The life insurance industry has not escaped the impact of the global financial crisis, and in the present economically uncertain times, where new business premiums have dropped more than 50% globally, insurers have a new set of challenges to face. Celent’s 2008 paper, Bad News on the Street, Insurance IT and the Financial Crisis, reports that in periods of economic contraction, the overall insurance market shrinks and sales decrease; consumers start to think of life insurance more as a ‘nice to have’. Life insurance providers are faced with downward pressure on premiums, reduced investment income, decreasing customer loyalty and increasing service expectations. In a time when consumers are buying less, and when – if they do buy – they become more discerning and are choosing more carefully, addressing these challenges is the difference between competing effectively and getting swept away in industry rationalisation.
Now, more than ever, having an effective IT backbone that can assist in meeting these challenges is essential.
Creating a competitive advantage and differentiating through IT
Automate – gain greater efficiency, cost savings and improved service to your clients
Employees are the driving force behind life insurance companies and so it is of the utmost importance that they be equipped with IT systems that allow them to work quickly and efficiently especially during periods of downsizing. Factors such as flexible workflow and automated underwriting capabilities are now must haves in order to service customers at a competitive level.
As Celent states in its 2008 paper, Celent Model carrier 2008: Case Studies of Effective Technology Usage in Insurance, document automation projects are more popular than ever; companies are increasingly looking to modernise and automate their business workflows and retire legacy systems. Easy to use systems with less manual processing equate to higher productivity levels and turnaround times, and therefore, more satisfied customers.
Get online – gain improved efficiency, improved service to your clients and cost savings
The most important factor in creating and maintaining a competitive edge is paying close attention to service levels for policy holders and intermediaries, as well as internal employees. In times of industry rationalisation it is service levels that differentiate life insurance companies. The provision of fast, easy access to accurate information is the ultimate aim for insurers, and the most effective method for attracting and retaining today’s selective policy holders and brokers. Today’s consumers expect round-the-clock access to information, and web-based solutions are increasingly shifting from being cutting edge and a ‘nice to have’, to being an essential service component.
Aside from meeting market demand, online functionality delivers a plethora of business benefits. According to Celent’s 2007 report Top Ten Trends in L/H Insurance E-Business 2007 and Beyond, the common opinion amongst insurers is that policyholder portals deliver improved retention, improved visibility and brand presence, and reduced call centre volume. The deployment of a state-of-the-art software solution, and the development and consolidation of an online presence for both sales and service is crucial in securing a competitive edge.
The desire to electronically manage their books of business and commissions has also put online functionality in high demand with intermediaries; they now expect life insurers to deliver high-end, user-friendly electronic functionality. The aforementioned 2007 Celent report states that over 90 per cent of surveyed life insurance companies either offered transactional agent portals or planned to do so within a year.
The deployment of agent portals is mutually beneficial for the agent and the life insurer; as well as facilitating (and therefore, satisfying) agents, according to the previously mentioned 2007 Celent report, the primary values associated with agent portals are better accuracy of information received, reduced cycle times and reduced rekeying burden.
Move away from legacy – quickly launch innovative products and improve time to market
A highly competitive marketplace has given birth to a discerning consumer pool with specific demands. In this era of reduced investment income, decreasing customer loyalty and multiple product choices, insurers are scrambling to win clientele and outdo their competitors. Life insurers are now in a race to develop innovative products and, importantly, get those products quickly to market.
Legacy IT systems are the main obstacle for rapid time to market; complex legacy code means that enhancements and additions require significant (and costly) programming time and effort. In most cases it can still take six to 12 months to launch a product due to technology limitations.
Select IT vendors are now offering a new generation of technology solutions that ensure new products are quickly and easily delivered to market. The ‘building block’ approach to technology (such as that of Bravura Solutions) readily supports the rapid launch of a broad range of different product types by providing a set of flexible, table driven, rules based building blocks that can be configured in many ways without the need to change or build program code.
Leading edge vendors are also investing in rules engines that allow product related rules to be defined in an external, centralised location. The introduction of these rules engines can deliver a dramatic reduction in the analysis, development and testing effort usually involved with implementing new products.
By deploying leading edge technology, as Bravura Solutions’ has recently proven with one of its largest Asian clients, it is now possible to reduce the new product implementation timeframe of a moderately complex product to a mere 20 working days (including testing).
What to look for in a software system
It is important that life insurance companies choose an IT vendor that understands their business and current market trends. The ability to provide modern, superior technology that meets market demands is key. Particularly in the current economic conditions, employed technology must deliver increased labour and cost efficiencies to life insurers, and enable an improved product offering to their clients.
Some of the features to look for in a life insurance solution include online services for policyholders and intermediaries, automated underwriting, comprehensive claims management, framework for integration and services such as Services Oriented Architecture (SOA), integrated workflow capabilities and a flexible user defined product set-up for rapid new product development.
Remember: get online, automate and move away from legacy – ‘untangled’, flexible technology is a crucial factor in a modern software system.
What can be achieved?
Staying at the forefront of technology can mean achieving a multitude of business benefits. For life insurance companies it means streamlining costs, achieving improved speed to market and creating a more satisfied customer base cost effectively.
Modern software systems provide long-term relief to the bottom line, delivering cost efficiencies through increased online interaction (lower administration, processing and printing costs, less mailing and lower call centre volume), and through simplified/less time-consuming enhancement/modification processes. Simplified enhancements and modifications also translate to flexibility and ease of product development, improved speed to market and therefore, increased revenue and market share.
An investment in software is also an investment in customer service; online integration, faster cycle times and automatic underwriting allow life insurers to provide their customers and agents with fast, easy access to accurate, real-time information.
While the concept of spending money may seem unthinkable to life insurers in the current financial climate – the old adage “spend money to make money” has never been more appropriate. An investment now means significant cost savings in the long run, satisfying and continuing to grow client bases, and ultimately weathering the ‘R’ word on top.