EXL White Paper - Why PAS Implementations Fail

70%ofpolicy
administrationsystem
implementations
fail
10 best practices to beat the odds
An EXL whitepaper
Written by
Aditya Chaturvedi
Senior Assistant Vice President
aditya.chaturvedi@exlservice.com
Alexander Kloubek
Vice President,
alexander.kloubek@exlservice.com

1 © 2016 ExlService Holdings, Inc.
This statistic may be shocking considering
how vital these systems are to a carrier’s
ability to successfully execute core policy
processes, capitalize on new market
opportunities and retain their existing
client base.
While PAS platform transformation is
becoming increasingly necessary for
most large and mid-market property
and casualty (P&C) firms, the actual
transformation journey typically faces a
number of major difficulties. Complications
include escalating implementation costs,
mismatches between the expected
system functionality versus what is actually
delivered, user acceptance challenges,
schedule overruns and adverse customer
experiences.
In worst-case scenarios, the entire program
falls significantly short of planned or
expected benefits.
Based on current industry trends, PAS
platform transformations will continue
being a crucial priority for both mid-size
and large carriers. Expected benefits
include improved speed-to-market,
enabling newer sales channels, improved
operational efficiency, improved customer
experience, higher rates of customer
retention, as well as better utilizing
analytics for data-driven decision making.
Because of these drivers, it is no surprise
that over 120 new PAS implementation
projects start each year in North America2
.
Even though policy
administration
system (PAS) platform
transformation has
been a hot topic within
the insurance industry
for some time, 70% of
PAS implementations
fail to deliver on their
objectives, either in
terms of cost, speed
of implementation or,
most challenging of all,
the desired business
benefits.
[ 70% of PAS implementations fail — 10 best practices to beat the odds ]

start an implementation is often based on
a very specific problem, rather than the
need for an overall system or organization
reboot. Carriers may find themselves
well into a tactical system update or other
minor technology interventions before key
decision makers realize that a total system
replacement may be necessary.
Even when the process starts out well
unexpected hurdles may arise during the
course of the implementation. Carriers
often face changing goalposts, scope
creep and budget overruns for the project,
as industry best practices and the
regulatory & compliance landscape
change. Another common source of
significant scope creep is jumping straight
to detailed requirements gathering
without defining the overall business
vision
of the target operating model the PAS
platform is expected to support. A failure
in communicating the broader vision with
the development team(s) may cause them
to produce architecture dissociated from
project goals, resulting in delays and/or
failure in user acceptance. If employee
concerns are not addressed early on in
the implementation, staff members may
become worried whether automated
processes or other functions will make their
jobs obsolete. This may cause a distracted
workforce and loss of project support.
Even if carriers make it to the end of the
program, they may
realize that multiple
38% of all insurance firms intend to adopt
or replace their PAS before 20171
, with 60%
of P&C carriers developing new platform
systems or major enhancements to existing
systems within 20163
.
If a carrier wants to beat the odds and
successfully transition from a function-
oriented legacy system to an enterprise-
wide platform, they must understand the
challenges and best practices associated
with PAS implementation.
Mind the gaps —
10 reasons why most PAS
implementations fail
Before beginning a PAS implementation,
carriers must first examine why so many
PAS implementations fail. The drive to
PAS
implementations
fail

unforeseen requirements are missing due
to a lack of initial planning. Frequently, this
triggers an iterative cycle of scope changes
leading to additional requirements and
so forth. Such cycles at a late stage often
result in widespread project fatigue among
employees.
Carriers can avoid these mistakes
by focusing on the 10 reasons PAS
implementations are most likely to fail. The
graphic illustrates the steps and processes
necessary for a successful PAS
implementation. The items in orange
represent areas that are most commonly
overlooked or improperly managed
throughout the program lifecycle. These
commonly overlooked gaps make or break
a program, but can be avoided through
strategic planning and decision making.
Program
management
Design&
architecture
Requirements
management
Change
management
Configuration&
customization
Testing &
training
Benefitvalidation&feedbackloop
9
8
7
5
64
31
2
Business
case
management
Benefit
quantification
Planning &
scheduling
Resource/
vendor
management
Mobilization &
execution
Governance &
change
control
Current
state
assessment
Model
attributes
comparison
Target
operating
model design
Target
architecture
model design
Rating and
underwriting
Customer
experience
Policy
administration
Reporting &
analytics
Forms &
letters
Data
migration
Maximumimpactonprogramsuccess
Change
strategy
Change
planning
Stakeholder
analysis
Communication
planning
Execution of
change
strategy
Application
configuration
Application
customization
Integration
with other
systems
Forms &
letters
Integration
testing
User
testing
Performance
testing
Product
training

Carriers should also examine what their
goals are for PAS implementation. They
should discuss how much they expect to
reduce the organization’s costs or increase
its profits. The reason for any new functions
to be designed should be another topic of
focus during this stage. For instance, if the
carrier is implementing an auto-quoting
system streamlining the manual
underwriting process, what is the expected
value increase in new business premium?
Committing the time, research or external
advisory costs to answer these basic
questions can help a carrier set reasonable
and specific goals at the start.
Carriers can often begin to define success
by looking at their competition. They should
examine how much their competitors
save after PAS implementation, what
operational efficiencies can be achieved, as
well as establish direction as to where and
how they will realize increased revenue.
Oftentimes, revenue increase goals are
created without a clear understanding
of how the PAS platform will drive this
revenue increase across channels,
geographies and customer segments.
Policy administration system features can
be overwhelming, especially when
comparing multiple systems side-by-side.
The temptation to use every feature and
functionality of a new application is high,
but it may not be the best choice for the
entire enterprise due to other interlinked
applications and systems currently in
use. Carriers must take a holistic view of
which combination of features across all
1. Planning and scheduling
A policy administration system
is only one component in the
enterprise-wide ecosystem of
applications, processes, and interfaces.
PAS platform transformation success is
dependent on identifying, planning and
implementing all the necessary changes
across the entire ecosystem in a logical
sequence during the transformation
program.
During planning and scheduling activities,
it is critical to set clear goals to define what
a successful PAS implementation will look
like upon completion. Despite seeming
like an obvious foundational pre-requisite,
countless PAS implementations launch
without clear metrics and benchmarks to
define their overall success.

Carriers should also explore innovative
pricing mechanisms to give a vendor
“skin in the game”. There is no one-
size-fits-all approach when negotiating
a price. Traditional models such as
“implementation costs + license fees”
do not create any incentive for the PAS
platform vendor to identify creative
solutions for the carrier’s problems, or
accelerate implementation timelines while
meeting the business objectives.
During the planning phases, carriers must
decide how and when they will roll out the
new system’s features. Large-scale “big
bang” implementations are more likely to
suffer from scope creep and expectation
fatigue. This can be countered by showing
tangible, visible progress iteratively to
the user groups to drive engagement
and build positive momentum towards
the PAS implementation program. Real-
world implementations show that using
a modularized approach works best, as
it helps to deliver tangible, incremental
gains that are quickly implemented. This
approach creates user buy-in and allows
for tweaking upcoming releases based on
actual user feedback.
enterprise applications would be the best
fit for their specific needs and goals.
Carriers should select a platform vendor
only after building a concrete vision for
their target operating model and defining
objective expectations and measures of
success from the PAS transformation.
Selecting a vendor is arguably the largest,
most significant predictor of a program’s
success. However, this step is often given
only a cursory or technology-oriented
consideration due to existing vendor
relationships. A carrier’s default vendor will
likely try to fit the carrier’s needs into the
solutions it sells, rather than helping them
find the optimal solution meeting their
needs. Hence, independent and unbiased
expertise is absolutely vital to making the
correct decision.
...independent and
unbiased expertise
is absolutely vital to
making the correct
decision.

Even when this is successfully accom-
plished, the project can be thrown off
course when any stakeholder requests
a change to scope, features or controls.
Without clear change control criteria,
scope creep can become debilitating and
drive the entire program towards failure.
Program managers will need to walk the
frustrating tightrope of making judgment
calls without access to the tools necessary
for making clear decisions, locking them in
a constant struggle to balance the program
budget and schedule against the benefits
of implementing the desired changes.
Creating a clear blueprint for governance
and change control procedures and
securing buy-in from key stakeholders
at the onset can help carriers avoid such
pitfalls and significantly increase the
likelihood of program success.
3. Target operating
model design
The target operating model
is a crucial link between the
carrier’s business vision and its
realization through the PAS transformation
program. The target operating model
(TOM) lays out how the business wants to
organize itself and manage its resources, as
well as the tools it will utilize in the future.
Without a robust and comprehensive TOM
that addresses the unique challenges
faced by the carrier, embarking on a PAS
transformation program is very likely to
result in catastrophic failure.
Carriers should not hesitate to seek
external expertise during the TOM design
process.
2. Governance and
change control
Even if a carrier’s project
plans are robust and
detailed at the onset, ad hoc
governance and change control systems
can obliterate forward progress at the
desired pace very quickly. When defining
program governance procedures, carriers
need to identify all possible internal
(operations, underwriting, finance, HR, IT,
legal, compliance, marketing, etc.) and
external (agents, brokers, policyholders,
etc.) stakeholders in the program,
determine their rules of engagement,
perform a detailed impact analysis for all
stakeholders and understand the optimal
processes and timing for their engagement.

Alternatively, consider campaign
management. Carriers need to transcend
traditional marketing channels via agents
and brokers in order to aggressively
compete for market share. The TOM needs
to consider the various modes of running
direct marketing campaigns that are being
developed and implemented in the market
today. External expertise can be a very
crucial differentiator in ensuring the new
TOM can deliver on the business vision.
4. Target architecture
model design
The target architecture
model sets up the technology
infrastructure that will ultimately
support delivery of the TOM and ensures
the PAS is capable of achieving the
expected business benefits. For example,
the system chosen for handling workflow,
document management, and invoicing
functions should be capable of achieving a
pre-defined set of performance standards.
The target architecture model design is
often inaccurately viewed as a specialized
task managed by the technology
leadership within the carrier organization.
This can cause a significant disconnect
between the carrier’s expectations and
the implemented architecture. That
disconnect can result in sub-optimal
infrastructure incapable of achieving
the desired interactions between the
program components. The architecture
model needs to be able to respond to
Utilizing knowledge of industry best
practices is critical for ensuring that the
output from this exercise is not obsolete at
the outset or will not result in competitive
advantages in the marketplace. For
example, carriers may aim to expedite and
streamline the policy document delivery
process by envisioning e-delivery channels
(e.g. PDF documents being emailed to the
broker). However they may need external
assistance to determine the optimal
delivery timeframe between the commit-
to-buy decision being made and the actual
policy document being issued. Without
this insight, they might end up restricting
themselves to the speed of document
delivery that a vendor proposes, rather than
what they really need to be competitive.

However, to accurately define and measure
customer experience, carriers must know
the expectations of their customers. For
example, customers may wish to see all
the relevant questions upfront during the
quoting process, or prefer to be asked the
questions in distinct, easy-to-understand
stages. They may have different preferred
methods of contacting the carrier, such
as through a website or by phone. These
are details that are often overlooked or
never thought of at all, with the existing
functionality or look and feel of the chosen
application being taken as the default
option. Inevitably, such implementations
lead to significant negative customer
feedback when launched.
Customer journey maps are one of many
powerful tools available to carriers for
mapping all of the customer touch-
points during the business lifecycle.
They are also useful in identifying crucial
customer “moments of truth” during
the entire lifecycle of their interactions
with the carrier. This allows for focusing
the program budget and resources on
optimizing the overall customer experience
at points that matter to the customer
instead of trying to improve every aspect of
the customer’s experience which may not
yield tangible benefits.
the performance demands of the TOM.
Many PAS implementations have resulted
in a working application being deployed
which has significant performance lags,
or availability and reliability concerns that
result in acceptance failure.
5. Customer experience
Rating and underwriting are
often seen as the main focus of
customer experience. While those aspects
are important, they are also some of the
relatively easier parts of the program to
define and implement due to their tangible
nature and being driven by mathematical
formulas that can be defined and
implemented with precision.

The abundance of third-party data
resources reduces the carrier’s
dependence on their own internal data.
Digital information from social media
accounts and various devices including
smartphones and computers have become
a major resource for insurance companies
seeking behavioral insights.
A new PAS implementation allows carriers
to glean all sorts of trends from the
data they currently have, but only if they
have the capability to mine their data
intelligently. Using home insurance as
an example, a carrier may determine that
they can achieve higher profitability from
homes that are located at cross-roads
or intersections due to higher visibility of
the property resulting in lower rates of
vandalism and burglary. However, such
nuanced outcomes are nearly impossible
to discover without the right data being
captured and the analytical tools being in
place to identify insights.
6. Reporting and analytics
To remain relevant, a carrier must
understand the growing role of
analytics and reporting to all lines of
business. Carriers are investing heavily in
technology and data, hoping to improve
various areas including underwriting
new risks and influencing users’
behavior.
Customer Journey Map
ThinkingJourneyFeeling
Realization Awareness Investigation Exploration Joining Participation
High engagement
Moderate
engagement
> Realization observation 1
> Awareness observation 1
> Awareness observation 2
> Investigation observation 1
- Investigation sub observation 1
- Investigation sub observation 1
> Investigation observation B
- Investigation sub observation B2
> Exploration observation 1
> Exploration decision 1
- Exploration decision A
> Joining observation 1
> Participation observation 1

change effectively increases the return on
investment (ROI) for projects more than
300%. This data speaks volumes to the
importance of having a comprehensive CM
plan in place for handling both system and
personnel changes.
Regardless of the presence and availability
of strong CM practitioners within the
carrier’s own organization, choosing a
vendor that understands the value of
change management and practices
effective change management techniques
is especially crucial when a carrier is
asking their entire organization to adapt
to significant changes in how they work.
Without an effective Change Management
Plan, team members and business
resources will fear for their jobs, or be
concerned about the significant disruption
to their daily work due to the new
processes and tools being implemented.
This kind of work environment can quickly
become toxic and result in program failure.
A comprehensive CM plan should also
include a robust release management
strategy for new functionality to manage
staff expectations. For example, during
early releases of the PAS platform,
current users may notice missing features
that were still being built and be more
concerned about their absence than the
new capabilities they have been provided.
Communicating the roadmap of what is
to come in the future with the associated
timelines will go a long way in allowing
users to focus on maximizing the benefits
from the features on the
new platform as they get
released.
Most PAS platform alternatives in the
market today will have some analytics and
reporting capabilities built in. However,
carriers must lay down the framework
for any reporting or analytical needs
early in the process. These reporting
requirements must be tied back to the
target operating model and the business
vision to ensure that the carriers are
capturing the information they need to
make good business decisions and look at
the captured data in meaningful ways.
7. Change strategy
According to a recent McKinsey
study4
, projects with excellent
change management (CM) strategies are
six times more likely to meet or exceed
project objectives. In addition, managing

opinion regarding how the system should
behave. It is important to keep in mind that
the user base that will test the system will
often consist of actuaries, salespeople
and underwriters rather than testing
professionals.
Before letting any personnel test a new
system, carriers should provide staff
members with the necessary tools and
training to ensure there is a common
understanding of the expectations and
objectives for the testing being conducted.
Knowing what the testing stage aims to
accomplish and having a clear roadmap for
defect reporting, triage and remediation
is another prerequisite that seems too
obvious to merit a specific mention, but
many PAS implementations get stalled
during this critical phase due to a lack of
this clarity. What makes matters worse is
the natural tendency for all stakeholders
in the process viz. business users,
requirements analysts and developers
to point towards each other as being
responsible for the defects instead of
working cohesively to understand the
underlying issues and addressing them
as a group. A well-documented and
agreed testing plan which includes the
aforementioned components as well as
acceptable levels of defects at various
criticality levels can go a long way in
fostering the collaboration which is vital to
a successful testing stage.
Prosci’s®
ADKAR®
model is a very robust
Change Management framework that
carriers can leverage to ensure they build
and implement a Change Management
strategy that meets their needs. This
framework aligns well with the typical
program implementation cycle, and
enables a systematic and iterative
approach for change management.
8. User testing
In theory, testing a system to
see if it meets all requirements
should be easy considering the plethora
of tools and techniques that are available
today. However, the program can stall
if testers don’t know what to look for, or
don’t understand the difference between
true defects and their own preference or

or simply being no longer required to do
their manual tasks due to new automated
systems and/or processes are strong
demotivating factors for any group of
users. It is critical to address these
concerns throughout the lifecycle of the
implementation program by using
appropriate change management
mechanisms designed to create an
environment of eagerness and positivity
towards the new system and processes.
Once this is accomplished, the actual user
training can proceed on a significantly
more productive trajectory.
The training curriculum should reinforce
the purpose and benefits of changes, and
be designed from a process perspective
rather than focus on application features
or screens. Trainees are likely to benefit
from understanding how they can execute
their day-to-day processes in the new
system, rather than how every screen in the
application works.
Carriers should not treat training as
an afterthought or academic exercise
necessary to start user adoption of the new
system and processes. Without a clear
idea of what they want their employees
to learn, training sessions can create
frustration and resentment. Change is
hard. The more comfortable employees
feel with a new system, the more likely they
are to accept it.
9. Product training
For any PAS Transformation
program, the “rubber hits the
road” when the new application and the
associated processes and procedures
are rolled out to the user community.
With a majority of the user community
being quite familiar with the previous
processes and systems, the resistance
to any sort of change is usually very high.
This is exacerbated by the relatively long
tenure of insurance industry employees,
where it is not uncommon to find users
performing essentially the same role for 15
years or even more. Like most other similar
examples, this resistance to change is also
typically driven by the fear of the unknown.
Concerns about reduced productivity,
being replaced by less experienced staff

a change occurs in the program, or fail to
define the benefits at all.
An iterative approach to implementation
mitigates or eliminates these issues.
Business users can evaluate feature
implementations, and request changes
to address their precise needs. As each
subsequent module is implemented, the
expected business benefit realization
can be measured, and any required
corrective steps can be taken to ensure
the implementation continues towards
its planned benefits and goals. Carriers
should consider using an Agile-based
iterative delivery approach to enable
sequential staged implementation and
solicit feedback. Even if they have
reasons to not adopt the Agile model of
application development in full (and many
circumstances make it impractical to do
so), carriers can still benefit from adhering
to the philosophy of tackling problems in
smaller bite-sized pieces.
10. Benefit validation and
feedback loop
While the benefits of a more
efficient, smarter, and robust
PAS seem obvious, it can seem difficult
to quantify and truly validate the
business value derived from such an
implementation.
One key reason is that the business needs
rarely remain static over the course of
a multi-year implementation program.
Project requirements and goals may shift
several times during the development
phase. External and orthogonal factors
may impact the ability of the project to
deliver as per originally stated objectives.
The real problem occurs when carriers fail
to revalidate the business benefits against
new program objectives whenever such
Industrychallenge
of large PAS transformation
programs struggle to meet
desired timeline and budget
expectations
70%
For programs that do meet
timeline and budget expectations
do not yield expected
business value or ROI
programs actually deliver the projected
business value, leaving
a signiﬁcant negative
impact on the business
of all PAS
transformation
As a result,
>67%
<10%

References
1. CEB TowerGroup Survey
2. Celent “Deal Trends in Property/Casualty Policy Administration Solutions” 2011 North American Edition
3. Datamonitor Survey
4. “Change Management That Pays,” McKinsey Quarterly, 2002
[ 70% of PAS implmentations fail — 10 best practices to beat the odds ]

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EXL White Paper - Why PAS Implementations Fail

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