Datos Insights’ latest Market Navigator report on Life/Annuity/Benefits (L/A/B) Policy Administration Systems highlights how insurers are rapidly adopting new technologies and flexible approaches to stay competitive in an evolving marketplace. Here are the key trends shaping the future of policy administration:
AI Adoption Accelerates
Artificial Intelligence is no longer just a buzzword in insurance—it’s becoming a core component of modern policy administration systems. Datos Insights research shows that 35% of life insurers have already deployed out-of-the-box large language models (LLMs), while 41% have current or planned pilots. This enthusiasm for AI extends beyond LLMs, with 47% of insurers having deployed machine learning solutions and 35% utilizing image recognition technologies.
Vendors are responding to this demand by integrating AI capabilities across various modules. From document interrogation and summarization to chatbots for agent portals, AI is transforming how insurers handle core processes. Some innovative applications include using AI for generating personalized communications, providing natural language policy search capabilities, and offering AI-driven product recommendations. These implementations are helping insurers improve operational efficiency while enhancing customer experience.
Flexible Modernization Approaches Gain Traction
Gone are the days of one-size-fits-all system overhauls. Insurers are increasingly adopting more nuanced approaches to modernization, focusing on targeted deployments for specific functions or market segments. This shift reflects a growing recognition that different blocks of business may require different modernization strategies.
A particularly noteworthy trend is the rise of “greenfield” implementations, where insurers deploy new systems specifically for new products or market segments while maintaining existing systems for legacy blocks. This approach allows insurers to innovate rapidly in new areas while managing the complexities of their legacy portfolio. For long-liability tail businesses like individual life insurance and annuities, this strategy has proven especially effective, enabling accelerated new product introductions without the need for costly and risky full system conversions.
Cloud and SaaS Solutions Become the Norm
The industry’s cautious acceptance of cloud-based solutions has evolved into a clear preference for hosted options. Insurers increasingly view data center operations as non-core competencies and are embracing cloud hosting to reduce costs and accelerate deployments. This shift from capital-expenditure-driven to operational-expenditure-driven environments represents a fundamental change in how insurers approach technology infrastructure.
All vendors in the market now provide hosted subscription models, though many existing clients continue to use on-premises installations for legacy blocks. The move toward cloud-native services and microservices via web services is enabling insurers to access policy administration functions and data more flexibly, supporting new applications and integrations with greater ease.
Conclusion
As we look ahead, successful modernization will require insurers to carefully evaluate their specific needs and choose approaches that align with their strategic objectives. Whether implementing AI capabilities, adopting flexible modernization strategies, or moving to the cloud, the key is to ensure these changes support enhanced customer experience, improved operational efficiency, and accelerated speed to market. For insurers beginning their modernization journey, the message is clear: focus on approaches that provide the agility to adapt to changing market conditions while managing the complexities of existing business. To read the full Datos Insights report on the PAS market for L/A/B insurers, visit our website.
