A Guide to Insurance Policy Administration Systems in 2024: Build, Buy, or Integrate?

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By The Boost Team on Apr 13, 2024

11 min read

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For insurance carriers and agencies, a policy administration system is the most essential piece of their tech stack. Whether you’re an insurtech startup researching your first insurance policy admin system, or an established player looking to upgrade, this comprehensive guide will cover the most current options on the market.

What Is a Policy Administration System?

A policy administration system (PAS) is the system of record for every transaction related to an insurance policy. The insurance policy admin system supports all operations that can be taken on a policy or quote, such as rating, quoting, underwriting, document generation, document storage, billing, endorsements, cancellations, invoicing, and more.

Whenever anything happens with a policy, the PAS records the transaction and takes any necessary action. This includes things like generating a quote based on information provided in an online form, modifying the policy’s coverage endorsements, or generating the appropriate documents for a new policy and facilitating delivery to the policyholder.

Because the PAS is the technical underpinning for all-online insurance transactions, a robust PAS is essential to offering the convenient digital insurance experience that modern customers expect.

If your business needs a new PAS, you have a few different options: you could build one yourself, buy a third-party PAS and the custom development work needed to use it with your offerings, or partner with an insurance-as-a-service company and integrate with their PAS.

Building a Policy Administration System (PAS)

What is the benefit of building your own PAS?

The biggest selling point for building your own PAS is the control. When you build your own, you have complete control over every aspect of the system, and you can determine how it will run. You have the freedom to customize the system to best suit your products and customer needs, and you can avoid the compatibility issues that you might have with a pre-built product. But that freedom comes at a cost.

Building a PAS from scratch is a very difficult and time-consuming task, with costs that run in the millions. Additionally, there are many details to consider that require nuanced expertise and ongoing attention.

What do you have to consider in order to build a PAS?

The biggest challenge that developers face when building a PAS is state-by-state variances in insurance laws and regulations. When it comes to insurance, each state operates like a separate country. Insurance products must be approved in each state individually, and every state has its own requirements for how insurance products should be sold. This includes rates, underwriting guidelines, notifications, how policy documents have to be delivered to the insurer, and more.

In order for a PAS to function smoothly, it must be able to automatically identify and follow all applicable laws for the state a policy is sold in. Otherwise, your agents would need to manually check and set up each transaction in the system - which essentially defeats the purpose of having the PAS. This means that you'll have to build the legal requirements for each state you do business in into your PAS so that it can automatically enable compliant transactions.

Here are a few examples of areas with significant state-by-state variation, that your PAS will need to account for:

Document generation and delivery

For any policy life cycle event–like a quote, policy issuance, midterm endorsement, cancellation, or renewal– documents need to be generated and provided to the insured. For admitted-lines products, individual state requirements can get very granular on what information each document must contain, and even specify which fonts and font sizes can be used. Once the documents are generated, certain states may also mandate how they can (and can’t) be delivered to the policyholder. When building your own system, you would need to take those different requirements into consideration, and build them into your policy administration system.

Cancellation notices

If a customer doesn't pay their monthly premium, your PAS should give them a notice saying that their policy will be canceled. However, each state has a unique timeframe by which that notice has to be sent. In some states it’s as little as 10 days after an unpaid bill, in others it’s as much as 40 days, and there is a lot of variety in between. For your PAS to function legally, each state’s timeframe needs to be built into your system so that the proper notification is sent out at the right time required by each policyholder’s home state, and the policy cancellations are executed correctly.

Changing regulations

To top it all off, laws are constantly changing, and the requirements for documentation, cancellations, taxes, and billing–to name a few–are always evolving or being added. Keeping your PAS up-to-date, and legally compliant with each state you sell insurance in, means keeping up with contract and insurance laws in each individual state. This means building your own PAS requires more than just technical resourcing - you’ll also need ongoing input from insurance law and compliance experts in order to stay current.

Essentially, the work of building a policy administration system is never done. You have to keep checking for new state filings, rules, and laws so that you can build them into your system.

How much does it cost to build a PAS?

Simply put, building your own policy admin system will cost you a lot of time and money. Building a PAS that supports one insurance product can take two to three years to complete, and several million dollars in development costs.

As we’ve seen, however, the initial build is only part of the PAS equation. After your system is launched, you’ll still need to budget for regular maintenance and update costs. These will vary based on the changes you make to your products; every time you refile your insurance product, you’ll need to update your PAS to support the changes. If you never update your products, then this cost will be minimal. However, if you want your products to stay competitive, you’ll probably do it regularly. Adding or updating PAS features is another frequent driver of maintenance costs.

If you have a multi-line business with more than one insurance product, the process becomes even more complex, expensive, and time-consuming. You would need to build a system that works for your most complex product and your simplest, taking all of their differences and intricacies into consideration.

For businesses that specialize in a single line of business and don’t intend to expand beyond it, building a PAS in-house can be a good option to create a system well-tailored to their specific needs. For businesses that don’t fit that scenario, it can quickly become a large ongoing expense. If you’re considering building your own PAS, it’s important to take these ongoing costs into account as you calculate the potential return on your investment.

Buying Third-Party Policy Administration Software

If building a PAS isn’t in scope, a second option is to buy an off-the-shelf software system from a company that specializes in building policy administration systems. There are several well-established companies that offer policy admin systems to insurance businesses of all shapes and sizes. However, the “off the shelf” label is a bit misleading. Deploying a third-party PAS isn’t as simple as adding to cart and installing software.

By definition, a third-party PAS is a generic piece of software, designed for use with any insurance company that buys it. What that means in practice, however, is that it’s not ready to use right out of the box. Before you can use a third-party PAS, it will need to be configured to support your business’s specific products and workflows.

How long does it take to implement an off-the-shelf PAS?

When you buy a third-party PAS, the amount of time required to get to market depends on the amount of customization you need and the kind of experience you want to offer your customers. In general, however, it’s a good idea to budget around a year.

You would likely kick off the process with a planning meeting to determine the scope of your needs. This includes issues like how many products your PAS will support (each product will need its own monthslong configuration), which specific products you offer and where you sell them, and whether you need any specific custom work from the vendor (for example, building a front-end to offer your products digitally). Once the contract is signed, the third-party company would adapt their baseline PAS to build a system to fit your specs, and integrate it into your existing systems and workflows.

If you have a single product line and are willing to accept a customer experience that may not fully incorporate your brand (for example, taking customers to a differently-branded portal), it can take around six months to a year. For multiple product lines, your vendor will need to do a separate configuration for each, which obviously would expand the timeline. Similarly, a highly customized front-end experience will require significantly more time and labor to bring to market.

If you have specific goals like a mobile-first experience or integrating your PAS into your website, that will require working with an API. This means you’ll need development resourcing on your side as well, to create the integration between your systems and your vendor’s API. How long this takes depends on several factors, but one of the biggest is the quality of your vendor’s API. If their API is low-tech or otherwise difficult to work with, it will negatively impact your developers’ timeline.

How much does it cost to buy a PAS off-the-shelf?

The total cost of buying an off-the-shelf PAS will depend on your vendor’s pricing model. The more traditional vendors tend to charge per-year service costs for building out and maintaining your PAS. These costs can be quite significant; some vendors’ prices start at $400,000 annually, with the potential to increase exponentially with any customization needs.

Rather than a large fixed yearly rate, newer vendors tend to charge a relatively low baseline platform fee, and then take a percentage of your gross written premium. Depending on your volume of business, this can be a more affordable option for companies that want to buy off-the-shelf. However, keep in mind that you’ll still need to pay a separate cost for the customization work to enable the PAS to support your products, and the managed services to build and implement. These indirect costs can sometimes be quite substantial, so be sure to ask questions about what you’ll need and get the full picture before making your decision.

Integrating with an Insurance as a Service Partner’s Policy Administration System

A third option is to partner with an insurance as a service company. This is a bit different from the other two options, as an IaaS partnership goes beyond just using your partner’s policy admin system.

What is insurance as a service (IaaS)?

Insurance as a service (IaaS) provides the whole solution necessary to support an insurance program. This includes a tech-forward PAS but also includes things like operational infrastructure, regulatory compliance, the insurance capacity needed to sell policies, and insurance products that can be white-labeled and sold under your brand.

When you partner with an IaaS provider, you’ll select which of their products you want to offer your customers, then integrate your website or app with your partner’s system via API. This offers insurtechs a significantly faster and lower-cost path to expanding their insurance product offerings than building a new insurance program themselves.

From a technology perspective, the PAS is provided as part of the IaaS provider’s standard solution. An IaaS provider’s PAS will only work with that partner’s products.

How long does it take to integrate with an IaaS partner’s PAS?

An insurance as a service PAS offers some considerable speed advantages vs. building a PAS yourself or buying a third-party system. Since the system will already be configured to support your partner’s white-label insurance products, there will be no need for the time-consuming development work required to build product workflows or customize an off-the-shelf PAS.

This is particularly beneficial when expanding your product offerings. If you wanted to add another insurance product to your lineup, you could simply select the product you wanted from your partner’s available portfolio, make a few modifications to your existing API connection, and begin selling a new insurance line within a few weeks.

However, there is still some initial development work required. You’ll need to build the connection between your digital front-end and your partner’s PAS, using their APIs. The good news is that insurance-as-a-service systems are designed for this, and so their APIs tend to be well-documented and easy to use. With a small development team and a high-quality partner API, you should plan for this step to take 3-6 months. The actual API integration itself usually accounts for about a month of development, with the rest of the time spent building the front-end to transact with the consumer.

What does it cost to integrate with an IaaS partner’s PAS?

Because the PAS is included as part of an insurance-as-a-service offering, the cost structure differs from build or buy. When you work with an IaaS partner, you will pay them a commission for sales of their product, and usually also a platform fee for using their service. The PAS will be included in these standard costs, with no special purchase or subscription required.

Another major savings point with IaaS is maintenance. As we saw earlier, a PAS is never really “finished” - in order to stay fully functional, it needs to be continually updated with the latest state regulations. A major selling point for IaaS, however, is that the insurance backend is essentially taken care of.

This includes keeping the policy admin system up to date - your IaaS partner is responsible for staying on top of compliance developments and ensuring the PAS continues to meet all regulatory requirements. With a good IaaS partner, these changes should happen in the background without any need for your involvement. New state requirements or product updates should simply be there when you use the PAS.

The most significant cost of integrating with an IaaS partner’s policy administration system will likely be paying your development team to build the API integration and front end. The cost for this can vary depending on if you plan to use in-house resources or an outside development firm. As we saw previously, the majority of the time (and thus expense) necessary for this step is related to building the front end, so your costs will also vary based on the scope and complexity of what you intend to build.

The policy administration system is a complex but critical system for any insurance company, and acquiring a new one can be a major project. Consider your budget and timing needs, as well as how to manage ongoing requirements, when deciding whether to build a system in-house, buy from a third party or integrate with a partner who’s already done the heavy lifting.

If you want to learn more about insurance-as-a-service through Boost, get in touch today.

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Offering Insurance: Build, Partner, or White-Label?

Nov 1, 2021

So you’ve heard that the insurance market is set to pass $700B gross written premiums this year and that changing consumer expectations are creating big opportunities for companies that haven’t traditionally offered insurance. Now what? If you’re ready to get started with offering insurance, your options fall into three general buckets: build and sell the insurance product yourself from scratch, partner with an insurance company to offer their product, or work with an insurance-as-a-service provider to offer white-label insurance products. So, which is right for your business? We’ll go through what’s involved with the top 3 options, as well as some pros and cons to be aware of. Your first option for offering insurance to your customers is also the most intensive: you can create the insurance products you want to offer, in-house. With this option, you would essentially create a business within a business: an insurance agency that operates as part of your company. As with most business-DIY options, the big advantage of building your own is that you can create exactly what you want. You’ll be responsible for the concept, design, operations, compliance, and tech, so you can approach each area in a way that centers your business needs. Building a new business from scratch is never easy, but insurance is a particularly difficult vertical to get into. It’s complex and heavily regulated, and getting started requires a significant investment of time and money. How significant? Here’s a quick overview of the steps you’d need to follow to create your own insurance products and offer them on your website. All in all, you’re looking at a multi-year timeline to build your insurance products in-house from scratch, with a considerable financial investment as well. And that’s not even considering the ongoing financial investment to maintain them - long-term program management requires significant resources. Besides just the effort involved, the long lead time for getting an insurance product to market means that by the time you get there, the market may well have changed. On top of time concerns, there’s another disadvantage you should weigh before going the build route. Everything we just covered about starting your own insurance program probably falls outside your company’s core business and specialization. What’s more, recruiting and hiring the right people to manage it may be significantly more challenging than hiring the right people for your core business. It’s often difficult to know what to look for when hiring for a completely different skill set, outside your core industry. Once you’ve brought all these new people on board, you’ll also have to manage them in an area where your core leadership has little experience. Consider whether the benefits of building it yourself outweigh the inevitable distraction of running an entirely separate secondary business within your company. Instead of creating an insurance product yourself, you might choose to partner with an established insurance company to offer your customers their product. In this scenario, you would have a link on your site for the customer to buy insurance. When the customer clicks it, they would be taken to the insurance partner’s website to buy the product from them. This is sometimes called affinity marketing, or click-through affinity. In this situation, you would be essentially acting as lead gen for your insurance partner. Your partner may pay you a certain amount per click, but after that you would not participate in the transaction. Your insurance partner would complete the transaction, collect the premiums, and own the insurance relationship with the customer. A click-through insurance partnership like this is both fast and simple to set up. After you’ve worked out the details of the partnership agreement, all you’ll need to do is add the link on your website to direct customers to the insurer. A partnership like this is also relatively low-commitment. Because you’re simply passing web traffic on to the insurer, you can later switch insurance partners or even remove the insurance option from your site altogether with a minimum of disruption to your business. The easy setup of a click-through affinity partnership also comes with considerable drawbacks. Because you’re just providing a link to your partner’s signup form, you lose control of the customer immediately after they click the link. Whatever comes after that is up to your insurance partner. If the customer has a negative experience during the process, it might reflect badly on your brand for offering the referral. Even if the experience is a good one, losing control of the customer comes with another big downside: you also lose control of the revenue. The insurance customer relationship will be with your partner, and they’ll collect the premiums. While a click-through partnership is a fast and straightforward way to connect your customers with insurance, it also removes one of the major benefits of offering insurance on your site in the first place. With this option, you won’t see the kind of regular recurring revenue that you would if your company were able to collect the premiums. Further underlining that it’s not your product (or your customer), with this kind of partnership you’ll have little to no input into the insurance product you’re offering. Your insurance partner will build, develop, and sell the products that best fit their business interests, which may or may not be a good fit for your particular customers. As just another marketing partner, you won’t have much influence to try and get a product created that closely matches what your customers need from insurance. A relatively new third option is to work with a company that offers insurance-as-a-service, and white-label the insurance product they provide you with. If you aren’t familiar with insurance-as-a-service, it generally works like this: insurance-as-a-service providers are companies who have already done the work we outlined in Option 1 (Boost is one example). They’ll have all the necessary state licenses to create their own insurance products, and they will have already negotiated with licensed carriers to back those products. A good insurance-as-a-service provider will also already have built the necessary technology to offer an embedded insurance product experience. Your company can then sign on with the provider to offer one or more of the insurance products they’ve created, under your own brand name, on your company’s website or app. Unlike affinity partnerships, partnering with a white-label insurance-as-a-service provider doesn’t simply generate customers for someone else. Your company will be the one selling the insurance product, on your own website. The customer will buy the policy from you, and you’ll be the one to collect the premiums and own the ongoing customer relationship. White-labeling an insurance-as-a-service product offers many of the advantages of building it yourself, but at a fraction of the time and cost. Because your partner will have already done the heavy lifting on things like operations, technology, compliance, and capital, you can easily offer the right insurance products for your customers - and get to market in a dramatically shorter timeline versus trying to create an insurance company from scratch. A white-label insurance product also allows you to reap the full business benefits of offering your customers insurance: While white-labeling an insurance-as-a-service product is much faster and easier than building one yourself, it’s still more involved than simply adding a link to your website. Working with an insurance-as-a-service provider may take longer to implement than partnering with an insurer for click-through affinity since you will be building the full experience into your website rather than just linking out to an insurance partner's website. Selling white-label insurance policies also requires an important additional step: someone at your company will need to be licensed as an individual broker, and then sponsor a license for your company. You may recall this as Step 1 in the build process - the broker license is required to legally sell insurance, which your company will do with its insurance-as-a-service products. This sounds much more intimidating than it actually is. The insurance licensing process itself is relatively simple and straightforward. However, it does require additional effort from one of your employees (usually a senior executive who is unlikely to leave the company). The other good news is that not only is the licensing process easier than it sounds, but once it’s done, it’s done. You’ll need to maintain it with fees, renewals, etc, but you won’t need to go through the process again as long as that employee is still at the company. A good insurance-as-a-service partner will also help you with this step, so you can check the box and start offering insurance to your customers as soon as possible. The insurance market is changing quickly, and there’s never been a better time for new entrants to take advantage of the embedded insurance opportunity. Depending on the route you take to get there, however, the cost, time to market, and experience for your customers can vary a great deal. When starting on the road to offering insurance, it pays to carefully consider your budget, your timeframe, and your business goals, so that you can choose the option that’s right for your company. Is insurance-as-a-service the right option for you? Boost can help get you started. Contact us today to learn more about your options for offering the different ways to offer insurance with one of our Boost product experts.

The top 3 takeaways from our embedded insurance consumer survey

Embedded Insurance Survey Results: What We Learned From Consumers

Feb 3, 2023

You may have heard that embedded insurance is a big opportunity to grow your business, but are your customers actually interested? We wanted to get the story straight from the source, and so in Q4 2022 Boost surveyed 650+ US consumers. We asked about their experiences with insurance, how they felt about their current insurance options, and what mattered most in their insurance purchases. Here are the top 3 things that we learned from our consumer insurance survey results. [See Full Size] In our insurance survey, a whopping 73% of consumers had either already bought insurance from a non-insurance brand, or would be interested in doing so. While price was mentioned most often, other reasons included brand loyalty and convenience. Trust was another important factor. 62% of respondents were interested in buying financial products from a trusted brand, rather than a bank. For millennials, the number went up to 95%. First movers might have an advantage here as well. 20% of our respondents had never been offered financial products from a retail brand - but they liked the idea. All this is promising news for companies outside the traditional insurance sphere who are looking to build revenue and customer loyalty with embedded insurance. If you can deliver the product and experience consumers are looking for, the appetite is there. It’s hardly a secret that convenience is crucial to customer experience in the digital age, so it comes as no surprise that it was important to our respondents. 59% told us that they’d be more likely to buy insurance if it were offered digitally, as part of a related transaction. Younger consumers were more likely to be enthusiastic about digital insurance: nearly 70% of respondents aged 18-29 were interested in buying insurance directly through a transaction on a retail website. For half of our respondents, embedded insurance wasn’t a novel idea. 50% had already bought embedded insurance at least once, at the point of sale in a related transaction. For many consumers, insurance is a long-term purchase. 68% of our survey respondents told us they’d had the same insurance provider for at least two years, and 10% had had the same provider for more than five years. For retailers, insurance could also be an overall boost to retention. 62% of respondents said that when a retailer offered protect-your-purchase options, they were more likely to be repeat customers. Learn more about offering embedded insurance in our free guide, or contact us to get started.

How to Market & Sell Pet Insurance

Mar 11, 2022

Offering embedded pet insurance is a great way for companies that already serve pet owners to bring in an ongoing source of revenue. But just like every other product out there, marketing and advertising are key contributors to your overall sales. If you’re new to the industry, here are six pet insurance marketing tips to keep in mind when selling pet insurance. Because pet insurance is still relatively new in the US, some of your customers may not even be aware that it’s an option. So how do you convert them? From industry experience, we know that customers are most likely to sign up for insurance when it’s offered as a complement to their existing pet purchase. If you can make them this offer at the point of sale as an add-on to what they’re already buying, you are much more likely to win that additional revenue (and turn a one-time customer into an ongoing one). Your existing relationship with your customers can help you make the right insurance offer at the right time. From their purchase records, you probably already know what kind of pet(s) your customer has, and how much they tend to spend on pet expenses. Leverage that data in your pet insurance marketing strategy. A customer who regularly buys vitamins and specialty food for their pet might be interested in a wellness package. A customer with several pets might be interested in a multi-pet discount offer. Additionally, you likely have a database of prospects that you’ve identified as your target audience, but who haven’t purchased with you yet. Since you’re already actively marketing to this group, you can add your pet insurance offer into the mix and the additional value may help nudge them over the conversion line. Insurance is complicated, and sometimes consumers miss out on the coverages they need because the details are confusing or buried in legalese. As a trusted source for information about their pet, your brand is in a great position to break it down for them. In your pet insurance marketing, offer detailed explanations of how your pet insurance works, and what is or isn’t included, in clear, natural language that your customers can easily understand. Avoid confusing your customers with jargon or complicated legal statements, and don’t try to hide details in small print. Everything in your pet insurance advertising should be understandable by the average consumer, and any information about what is or is not included needs to be easily visible. One of the most powerful sales tools you can get is a real-life story about how your customer’s pet insurance made a difference for them. Consider reaching out to insurance customers who save on big bills, and see if they’d be willing to share their stories so you can leverage these in your pet insurance marketing. When sharing testimonials for insurance, there are a few things to keep in mind: This sounds like a marketing no-brainer, but this is particularly important for insurance advertising. If a state insurance commissioner finds your ads to be misleading or deceptive, you could be hit with fines and other enforcement actions, so it is always advised to be transparent when selling white-label pet insurance. If you use any statistics in your insurance ads, you’ll need to cite where that information came from. It pays to go the extra mile for good, credible sources - a great statistic isn’t so great if you have to attribute it to “koolstats4u.biz” in your ad. It’s a good idea to make sure that nothing related to insurance goes live without first passing a compliance review. If you use external marketing agencies for things like paid search ads, set up a review process to ensure that all insurance-related copy is vetted by your team before going live, including for A/B tests and similar experiments. If your company offers pet-related products or services, selling pet insurance is a great option and it is so easy to do with Boost. If you’re just getting started with pet health insurance, our team is here to help. Get in touch with us today.