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Point of view AppendixA framework for responseCompetitive intelligence
The Group insuranceindustry is facingunprecedented change.How can a PAStransformationsupport your growthstrategy?
Powering Group insurance throughPAS modernization
Tightening up your core:
FS Viewpoint2
Executive summary
Group insurance carriers arefacing unprecedented marketdisruptions, but they also havea once-in-a-generationopportunity to respond.
At a crossroads
For decades, Group insurers enjoyedunprecedented stability as brokers, employers,and employees worked with carriers inpredictable ways. Now the opposite is true.
Disruption creates challenges, but alsobrings opportunities
As Group insurers seek to navigate the shiftinglandscape, many are discovering their existingpolicy administration systems (PAS), billing,claims, case installation, and enrollmentsolutions are unable to address newchallenges. Outdated technologies andantiquated development methodologies, alongwith other structural constraints, contribute tothe inability to modify legacy core systemsquickly or effectively enough.
In our view, this also means carriers have anunparalleled opportunity to gain competitiveadvantage by transforming their legacysystems. As shown in Figure 1, moderntechnology architectures provide the necessarycapabilities to help carriers succeed in this newenvironment. New technology platforms caneven empower business users to makeadjustments that once required dedicated ITstaff. This provides insurers with greateragility, improving their ability to be moreresponsive, improve customer centricity, andlaunch new products and services morequickly.
Getting to the goal
Based on our experience, the most successfulcore system modernizations start with abusiness-led model rather than a technology-led model. We recommend insurers start byundertaking the following three planningcomponents: understanding business design,prioritizing business goals, and aligningtransformation scenarios.
Our framework helps carriers develop aneffective business case that aligns resourceswith the highest business priorities, allowingthem to gain executive and stakeholder buy-in.
We have published several perspectivesexploring this topic for property and casualtyinsurers. This is the first in a series focused onthe Group insurance market. Although we willtalk about the drivers for core transformationchange across a variety of platforms, we willstart in this paper by exploring more detail oncomponents of PAS transformations.
Today
Posttransformation
The percent of insuranceCEOs that see more threatsthan there were three yearsago. But 59% also see moreopportunities.
61%
Figure 1: The insurance marketplace istransforming, creating both challengesand opportunities.
Source: PwC, PwC’s 18th Annual Global CEO Survey,Insurance sector data, February 2015.
Tightening up your core: Powering Group insurance through PAS modernization
Point of view
FS Viewpoint | Point of view4
Aging core systems areincreasingly unable tomeet the demands of theGroup insurance market.
In our view,transformation likelyoffers the best option todrive long-term success.
Underinvestment has led to theindustry’s current challenges
Most Group insurers have underinvested intheir core systems and technology platformsover the past two decades. Now, with the rapidand significant changes occurring in the Groupmarket, existing systems are increasinglyunable to meet current demands.
Carriers are looking for growth throughexpansion into adjacent markets, serving boththe employer-supported and individualmarkets. Diversity in these markets requires ahigh degree of responsiveness and flexibility insupporting technologies, as does servingvarying case sizes, supporting different productofferings, and managing a variety ofdistribution channels. Legacy admin systemsoften delay carriers’ abilities to reach newmarkets.
As a result, many Group insurers are at acrossroads. Should they continue patchingantiquated, legacy systems, or undergo a large-scale transformation?
Determining the best way forward
In our view, a core transformation likely offersthe best option to drive long-term success.
However, there are many questions that needto be answered, including:
• Which legacy systems should betransformed?
• Can one system support core Group,voluntary, and individual worksite productsacross all market sizes?
• Can one system support the entire valuechain, from sales and enrollment through tobilling and claims?
There are many considerations that factor intowhere a carrier’s core system capabilities aremost in need of an upgrade. A carrier’s needsvary by market focus, distribution strategy, andproduct strategy, and should be measuredagainst current gaps. In this paper, we willexplore how these considerations impact apolicy administration system (PAS)transformation.
Figure 2: Multiple legacy systems createchallenges for Group carriers and willultimately require core platformtransformation.
Coretransformation
Policyadmin
Billing
ClaimsCaseinstallation
Enrollment
Tightening up your core: Powering Group insurance through PAS modernization
FS Viewpoint | Point of view5
Beyond aging coresystems, multiple newmarket demands arecreating complexchallenges that, in turn,are further driving theneed for core platformtransformation.
Addressing healthcare reform
Healthcare reform (HCR) is fundamentallyaltering the insurance marketplace in thelarger health and benefits sector. Exchangesallow choice, and we are seeing employee andemployer buying behaviors changing as aresult. Employers are seeking Group plans withsufficient options and flexibility to meet newemployee expectations.
Leveraging the move toward voluntarycoverage
Weary of rising healthcare costs, employers areshifting to voluntary coverage for somebenefits. As a result, employers will requireadditional flexibility to support both employersand their employees. Examples of flexibilityinclude product configuration, customizationoptions, and the ability to switch between coreGroup and voluntary worksite coverages. Inaddition, employers will expect Group insurersto work directly with their employees.
Rising consumer expectations fromcarriers
The shift to voluntary coverage meansemployees are becoming decision-makers,paying more out of pocket, and placingincreased expectations on carriers. Forexample, they expect increased transparency,better information, and a streamlined multi-channel experience. As we explored in Playingfor keeps: How insurers can win customers,one at a time, customer expectations arounddigital capabilities and anytime access toinformation have exploded.¹
Changing consumer expectations include:
• Access to intuitive self-service tools and real-time reporting.
• Policy portability when they changeemployers.
• Improved digital enrollment capabilities.
• Guided help tailored to their needs andpersonal situations.
The percent of employersconsidering moving theiractive employees to aprivate exchange in thenext three years.
32%
The result? In our view, insurers will need to make the following adjustmentsto stay competitive:
Carriers will need to develop new systems for managing, and providing access to, plan datafor employees and employers.
Since benefits will be transferrable if an employee leaves a company, portability will becritical to an insurer’s ability to retain that employee as a customer. This is particularly truefor capturing revenues from younger workers, where job tenures are shorter.
Due to inherently larger policy volumes, the ability to automate processes will be key toremaining profitable.
Source: PwC, 2014 PwC Employer Touchstone Survey,
June 2014.
Tightening up your core: Powering Group insurance through PAS modernization
1 PwC, “Playing for keeps: How insurers can wincustomers, one at a time,” July 2014, www.pwc.com/fsi.
FS Viewpoint | Point of view
The result?
In our view, the ongoing development of exchanges by brokers will result in employeesmoving away from the acquisition of benefits as stand-alone products.
A carrier’s ability to partner with brokers, and their exchanges, to offer attractive productbundles will become critical for retaining, or gaining, market share.
Carriers will need systems, processes, and products that can leverage the defined-contribution approach, which aligns employee risks with product offerings.
To meet individual market expectations, PAS systems will need to support effective direct-to-consumer sales tools, advanced online customer experiences, and straight-throughprocessing to speed underwriting and service.
6
Evolving distributionchannels, including therise of exchanges, shiftingbenefits models, and newcompetitors are alsodriving the need fortransformation.
Distribution channels are shifting.
The Affordable Care Act (ACA) introduced newcompetition via public exchanges. Brokers arealso evolving their own private exchanges.Brokers focused on small employers arechanging what they sell, combining employer-paid and voluntary packages more frequently.Carriers are now competing with single-company agents.
A defined-contribution approach forGroup benefits is gaining ground.
With health exchange enrollments predictedto surpass employer-sponsored Groupcoverage by the end of the decade, defined-benefits products will be unsuitable for thenew environment.
New market competitors are takingadvantage of Group insurers’ lethargy.
With the “individualization” of Group benefitscreated by HCR, voluntary coverage, andexchanges, traditional Group providers havebeen slow to respond. Now, individual insurersare starting to take advantage of the situationand are capturing a significant share of themarket. As a result, the Group industry isbeginning to look similar to individualcoverage from both an operational andtechnological standpoint.
Increasing regulatory requirements.
Group insurers face regulatory challengesincluding the ongoing rollout of the ACA,capital data standards for financial institutions,and cyberfraud. Carriers also face regulatoryexpectations related to the rising demand fordata interaction in self-service environments,on an on-demand basis.
Analysts suggestexchanges could dominatethe health care benefitsmarket by 2020.
Tightening up your core: Powering Group insurance through PAS modernization
Source: S&P Capital IQ, “The Affordable Care Act CouldShift Health Care Benefit Responsibility Away FromEmployers, Potentially Saving S&P 500 Companies $700Billion,” April 2014.
FS Viewpoint | Point of view7
In the Group space,diverse marketexpectations requirecarriers to evolve theirPAS infrastructure.
Meeting expectations across diverse markets and case sizes
Group insurers face complexities quoting and setting up cases to meet the varying degrees offlexibility expected by diverse market segments and their related distribution channels. This isespecially true for mid- to large-sized employers, where product bundling, rates, employercontribution levels, and evidence of insurability requirements all need to be addressed. Carriersrequire a distribution strategy to support diverse channel needs, products and services for varyingemployer segments, and associated infrastructure and policy administration systems.
As shown in Figure 3, small employers require greater automation to support scale and managecosts, whereas national accounts demand greater customization and enhanced capabilities such as:
• Increased support for brokers, such as “quick quote” capabilities and real-time status updates.• Enrollment platform with integrated evidence of insurability (EOI) and decision support tools.• Integration with third-party platforms.• Ability to list-bill and track and store individual member information.
Figure 3: Product offerings and distribution channels vary depending on the size of the employer.
Tightening up your core: Powering Group insurance through PAS modernization
Micro15-100
Small101-500
Mid501-3,000
Large3,001-7,500
National7,500+
Captive/worksite National brokers/specialty consultants
Regional brokers
Independent brokers
Exchanges
Tailored off-the-shelf products Customized products and plan designs
Productofferings
Distribution
Groupvoluntary
Individualvoluntary
Minimalself-admin
Groupvoluntary
Lessself-admin
Groupvoluntary
Self-admin/employer paid
Group life,disabilityinsurance andleave
Self-admin/employer paid
Group life,disabilityinsurance andleave
FS Viewpoint | Point of view8
Leading carriers are already responding to a changingand complex business landscape with multiplemodernization strategies.
Strategy Description
Shifts in the target market sizeand changing platformconsiderations
• Leading carriers are reviewing their market size focus, resulting in operating model and technology platformconsiderations.
• Leaders are evaluating shifts in technology platforms to support the move toward voluntary coverage, meet self-service expectations, and modernize the online experience.
Product changes, bundling, andexpansion planning
• Leading carriers are beginning to modify their product portfolios, with traditional voluntary carriers exploring moreGroup products while traditional Group carriers are exploring voluntary offerings.
• Leading carriers are considering product bundles and life-cycle product sets.• Whether offering Group or voluntary coverages, leading carriers are expanding product lines to enable offering
attractive bundles with a wider variety of choices for employers and employees.
Marketing and enrollmentcapability updates
• Leaders are devising holistic enrollment strategies critical to improving employer and employee experiences, thusincreasing economic return.
• Leading carriers are developing technology capabilities to enable holistic strategies that include addressinginteractivity, and other requirements, of future exchanges.
Distribution/broker strategyreview
• To help improve overall broker channel management, leaders are assessing ways to improve analytics, refinesegmentation, and tailor their value propositions.
• Leading carriers are recognizing that account and implementation management services are becoming tablestakes for maintaining a strong broker business.
Analytics • Leaders are cleaning up old data architecture to help ensure they can support private/public exchanges andexpanded enrollment methods.
• Leading carriers are seeking ways to integrate new data sources to provide new insights.• Leaders are investing in new data architecture, infrastructure, and analytics capabilities.
Platform transformation initiation • Leading carrier evaluations are focusing on operational efficiency, process streamlining, and business processmanagement to lower costs and reduce risks while simultaneously improving broker, employer, and employeeexperiences.
• Leaders are retiring legacy platforms and focusing on PAS transformations to support expanded product sets andefficiency improvements while also lowering costs and decreasing operational risk.
Tightening up your core: Powering Group insurance through PAS modernization
FS Viewpoint | Point of view9
In our view, carriersshould approach theirPAS transformations asan opportunity to enablecarefully targetedbusiness benefits throughmodernized technology.
Shifting from technology-led tobusiness-driven contributes to success
Before moving forward with a PAStransformation, Group carriers should fullyunderstand their business case, evaluatespecific business goals, and assess how atransformation will impact those drivers andoverall profitability. This process will not onlyhelp executives gain executive support, it willhelp them make sure that they align availablecapital to the highest business priorities.
This business-led approach can help reducerisks and improve an insurer’s ability to adaptand respond in a changing market.
Guiding principles help insurers stayfocused
As shown in Figure 4, we recommend thatGroup insurers adopt guiding principles for aPAS transformation. Guiding principles helpkeep key decisions (from selection to timing toimplementation tradeoffs) aligned to primarybusiness goals and ultimately support betterrealization of business benefits.
Figure 4: Guiding principles for PAS transformations.
Guidingprinciples
Drive innovative products to market and enhance existing products to gaincompetitive advantage.
Build a customer-centric platform, with a consistent, multi-channel experience, that shares datafrom the policy admin system and other applications to power customer-facing processes.
Increase market responsiveness to enable the best impact on business priorities.
Improve operating leverage by modernizing platforms to automate underwriting, reducedata entry, and eliminate redundancies.
Design systems for data agility and architectural scalability, including cross-channel informationintegration, to improve overall policy administration and enhance business effectiveness.
Tightening up your core: Powering Group insurance through PAS modernization
FS Viewpoint | Point of view10
Our experience has helpedus develop a business-driven, four-stepapproach. It starts byaligning the businessstrategy withtransformation goals.
In our experience, PAS transformations are far more likely to succeed when carriers invest time to understand thecore business drivers upfront and then develop a business case that fully aligns the operating strategy with thetransformation.
We focus on Step 1 in this paper and will cover subsequent steps in future papers.
Strategy and businesscase scenario planning
Vendorselection
Mobilization Execution
• Understand business design andoperating environment.
• Prioritize key business goals fortransformation.− Identify and prioritize key technical
constraints.• Align transformation scenarios.
− Assess high level costs, benefits, and risks of each scenario.
− Evaluate scenarios against business and technical drivers.
− Recommend scenario based on evaluation output.
• Conduct vendorsearch.
• Execute anRFI/RFP.
• Conduct vendorworkshops.
• Select a vendor.
• Decomposeselected scenariointo anachievableroadmap.
• Create executionplan.
• Mobilizeresources.
• Establish programmanagementoffice.
• Perform systemdevelopment.
• Complete qualityassurance testing.
• Deploy system.• Roll out training
andcommunications.
Tightening up your core: Powering Group insurance through PAS modernization
FS Viewpoint | Point of view11
In our experience, thereare six key benefits tomoving forward on atransformation initiativeas soon asorganizationally feasible.
Benefit Description
Improve customerexperience
Improve your company’s customer retention, and employer stickiness, bydemonstrating to brokers, employers, and employees you are able to meettheir new needs and demands.
Improve data agility Build a robust repository of structured and unstructured data by leveraginginternal data from across the enterprise, as well as external informationfrom industry and other sources. Then, analytics can be used to uncoverhidden market opportunities and evaluate product profitability, such ascustomized plans versus standard options.
Enable rapid introductionof new products to market
Turbocharge your firm’s speed to market, enabling the introduction of newand expanded product and service offerings to take advantage of swiftlychanging demands and shifting distribution needs.
Enhance regulatorycompliance
Improve your ability to provide accurate and timely reporting to regulators,enabling you to meet regulator expectations. Improve your capacity toadapt to changing regulatory requirements without major operationalimpacts.
Improve brand recognition Improve your business’s brand recognition by getting ahead of thecompetition to offer new features, functionality, and benefits before otherscan do so. This demonstrates the ability to respond to market conditionsnimbly, with agility and flexibility. It also permits acquiring and integratingnew books of business more rapidly, further improving market prominence.
Improve operationalefficiency
Take advantage of disruptive innovations, such as sensors, biometric, orother technological and marketplace changes. Simultaneously, you canhelp brokers and employers engage employees using new presentation andenrollment tools, including mobile and other interactive strategies. Thisleads both to reduced costs and operational improvements.
Tightening up your core: Powering Group insurance through PAS modernization
FS Viewpoint | Point of view12
Even leading Groupinsurers face PAStransformation obstacles.Here are some commonroadblocks we’veobserved and how theycan be overcome.
Obstacle How to overcome
Lack of PAS technologymaturity in the Groupinsurance space
Review and revisit PAS technology.• No one vendor has emerged as an industry leader. However, vendors
are recognizing the growing demands and unique needs of the marketand are developing and offering new capabilities. As many platforms arematuring rapidly, guidance and training from various trusted technologyvendors and partners can help carriers determine which system is bestsuited for their needs.
Legacy data and analyticschallenges
Design sophisticated, well-planned data management and analytics.• Know the typical stumbling blocks inherent to converting and using data
from legacy systems. Then, plan against and around them to achieveyour objectives. Enrich and remap data onto modern structures duringthe conversion process.
Budgetary constraints Focus on ROI.• Understand and communicate the vision for growth going forward and
look for the level of benefits that drive the investment. Leverage thevision and benefits information to help you position the opportunities aPAS transformation represents.
Organizational readiness Deploy change-focused communications and tackle training.• Focus on the transformed mission and vision in all internal and external
communications. Develop a multi-faceted, multi-channelcommunications and training approach. Align new and existing talent tothe mission, goals, and tasks with strategic communications and robusttraining.
PAS transformation led byIT without involvementfrom the business
Involve the business from the beginning. Concentrate on profitability andcompetitive advantages as measures of success.• Pursuing a business-focused approach to modernizing legacy systems
reduces risk while helping the business take advantage of opportunitiesto create competitive advantage or address rapidly evolving marketconditions.
Tightening up your core: Powering Group insurance through PAS modernization
If PAS transformations were easy, so many carriers wouldn'tbe saddled with outdated technologies or be struggling withfailed implementations. Fortunately, obstacles can beovercome with the right design, focus, and training.
FS Viewpoint | Point of view13
Simply put, carriers thatlag in their transformationefforts risk being leftbehind. And the longer ittakes to get started on thetransformation journey,the greater that riskbecomes.
Legacysystemissues
Examples of inefficienciescaused by these issues
Example impactson the business
Archaic andobsoletetechnology
• Many labor-intensive manual tasks have arisen forsupporting processes such as disability and Familyand Medical Leave Act requirements. This hasresulted in spreadsheet and local databaseproliferation.
• ↓ Efficiency• ↑ Cost• ↑ Risk
• Very long and complex projects are necessarywhen attempting to modify or enhance legacyplatforms.
• ↓ Efficiency• ↑ Cost• ↓ Speed to market
• Unable to offer comprehensive self-servicemember portals as rules cannot be automated.
• ↓ Customer retention• ↑ Cost
• Incapable of utilizing disruptive innovations, suchas data lakes and biometrics, to improve analytics,underwriting, and customer attraction.
• ↓ Competitiveness• ↓ Customer retention
Inflexibleoperatingmodels
• Insufficient responses to current compliancerequirements.
• ↑ Risk• ↑ Cost
• Manual case setup, integrations with enrollment,billing, and claims.
• ↑ Operational risk• ↓ Responsiveness to
customers and brokers
• Inability to automate or customize workflows forthird-party data exchange, integration with externalenrollment tools, and census file intake.
• ↓ Efficiency• ↑ Cost• ↓ Responsiveness to
brokers
Lack ofgranular datatracking
• Insufficient data and analytics. • ↓ Market visibility• ↑ Risk• ↓ New sales opportunities
Archaic PAS systems interfere with new product introduction, impede effectiveanalytics, introduce significant inefficiencies, increase operational risk, and addsignificant costs.
Together, these problems culminate in an inability to meet customer expectations, make itdifficult to reduce risk, and make it next to impossible to retain, or gain, market share. Weoutline some specific results of inaction in the table below:
Source: PwC, PwC’s 18th AnnualGlobal CEO Survey, Insurancesector data, February 2015.
Tightening up your core: Powering Group insurance through PAS modernization
of global insurance CEOs areconcerned about the speed oftechnological change.
70%
Competitive intelligence
Our observations ofindustry practices.
FS Viewpoint | Competitive intelligence15
We have observed insurance carriers at various levels of maturitywhen it comes to readiness for embarking on a PAS replacement.
Area of focus Lagging On par Leading
Timing ofmodernization
Does not react to changing market conditionsand consumer needs; continues business asusual with a legacy platform. Retiring work forcemeans rapidly approaching loss of legacysystem subject-matter specialists (SMSs).
Realizes current platform requires investment tostay competitive and is actively reviewing options.Carrier has started planning or is working withexecutives to get approval/funding for the PAStransformation.
Understands the benefits of modernizing currentplatform to a fully integrated policy administrationplatform with robust design capabilities. Carrierhas taken steps to prepare for transformation andhas completed an integrated roadmap and cost-benefit analysis.
Data andanalytics
Has not considered long-term data needs andhow to extract valuable insights from platform.Limited data exchange capabilities. Manual datacollection processes and multi-entry steps dueto disparate systems and processes.
Data is considered as part of the modernization.Carrier has developed business intelligencerequirements and is capable of communicatingthose needs as part of the implementation.
Fully invested and aware of the benefits ofeffective data extraction and application to meetconsumer needs and demands. Data analytics isconsidered a top criteria in the identification andselection of a system.
Coordinationwith aconsolidatedarchitectureblueprint
Utilizes a project by project approach; lack of aholistic enterprise architecture view. Manualnotification processes and reliance on SMSexperience to identify critical cross-functionalimpacts.
Carrier has a good understanding of architectureneeds and requirements and is able to articulatetheir blueprint.
Insurer has a very clear vision on both currentand future state architecture. Enterprise-wideview of capabilities and gaps is fully vetted.
Vendorselection andmanagementcapabilities
Carrier has little to no experience navigatingvendor relationships and contracts. Carrierwaits for the “perfect” solution to becomeavailable in the marketplace or assumesvended solutions will work. Considers policyadministration systems with limited product,coverage, and producer compensationconfiguration abilities. Does not prioritize third-party connectivity, making coordination withvendors or aggregation partners difficult.
Carrier has procurement and vendormanagement capabilities and sufficientexperience in this area to engage in discussionsabout a potentially vended solution. Carrier alsohas a good understanding of contractingrequirements but may not have completed avendor selection process for a largetransformation before.
Carrier has strong procurement and vendormanagement practices. Looks for vendors thatare committed to investment in the Group spaceby expanding product portfolio and offerings.Desires forward thinking capabilities andsystems. Examples include robust third-partyplug-ins, automated one-time-only informationcapture, automated role-based notificationcapability, and configurable business-rule drivendocument generation systems.
Programmanagementand delivery
Carrier has no program management (PM)governance; lacks resources and skill sets forprogram delivery. Does not fully grasp theresources, time, expenses, or skills required fora PAS transformation.
Carrier has a PM governance model andstakeholder engagement. Team is prepared toengage qualified delivery team.
Carrier has robust PM methodologies andpractices with resource capacity to help ensuremilestones are met and dependencies, risks, andissues are identified. Carrier is prepared toengage qualified delivery team, whether using in-house or external resources.
Tightening up your core: Powering Group insurance through PAS modernization
A framework for response
Our recommended approachto the issue.
FS Viewpoint | A framework for response17
We’ve identified threekey steps to help Groupinsurers develop theirPAS transformationstrategy and businesscase.
Although Group insurers have unique challenges and marketplace issues, our transformationframework—which has been adopted by multiple P&C insurers—can be customized and applied forthe Group space. We recommend that Group insurers follow these three steps in order to developtheir PAS transformation strategy and business case.
Tightening up your core: Powering Group insurance through PAS modernization
Strategy and businesscase scenario planning
Understandbusiness design
Prioritize businessgoals
Aligntransformation
scenarios
Note: This step is where we often seelagging insurers miss the target.
• Validate the business model, including the markets to beserved and channels through which carriers will distributetheir products.
• Define the operating model.• Understand the necessary organizational structure and skills.• Identify an appropriate technology platform that will support
and integrate functionality around consumer, employer, andbroker experience, product design, and data migration.
• Analyze the business design components, opportunities, andconstraints.
• Use the business design analysis to develop a prioritized setof business goals. These drivers should directly influencehow you prioritize capabilities such as quoting, enrollment,and customized reporting.
• Using the prioritized business goals, consider the relevanttechnology factors, such as scalability and integration withmobile.
• Understand the technology considerations associated withmodernization of existing platform, replacement of existingplatform with new internal solution, or replacement of existingplatform with new vended solution.
• Score the transformation scenarios for each product offering.
FS Viewpoint | A framework for response18
Step 1: Understand thebusiness design.
Products Channels Markets
Sample business design assessment
Business modelHow do wefundamentallyprofit?
Operating modelHow do we mosteffectively organizeto support thebusiness model?
Technology platformHow do we support,automate, improve,and innovate our go-to-market capabilities?
Structure andincentivesHow do weencourage andenforce ourvision?
• Which productsrepresent growthopportunities? Forexample, if you arecurrently in coreGroup, do you wantto move intovoluntary?
• Which products ineach channelrepresent the bestcross-sell/up-sellopportunities?
• What are the bestmarket opportunitiesacross products andchannels?
• How should productmanagement beorganized?
• Which functionsshould becentralized?
• How will we leveragecustomer supportfunctions acrosschannels (such ascall centers)?
• What additionalservices need to besupported in thefuture?
• What trends willimpact our design?
• How well do ourtechnology platformsenable products tobe sold in multiplechannels?
• What level ofchannel integrationis necessary?
• How can weleverage a single,flexible onlinechannel?
• How well does ourtechnology enablemarketresponsiveness?
• How do subsidies forone product drivegrowth in others?
• How does ourcommission andbonus structureimpact growth?
• How well do ouronline and offlinechannel incentivessupport each other?
• How can we keepthem fromcompeting againsteach other?
• How do we promotecustomer, ratherthan product focus?
1
2
3
4
We recommend that carriers develop their initialbusiness design by answering the followingquestions:
1. Business model• Given the changing Group insurance market
environment, what is your strategy? Who do youwant to be? What are the products, channels, andmarkets that you want to play in?
2. Operating model• What operating model do you need to support your
chosen strategy across products, channels, andmarkets? For example, moving responsibility forsome activities to the marketing department fromindividual product silos may help improve customercentricity.
3. Technology platform• What technical capabilities are needed in core and
customer-facing systems to support your strategy?
4. Structure and incentives• What gaps exist in your incentive structures that
may be constraining agility and/or efficiency? Forexample, current incentives may not promotecustomer-centric behavior.
Tightening up your core: Powering Group insurance through PAS modernization
FS Viewpoint | A framework for response
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2
3
4
5
6
19
Step 2: Clearly prioritizebusiness goals.
We recommend that carriers start with an understanding of the opportunities andconstraints to help them prioritize the business goals they should focus on.
There may be dozens of business goals that are needed to achieve the business model carrierswant, but these need to be balanced against operating model, technology, and organizationalconstraints. In the illustrative example below, this carrier analyzed the opportunities andconstraints in the market to determine that their top business goal was to “improve customerexperience” and their second-most important goal was to “improve data agility.”
Tightening up your core: Powering Group insurance through PAS modernization
Rapidly react toregulatory changes
Eliminate legacyplatforms
Improve data agility
Improve operationalefficiency
Rapidly introduce newproducts to market
Rapidly react toregulatory changes
Eliminate legacyplatforms
Improve data agility
Rapidly introduce newproducts to market
Illustrative prioritizedbusiness goals
Improvecustomerexperience
Rapidly reactto regulatorychanges
Improve brandrecognition
Improve dataagility
Improveoperationalefficiency
Enable rapidintroduction ofnew products
Businessmodel
Operating modelTechnology
platformStructure and
incentives
Businessmodel
Flexibility to delivernew products andservices to market.
Customize channelusage to targetsegments.
Increase customerinsight through dataanalytics.
Expand market reach. Create more
technology-enabledproducts.
Encourage brokers tosupport new productsthrough tailoredincentives.
Operatingmodel
Additional products,services, andtransaction/interactiontypes increase costs.
Conflict betweenchannels.
Create a low-costoperating platform.
Enable variable costoperations anddemand-drivenmodel.
Automate metrics tosupport processimprovement.
Technologyplatform
Platform proliferationwith integrationchallenges.
Capability duplication. Lack of standards
compliance.
Unresolvedcomplexity in thebusiness/technology limits theability to reduce unitcosts.
Improve leadership’sability to influencefront-line operations.
Structure andincentives
Power bases built bylevel and functionhinder optimalbusiness modelfunction.
Focus on efficiencyand speed metricsnegatively impactsservice quality andcustomer experience.
Organizationalstructure encouragessiloed technology.
Across-the-board costreduction mandates intechnology.
Illustrative opportunities and constraints
FS Viewpoint | A framework for response
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3
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5
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Step 3: Aligntransformationscenarios.
We recommend that carriers consider both prioritized business goals and technicalconsiderations as they develop potential transformation scenarios.
Technical considerations such as scalability, integration, delivery timelines, and the desire tominimize complexity should be considered in order to develop a set of transformation scenarios.In the illustrative example below, this carrier developed four potential transformation scenarios.These range from Scenario 1, which leaves the system as is and calls for continued internalmodernization, to Scenario 4, which re-platforms all products with vended solutions.
On the following page, we present an illustration of how to score each scenario to decide whichtransformation scenario is most suitable.
Eliminating or minimizinginconsistencies can drivequality, shorten turnaroundtime, and improve customersatisfaction.
Multiple platforms willincrease the complexityof the solution. There isan implicit architecturalpreference for fewerinterfaces.
On-time implementation ofthe solution is critical.Delays may impact thestrategy and expectedbenefits considerably.
Scenario 1• Leave system as is• Continue to
modernize internally
Lower
Higher
Degree ofchange
Mo
re“d
efe
nse”
Mo
re“o
ffen
se”
Use of modern technologiesenable higher degrees ofintegration flexibility. Systemshould be able to integratewith other vended orhomegrown systemsnecessary to function.
Scalability Integration
Minimizecomplexity
Deliverytimelines
Illustrative prioritizedbusiness goals
Illustrative technical considerations
Illustrative transformationscenarios
Scenario 2• Leave core Group as is• Re-platform voluntary
& individual worksiteproducts
Scenario 3• Re-platform core Group• Modernize voluntary
and individual worksiteproducts internally
Scenario 4• Re-platform all
products with vendedsolution
Improvecustomerexperience
Rapidly reactto regulatorychanges
Improve brandrecognition
Improve dataagility
Improveoperationalefficiency
Enable rapidintroduction ofnew products
Tightening up your core: Powering Group insurance through PAS modernization20
FS Viewpoint | A framework for response21
Step 3: Aligntransformationscenarios (continued).
Evaluate the transformation scenarios to score how well they align with theprioritized business goals.
In this illustrative example, Scenario 1 receives a very low score, but is also the least expensivescenario in the short run. Scenario 4 re-platforms all products with a vended solution, but will bethe most expensive, time consuming, and risky scenario. Carriers should evaluate each scenarioand decide which one delivers the right benefits for the costs and risks they’re willing to take on.
Tightening up your core: Powering Group insurance through PAS modernization
Does not meetbusiness goalcriteria
Meets businessgoal criteria
Partially meetsbusiness goalcriteria
Does notsupportbusinesscriteria
Supportsbusinesscriteria
Partiallysupports
Will not fully maximize benefits around speed tomarket, operational efficiency, and customerexperience, but addresses legacy platform
architecture issues.
Least expensive scenario in the short run.
Introduces operational efficiencies and platformelimination, but fails to fully address customerexperience needs.
Cost will be dependent on efficiency of currentcore system among other things.
Supports incremental business benefits for speedto market, but may not reduce overall systemcomplexity or operational costs.
Cost will be dependent on efficiency of currentvoluntary and worksite system among other things.
Simplifies the system and addresses many of thebusiness goals.
However, this will be the most expensive, time-
consuming, and risky scenario.
Dataagility
Productspeed toMarket
Regulatoryresponsive
-ness
Legacyplatform
elimination
Operationalefficiency
Illustrative scenario benefits andconstraints
Customerexperience
Illustrative overallscore
Illustrative business goals
Scenario 1• Leave system as is• Continue to
modernize internally
Scenario 2• Leave core Group as is• Re-platform voluntary
& individual worksiteproducts
Scenario 3• Re-platform core Group• Modernize voluntary
and individual worksiteproducts internally
Scenario 4• Re-platform all
products with vendedsolution
Appendix
Select qualifications.
FS Viewpoint | Appendix—Select qualifications23
Select qualifications
Tightening up your core: Powering Group insurance through PAS modernization
Project and client Issues Approach Benefits
Policy administrationsystem vendorselection—Group voluntarybenefits carrier
A Group voluntary benefits carrier hadrecently expanded its target market fromsmall and mid-size employers to much largeremployers and national accounts thatdemanded highly customized products andservices. In a highly competitive market thatwas facing upcoming health care reform, thecarrier was unable to support the changingneeds of the business due to its aging legacysystems, inflexible processes, applicationswith high maintenance costs, and misalignedbusiness and IT organizations.
PwC helped the carrier create a strategic planthat aligned with business goals, identifiedand evaluated the organization’s pain points,prioritized business goals, and defined theinitiatives needed for the change to be asuccess. As part of this process, PwC helpedthe carrier:
• Assess current-state architecture.
• Prioritize future-state business capabilities
and architecture.
• Evaluate PAS priorities.
• Create cost-benefit analysis models.
The insurer’s business and IT leadershipagreed on a strategy and roadmap to evolvetheir technology platforms and enable newbusiness capabilities to support continuedgrowth and operational efficiency. Thisimproved the CEO’s ability to make trade-offdecisions based on a top-down view of theorganization’s operations. In addition, thecarrier now has a deep understanding of thebusiness capabilities needed to support itsfuture business scenarios and contingencies.
Portfolio healthassessment androadmap development—Large Group insurancecarrier
A large Group insurance carrier facedincreased competitiveness within the Groupand voluntary markets, where many carrierswere making significant investments. Thecarrier needed to develop a multi-disciplinedportfolio of strategic initiatives to effectivelymanage its increasingly individual andemployee-oriented business model.
PwC collaborated with the client to develop ahealth assessment to examine and mitigaterisk across the company’s employee-centeredoperations portfolio. The project teamevaluated the portfolio across variousdimensions and analyzed its alignment tobusiness strategy. This was used to develop acapability-based roadmap and would assistthe client in improving both Group andmember-facing capabilities across the billing,enrollment, service and administration, anddata and integration functions.
The insurer used the research findings toidentify key capabilities for each strategicinitiative. The organization then used theinformation to prioritize initiatives based onrequired resources, costs, and time required.This helped the carrier move forward with thetransformation in a more nimble and agilemanner in order to meet industry demands.
Evaluation of majorvendor tools—Group business of aleading insurancecompany
The carrier wanted to transform its businessto meet changing market demands in theGroup segment. However, the company’sexisting technologies and toolsets were toorestrictive to allow the carrier to compete inthe new market environment.
After prioritizing business goals andconsidering technology options, PwC helpedthe client by executing a proof of concept(PoC) to assess the viability of a leadingpolicy administration system and a membermanagement and enrollment portal to supportcapabilities that were deemed critical to theinsurance company’s Group business. ThePoC included architectural schematics andpackaged solutions.
The insurer was able to drive increasedoperational efficiencies by utilizing thefindings to identify the right PAS platform andportal for its Group business.
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“Tightening up your core: Powering Group insurance through PAS modernization,”PwC FS Viewpoint, April 2015. www.pwc.com/fsi.
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