An important but often forgotten factor in modernization strategy and execution for policy administration systems (PAS) is carrier autonomy from the vendor. While it makes a lot of sense to enter into SaaS agreements with PAS vendors to reduce the load on internal IT and ensure all aspects of the PAS stay completely up to date and are fully managed, carriers need the capability to configure products themselves—increasing agility and accelerating product development in an increasingly changeable market.
Many carriers have outdated legacy systems in dire need of replacement. Others have upgraded to modern systems but remain dependent on their technology vendors to implement even small product changes. In both cases, the old PAS functions as a black box that records and houses millions of vital data points but is only accessible and configurable by the vendor. As a result, every modification, no matter how minuscule, requires code changes that end up costing a fortune in both monetary costs and drawn-out implementation and modification timelines.
If life insurance carriers want to extract the full value from their PAS, they need to be able to quickly and easily make product changes or develop new products, independent of their vendor. This reliance on the vendor for all changes is known as "vendor lock-in" and is increasingly a concern for carriers—the trend is toward carriers seeking autonomy.
What are the benefits of autonomy?
With autonomy, life insurers can lower overall costs by eliminating dependency on costly resources. For carriers of all sizes, including those operating with larger budgets, pursuing autonomy also helps drive more innovation and value from transformation projects.
Autonomy also supports a faster go-to-market strategy. In the age of AI, the competitive landscape has shifted the pace of business. In the coming years, the speed of product launches will spell the difference between a strong competitor and a digital laggard. While being able to independently operate and modify PAS might not seem like an essential business strategy today, it is a capacity that will greatly move the needle in the future.
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What’s holding carriers back from achieving autonomy?
Technology vendors are the primary deterrent preventing life insurance carriers from reaching the self-sufficiency that the changing competitive landscape requires.
Many PAS vendors promise a fast launch timeline using the greenfield PAS modernization strategy, in which carriers can implement new core systems and deploy fresh products without the need to retire the original legacy systems concurrent with or immediately following project completion. Greenfield may help get carriers into production faster and appeals to the need for a quick return on investment, but in the midst of contract signing and the desire to finish modernization projects quickly, autonomy is a quickly forgotten priority.
The PAS vendor’s technology may also prevent autonomy. They may provide access to their technology, but it’s specialized and undocumented to the point where it’s unusable by anyone other than the vendor.
There was a period where low code was seen as the solution to addressing the autonomy issue, and on some level it did. It provided a local platform for carriers to modify and revise their policy admin systems without the involvement of their vendor. But low code also introduced other challenges, namely that the carrier still needs to rely on the vendor to build the capability for them to leverage. And when a new capability is released on the market, the carrier must go back to the vendor to build it into the platform. So, while the carrier gains some autonomy back with low code, they’re still dependent on the vendor in some capacity.
Some vendors offer their own proprietary language that carriers can use to do their own coding. But if the vendor is smaller and doesn’t have that many clients, the language may not evolve as much as it needs to, and the available documentation may be limited. This brings carriers back to square one; they still need to work with the vendor to make the proprietary language work for them.
How can a life insurance carrier achieve autonomy?
To achieve autonomy, carriers should be looking to leverage solutions that are common across the financial services and insurance industry. Many organizations are leveraging common coding languages like Python to implement machine learning. Carriers can use these languages as they’re building up their PAS to lock their autonomy in place.
Carriers can also look to cloud technology. Public clouds — like Amazon Web Services (AWS), Google, Oracle Cloud Infrastructure (OCI) and Azure — are heavily documented, which reduces reliance on the supplier to understand how to use them to best effect. By using these technologies, carriers can achieve autonomy over their PAS and other systems in place that vendors might provide.
Perhaps the most important piece of carrier self-sufficiency is making sure that good integrated development environment (IDE) software is available that will give the organization’s IT and business staff control over product configuration. The IDE should be fast and easy to use. It should enable the carrier to configure, test and manage the release of new development. Carriers that are able to use a modern IDE, built to work with their state-of-the-art PAS, will have increased flexibility and much greater speed to market when developing products.
When selecting a PAS vendor, it’s vital to ask questions about their strategy and model. Will the carrier be able to make changes to their system as needed, or will they need to continually have to ask their vendor to do so? A short sentence that says the carrier can “do it themselves” isn’t enough. Carriers need to make sure that not only is self-sufficiency ingrained in their strategy and business model but that self-sufficiency is on the road map. This includes carrier training on the use of the IDE starting at an early stage of the PAS implementation project. They need to confirm the steps to full autonomy and ensure that it’s a priority that is taken seriously by the vendor.
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A path to self-sufficiency must be ingrained in business strategy
Achieving autonomy in policy admin systems is essential for life insurance carriers aiming to fully leverage modern technologies to be a strong competitor. It reduces dependency on costly vendor resources and enables an organization to quickly modify their systems to match their needs and those of their customers.
To overcome common roadblocks to achieving autonomy, life insurance carriers should look to the cloud and common coding languages, which ensure that a PAS can be independently managed and modified. They need to have an advanced IDE and sufficient training in its use so staff are comfortable making configuration changes. Most importantly, carriers should rigorously evaluate any PAS vendor they may choose to work with and ensure that a path to self-sufficiency is ingrained in their business model and strategy.
As the life insurance industry progresses and adapts to changes in the customer and competitive landscape brought on by innovative technologies like AI and LLMs, autonomy will increasingly become a critical factor in determining which carriers thrive and which fall behind.
