently
$15,510
$26,391
Overall High Performer
Average Premium per Personal Lines Underwriter
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Functional & Productivity Improvement
Service Standards – Personal Auto Overall Legacy Modern
Minutes per New Policy Quote 7 5 12
Minutes per New Policy Issuance 271 128 4
Minutes per New Policy (excl. Batch) 12 11 12
% of Systems Batching New Policy 18% 27% 0%
Minutes per Endorsement 279 126 2
Minutes per Endorsement (excl. Batch) 6 5 8
% of Systems Batching Endorsements 19% 27% 0%
Expert Underwriting Pass Rate - New
Business53% 48% 62%
Expert Underwriting Pass Rate - Renewal
Business75% 66% 88%
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Improved Service Standards – Agency Self Service
0% 25% 50% 75% 100%
View Commissions
Pay Bills
View Claim Status
Report Claims
Non-Premium Endorsements
Premium Endorsements
Purchase/Bind Policies
Receive Quotes
View Policies
View Account Info
Percentage of Commercial Lines Respondents with Capability
Overall
High Performer
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Improved Service Standards – Agency Self Service
0% 25% 50% 75% 100%
View Commissions
Pay Bills
View Claim Status
Report Claims
Non-Premium Endorsements
Premium Endorsements
Purchase/Bind Policies
Receive Quotes
View Policies
View Account Info
Percentage of Personal Lines Respondents with Capability
Overall
High Performer
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Improved Service Standards -Policyholder Self-Service
0% 25% 50% 75% 100%
Pay Bills
View Claim Status
Report Claims
View Policies
View Account Info
Percentage of Commercial Lines Respondents with Capability
Overall
High Performer
Source: Ward Research Center PAS Total Cost of Ownership Report
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Improved Service Standards -Policyholder Self-Service
0% 25% 50% 75% 100%
Pay Bills
View Claim Status
Report Claims
Purchase/Bind Policies
Receive Quotes
View Policies
View Account Info
Percentage of Personal Lines Respondents with Capability
Overall
High Performer
Source: Ward Research Center PAS Total Cost of Ownership Report
Additional value opportunities
created through flexible core
systems…
Additional Value OpportunitiesOther Potential Gains
Total Cost
Of
Ownership
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Q&A
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
Closing Summation
When undertaking a core system transformation – what are
the most important factors you considered with regard to cost
as well as value?
IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW
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