A policy administration system (PAS) is the part of an insurer's core that writes every policy and records every change to it over its life. A policy is the contract in which the insurer promises to pay for a defined loss in return for a premium. The PAS holds the official version of every policy that the insurer has sold.
A policy changes many times. When it is first sold, the PAS creates it with the insured person, the thing insured, the cover, the price and the dates. The price comes from the insurer's underwriting rules. During the year, the customer may ask for a change, such as a new address or an extra driver. Each change is called an endorsement. The PAS records the endorsement and works out any extra premium. At the end of the year, it prepares the renewal.
Take, for example, a car policy in Jaipur. It has two parts. Third-party cover pays for harm to other people, and every vehicle in India must carry it by law. It costs ₹3,400. Own-damage cover pays for damage to the owner's own car, and it costs ₹8,000. In the fifth month, the owner fits a CNG kit to the car. The PAS records an endorsement for the kit and adds ₹350 to the premium for the rest of the year. The year ends with no claims. At renewal, the PAS applies a no-claim bonus, a discount for a year without claims. The bonus is 20 per cent of the own-damage premium, so ₹1,600 comes off.
The PAS is one of the three parts of the insurance core system. Premium billing collects the amounts that the PAS works out. Claims management reads the policy to check whether a loss is covered.
A PAS handles more than car and home policies. A phone's extended warranty or protection plan, ticked at an online checkout, is also recorded as a policy. A term life policy issued without a medical examination, through accelerated life underwriting, is created in the PAS as soon as the model accepts the applicant.