Building the Business Case for Policy Transformation

The policy system sits in the center of the insurer’s business model, maybe the epicenter. I often refer to policy as the insurer’s cardiovascular system. However you want to describe it, the policy system is an essential foundational component and building a business case for transforming the policy space can be a difficult task.

A metric driven business case (including both the hard and soft benefits) is an essential first step on the transformation path and if well constructed will not only empathically answer the question “why,” but also create a basis for performance management after the transformation is complete.

Note that I’m using “transformation” because this effort needs to be seen as more than just a “replacement” of the existing policy system. It’s an opportunity to examine the entire process and effect not only a performance improvement, but at the same time streamline and modernize the entire policy issuance process.

If you accept the fact that there are just two ways to measure business success, growth, and profit, then creating a business case can be simplified into the two basic components of cost and benefit.

Cost is the basic estimation process, and there are many tools available to estimate both the configuration and integration costs associated with policy transformation. This estimate has to include the entire cost of end to end transformation including planning, licensing, configuration, integration, migration, testing and organizational change management, etc.

The benefit side is a bit more complex, but fundamentally breaks down into three basic components or legs, which I like to call the three legged stool.

  1. Process change – During the process of evaluating the policy system environment, there is a real opportunity to assess the entire process from issuance through  renewal and identify processes and procedures that can be eliminated, integrated into the new policy system’s functionality, or streamlined with the goal being to develop a lower total cost of ownership. This is really about capacity management and acquisition cost. Some of the typical metrics to consider include issuance cycle time, straight through processing, self-service utilization (generally measured by customer/agent in bound phone calls, abandon rate and hold times).
  2. Expanded access to markets – Clearly these tend to be softer benefits, and therefore somewhat more difficult to measure, but in many cases this can be where we generally find the richest benefits that really move the business forward. Typically, we look at adding the capability through policy system transformation to enter new markets, new states, and new distribution channels. There’s also the effect on top line growth of offering comparable product features that ultimately enhance retention and increase quoting activity.
  3. Legacy retirement – Finally, there is the cost savings relative to the retirement of the current legacy application stack. The ultimate goal of the policy transformation is to eliminate the legacy systems and all of the ancillary support applications that go along with them.

Hopefully, you found this brief summary helpful, obviously this was meant as a high level summary of a very complex process. I’m happy to answer any specific questions on the process and help you in any way I can to build your business case. Please don’t hesitate to reach out. Thanks for reading.