The Real Reason Policy Administration System Implementations Fail

Insurance company technology environments are in a state of flux and renewal, and progress has been slow and tough going. The only reason progress has not stopped completely is due to the fact that the need for change is so overwhelmingly apparent that it compels action. The reasons for change are so well understood by industry leaders that they barely warrant mention, but for completeness sake they include: the need to respond to rapidly changing insurance markets and regularly requirements, aging work force, aging and obsolescent technology, and the cost of organizational inefficiencies. The real reason Policy Administration System (PAS) implementations fail isn’t the “why,” it isn’t even the “how” or the monetary “cost,” it’s that the process of change is so difficult for these organizations that reluctance is almost equal to the need.

 

Insurance companies are typically both structurally unprepared from an IT governance perspective, and culturally unprepared from an organizational change maturity perspective. Under the current short-term driven reality that is overwhelmingly directing insurance industry efforts, staff in insurance companies are not ready to make a major changes needed because they do not truly understand, in any substantive way, the real urgency or benefit of proceeding down that path in terms of their own self-interest. These problems are certainly not unique to insurance companies. They are manifest in most organizations with well-entrenched process-driven bureaucracies. Paradoxically, to thrive in these organizations a person must become well-entrenched, which is the antithesis of change. However to survive in the long-term, insurance companies must change, which is the antithesis of entrenchment. That is both the paradox and the key challenge for PAS implementation efforts in insurance companies.

Now, this “change-is-hard” counter-balance certainly plays into the “how” and “cost” factors, but the point is that companies come up with a myriad of excellent plans for PAS implementations and spend millions of dollars over initial cost estimates and still fail. And even if they succeed, the results fall short of expectations, sometimes significantly so. Therefore the “why,” “how” and “cost” are window dressing on PAS implementation efforts.

The postmortems of such effort often focus on the “how” and “cost”; as if the insurance company in question just had a better implementation plan or had better execution or spent just a few more dollars things would have been different. And many times there is wisdom in such observations and assessments, but they often skip over the elephant in the room: a PAS implementation is a gut wrenching contest of wills between the status quo and change, which no implementation plan or amount of money can mitigate enough to matter to the people living through it.

Therefore one must acknowledge that there is personal capital involved that is high enough in a project like a PAS implementation to force individuals at all levels of the company to inadvertently, and without forethought or malice, act against the best interest of the company and/or their self interest. There are people in a typical insurance company who have been there 20 to 30 years, who have spent a lot of time and effort building the workarounds the new PAS is intended to “fix,” who have little interest learning a whole new process while maintaining the old process all things being equal, and who make the “perfect” the enemy of the “good” out of an ethical sense of due diligence. These typical change management issues can be overcome. The methods for doing so are numerous and well documented, but regardless these change management issues create one heck of a headwind on a project as large and complex as a PAS implementation and require a hefty long-term personal commitment from leaders and staff alike.

The inherent difficulty in PAS implementation projects it should be a fundamental wake-up call to the insurance company leadership and supporting staff since so many insurance companies are going to be forced to undertake such a project or go out of business. So before contemplating any movement toward PAS implementation effort, leaders and staff members in insurance companies need to significantly re-think leadership roles in the transformation. Insurance companies need its leadership and the staff to become more self-aware of these cultural challenges so that they can steel themselves to the massive amount of personal capital it will take to pull this off. Once that is done (or well on its way) the insurance company can then focus on the “how” and the “cost” (in dollars), which in the end are the easy parts of a PAS implementation.

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