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

Insurance Infrastructure Insurance Technology

All Tags

Insurance Infrastructure Insurance Technology

By The Boost Team on Apr 13, 2024

11 min read

Closeup of a software engineer's hands as they work on a computer.

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.

Explore Popular Categories

Boost News Insurance 101 Insurance Infrastructure New Product Development White-Label Insurance

Share this Article

Ready for Liftoff: BHMS Backs Boost

Jul 31, 2024

Friends of Boost, Today Boost is thrilled to announce that we have secured a significant equity investment from BHMS Investments, setting the stage for an incredibly exciting next phase for this company and the amazing team that has built it brick-by-brick over the past seven years. With a rock-solid foundation firmly in place, this partnership is going to supercharge our growth, fuel more innovation, and cement Boost’s position as the go-to infrastructure platform in insurance. We are on a mission to empower MGAs, insurtechs, independent brokers and agents, wholesalers, embedded insurance providers, and really any company that just wants to build, transact, and operate more efficiently in this technology-enabled world of ours. While capital is great, today is about hard-earned validation for our team doing that the right way since Day 1. BHMS is the perfect capital partner for Boost in terms of their insurance expertise and unquestionable track record in the space, but more importantly, they are fantastic people that share both our views on the industry and our principles of company building. The market is dangerously fixed for early and growth stage companies right now (and I say “fixed” intentionally). It’s incredibly easy to get picked off in an environment like that, so it takes a rare mix of both intellect and character to do the right thing when you’re on the capital side of that equation - and even more to be truly value-add to your portfolio companies. BHMS has that mix in spades and appreciated Boost for what it is, what it has accomplished, and what remains an incredibly high ceiling for this company vs. playing short-term charades with the herd. That’s our kind of investor. This investment isn’t just about the money—it's a resounding endorsement of Boost’s strength, credibility, and potential to make a truly meaningful impact on the insurance industry at scale. With BHMS now on board, alongside an incredible group of long-time strategic backers like Markel, RenaissanceRe, and Canopius, we’re ready to take our game to the next level. Our mission has always been to disrupt the insurance space with cutting-edge tech and unparalleled service, and this backing proves that disrupting responsibly is the only approach that works in our industry. Anyone can grow fast if they don’t care about quality or long-term credibility. At Boost, we underwrite profitably, we respect compliance, and we always - always - take a collaborative approach with our stakeholders across the entire value chain. As someone with literally zero patience, I can personally attest to that being incredibly difficult to do at times - but it scales. Even with the market’s ups and downs, Boost has been a powerhouse of innovation in the insurtech landscape with equal commitment to disruption and reliability. Doing things the right way does not mean you cannot innovate - or even disrupt - and leveraging best-in-class technology is not a right reserved for #insurtechs. Our platform has always been a one-stop shop for insurtechs and embedded insurance providers and MGAs, independent agents and brokers, and wholesalers alike - offering everything from product development to underwriting and program management to claims administration and reinsurance capacity. With our proprietary tech and a dream team of industry pros, we’re delivering smarter, more efficient solutions than ever before. Since our first program launched in 2019, we’ve underwritten over $200 billion in coverage, which is a somewhat staggering figure in hindsight. Today we’re proud to support programs for giants like Amwins along with trailblazers like Cowbell, Newfront, and Wagmo, and we’re grateful for all of the companies that chose to build with Boost even when Boost itself was just getting started. Our steady, disciplined approach has kept our portfolio profitable and we like to think that has kept our partners in front of us very happy as well. All of Boost’s success is thanks to what is hands down the best team in the industry. Hard stop. Their grit, dedication, and willingness to tackle tough challenges head-on has been crucial. Boost’s commitment to quality starts with our team and is reflected in them every single day. We keep things lean at Boost because that quality always outperforms quantity. Even if that approach always requires more from each individual and makes the stakes a bit higher, working with the right people makes the returns on each long hour invested that much more gratifying. Few people exemplify those principles or have demonstrated such an unwavering commitment to Boost more than Jeremy Deitch, so I am also thrilled to announce that Jeremy has been promoted to President at Boost and will join me on our Board of Directors. Jeremy’s leadership has been critical since the day he started at Boost almost 6 years ago, following probably the most grueling interview process in our company’s history - one he is always happy to dramatize even more if you ever ask him. ;) I couldn’t be more grateful to have a partner like him as Boost soars to new heights. With this new investment, we’re geared up to boost (pun intended) our growth and expand our tech offerings. We’re planning to scale our MGA programs, roll out new products, and snap up some strategic acquisitions. Our goal? To make building a business in insurance easier, faster, and more efficient for everyone so they can better serve their customers. We’re more fired up than ever about our mission to empower insurance providers with the tech and infrastructure they need to thrive. This partnership with BHMS is just the beginning. The future is bright, and we’re ready to lead the charge. Thank you to everyone who has been part of our journey thus far. Let's all keep pushing boundaries together - because the best is yet to come. Special thanks to the team at Howden Capital Markets & Advisory for helping Boost always say what it’ll do and do what it says. You can find our full press release here and, more importantly, can start joining our platform here. All my best, Alex Maffeo CEO & Founder Boost Insurance

Two business people work on a laptop in an office conference room.

What is a Cell Captive?

May 23, 2024

A captive is an insurance entity that a business creates, rents, or owns in order to self-insure risks. A cell captive, sometimes also called a protected cell captive or segregated cell captive, is a specific insurance captive structure that allows an entity to segment or separate business in one cell from that in another cell, so that a particular cell’s assets and liabilities are insulated from anything that happens in another cell (even if both cells are part of the same overall captive facility). Using captives to self-insure risk offers businesses a number of benefits: they can participate in some or all of their program’s underwriting profitability, maintain end-to-end control over risk (including pricing and claims handling), and avoid paying significant overhead fees to a “middleman” insurer. Companies have several options for structuring and utilizing an insurance captive. They might build a single-parent captive, pool risk in a group captive, or make use of a cell captive. In this blog, we’ll take a look at each. In a single-parent captive, a company will often partner with a fronting carrier to reinsure at least part of their own risk. These are most commonly used by very large companies with exposure to multiple lines of business, which they can insure through the same captive entity. Example: A national food-delivery business wants to provide insurance to its restaurant partners, to protect against the risk of lawsuits related to food safety for meals delivered through the service. It discusses partnerships with several major insurance carriers, but none are willing to provide the level of coverage that the business is looking for at a reasonable price. To get what it needs, the food-delivery business sets up a captive to reinsure a fronting carrier partner, enabling the business to insure its own risk and provide the coverage it needs to its restaurant partners. Setting up a single-parent captive is a considerable undertaking with high capital requirements and a complex setup, with significant ongoing operational requirements going forward. In order to make sense financially, it usually requires a high volume of premium. For that reason, this option is usually only viable for very large businesses. For businesses that can’t afford (either in time or in money) to set up their own captive, a second option is to partner with other businesses in a related industry to set up a group captive. In this scenario, a single captive maintains portfolio capacity that can be shared by a group of entities. The entities can then pool risk together in the single captive. Example: Several real estate companies form a partnership to share a group captive to pool their similar risks. Each company contributes a certain amount of capital to fund the captive, and the capacity is shared among the partners. The participating real estate firms are then able to leverage the captive’s capacity to exercise greater control over their risk, and avoid paying high fees to middlemen. This can allow the partner businesses to share risk (and benefits) between them, and works well for trade associations and other groups of companies in related industries, that share similar risks. However, since the fund is shared between partners as well, one partner’s negative returns can impact the other partners involved. In a cell captive, the business first sets up an entity called a core, which is a similar process to setting up a single-parent captive. Once the core entity is complete, however, the business can much more easily spin up additional cells within the captive structure. The financials for those individual cells are separate from each other, rather than the combined funding of a single-parent or group captive. For many companies, however, using a cell captive doesn’t mean building one themselves. While there are use cases for single-parent cell captives, most businesses that create them then rent out cells to other businesses. Using a cell in another company’s captive entity (also called captive-as-a-service) allows a business to reap the benefits of an insurance captive at a much lower cost. We’ll look at some examples in the next section. The first step in creating a cell captive is to create the “Core” entity. This process is similar to building a single-parent captive: Once the core captive entity has been created and adequately funded, the owner can spin up individual cells within the captive’s structure to support different lines of business, segments, or partners. The Department of Insurance will still need to approve all new cells, but the process is much more streamlined than in prior cases. New cells can often be set up in weeks instead of the months or years typically needed for entirely new captive entities. Captive cells’ assets and liabilities are then statutorily protected from each other (which is where the ‘protected cell captive’ name comes from). This means that if one cell has a difficult year and experiences significant underwriting loss, the assets of the neighboring cells can’t be used to fund that loss. There are multiple ways that cell captives are used, including offering captive-as-a-service (also called rent-a-captive) to other partners or businesses, and separating different parts of the parent company’s business for performance tracking. In a captive-as-a-service or rent-a-captive scenario, the company that owns the captive core would allow other businesses to use cells in its captive. For a fee, the owner can set up a new cell specifically for the partner business, and manage it on their behalf. This lets the partner business leverage the owner’s infrastructure to achieve many of the same benefits of a single-parent captive, without the cost and complexity of creating one. Example: An insurtech specializing in commercial insurance has built a very strong customer base, and wants to further grow its business by participating in some of its own risk. However, building a full captive is too resource-intensive for the insurtech to take on. Instead, the insurtech partners with a CaaS provider and rents a captive cell. The insurtech then uses the cell to self-insure some of its risks, enabling it to participate in the underwriting returns and further scale towards a full-stack insurance business. While the most common reason for building a cell captive is to rent out cells to other businesses, there are a few reasons a company might build one for its own use. Because the cells’ financials are statutorily separated from each other, a cell captive allows a large enterprise to delineate between different lines of business or geographic regions, and monitor their performance separately. Example: A nationwide property management company offers several insurance products to its customers to help protect their personal property and finances. For planning and budgeting purposes, each line is supported by an individual cell in the management company’s cell captive. Over the course of the fiscal year, several lines perform over their targets, while one line significantly underperforms. The other LOBs’ budgets are unaffected by the low-performing LOB’s losses, and the company has clear visibility into which of its products are doing well and which may need a course correction. Cell captives provide a number of benefits to both their owners and the end users: Cell captives are popular for a reason: they offer significant value to both the companies with the resources to build them, and the companies that would rather rent a cell than build a single-parent entity from scratch. To learn more about Captive-as-a-Service with Boost, contact us.

The text "Trends at Money 20/20 2021" appears in white lettering over a dark-colored abstract background

Partnerships and Focus: Big Trends at Money20/20

Nov 3, 2021

It was a busy October for the team at Boost Insurance, wrapping up with one of our favorite industry events: Money20/20. The conference was a super interesting contrast to ITC which was laser-focused on insurance, while Money 20/20 was more about fintech in general and much, much bigger! With fintech about ten years ahead of insurtech in terms of maturity, it’s interesting to see the level of innovation and diversity of companies in our big brother industry. Here are some of the big trends we noticed. One of the really interesting trends that kept being repeated at Money20/20 was a shift in mindset among both fintechs and banks. In the past, they have tended to see each other as competition for consumers’ business and attention but now everyone is moving towards viewing each other as complementary vs. competitive. We saw multiple collaborative efforts between the upstarts and the established, working together to create a better customer experience. This works because they each have a specialization (fintechs excel at meeting modern consumer expectations and banks are experts in profitably navigating a very regulated, very complex business), and partnership lets them bring both those strengths to the table. This was extra interesting to us at Boost because it reflects what we see in insurance, with insurtechs and carriers working together and bringing their own strengths together to meet modern consumer needs and expectations. For example - Boost has built a modern tech platform making various insurance products available via API but partners with established reinsurance companies to facilitate risk transfer. There will still be winners and losers between the incumbents and the upstarts, but as collaboration and competition continue consumers will be the clear winners. A trend I’ve written about before, and one that we continue to see play out, is tech companies’ focus on affinity groups. Fintechs are springing up all over with explicit goals of serving a relatively narrow group of people and serving them well. Companies like Paceline for people focused on health and wellness, Daylight for the LGBTQ+ community, and First Boulevard for African-Americans are just some of the fintechs concentrating on being the best option for a specific set of consumers. This is pretty much the opposite of traditional one-size-fits-all programs - instead of creating something broad that can be good enough for the biggest slice of people, creating something very targeted that can be great for a specific niche. This trend is great news for consumers who traditionally have not been served well by financial services in general. At Boost we’re starting to work with more affinity-focused companies because our modular, customizable product structure allows partners to tailor insurance for their customer needs. It’s exciting to be part of making insurance more accessible to all groups of people! Finally, it was really exciting and validating to see so much interest in new approaches to traditional industries. Finance and insurance have historically had a reputation for being very slow to change, sometimes for good reason (highly regulated, handling people’s money is a big responsibility, etc). This year though there’s a ton of interest in potential innovations, look no further than the enormous presence of blockchain and crypto-focused companies at Money20/20! Boost met with a TON of different companies during the show, and we cannot talk about anything yet but be on the lookout for some very interesting things coming in the near future! Money2020 was a heck of a conference and while my conference year is wrapped, the Boost team will be out and about at shows the rest of the year. We are looking forward to more opportunities to meet people in 2022, so if you did not get a chance to connect with us at Money2020, just drop us a line.