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Many life/annuities carriers of all sizes are either continuing or beginning policy administration replacement projects in 2019. Novarica research indicates that 50 percent of midsize life insurers and 26 percent of large (over $1B) life insurers are working on a policy administration system (PAS) transformation project this year. But the costs, both of time and money, associated with large-scale transformation can be hard for IT leaders to justify to the business leaders at their organization.
Fortunately, however, PAS implementations are skewing toward options that are both less costly and faster to complete. Life and annuities carriers are seeking key benefits from new platforms in addition to cost reduction, including improved speed to market and better data transparency. Improved PAS solutions can also enable carriers to better support new products or distribution channels.
Cost-effective management and operation of PAS solutions is leading some insurers to prioritize configurable systems over customized ones. Configuration tools can help accelerate speed to market on top of cutting long-term costs. Speed to market doesn’t just mean beating competitors to new sales or distribution channels; it can also mean enhancing products faster to meet new customer preferences or market trends.
Consumer preferences, both from customers and agents, are a priority for insurers across all lines of business. Elements of the customer experience might mean launching new communication channels, enabling 24/7 data access, or updating products. Life/annuities carriers are typically behind property/casualty insurers due to their legacy products and environments, but more life carriers are making strides to catch up.
Deployment Options Are Evolving
Life and annuities business is usually accompanied by a long liability tail, and converting legacy blocks of business is a top concern. Accommodating older policies can lead to alternative approaches for some carriers, depending on their scalability targets. Opting for a bifurcated line of business can allow carriers to deploy newer options more rapidly while giving themselves more time to convert legacy business.
Similar to the property/casualty market, vendors in the life/health/annuities space are providing an increasing number of SaaS-based and hosted deployment options to meet carriers’ demand for solutions with lower risk and cost. Nearly all vendors offer a hosted subscription model for their PAS solution, despite most existing clients relying on on-premise deployments. Vendors are also seeking to meet insurer needs by offering stand-alone options for areas like claims, new business and underwriting, and billing. A modular approach helps large insurers in particular; they can build out a risk mitigation strategy for a phased full PAS replacement while consolidating solutions by functional area.
Regulation Changes Affect Decision-Making
New technology options may be helping insurers improve their customer experience and boost their speed to market, but shifting regulations are impacting how insurers conduct business. The Affordable Care Act’s future is not set in stone; Congress voted to repeal the Act and its associated individual mandate. Individual and group carriers may have an opportunity to offer new worksite and voluntary benefits products to accommodate this change.
Predicated Department of Labor regulation focused on distribution of annuities is also uncertain. The near future may include changes to compensation, products, and self-service tools as the retirement product market evolves. Any carriers changing their offerings should keep potential regulatory changes in mind and be prepared to respond, as state regulations are a likely replacement for federal mandates.
Changing Demographics Impact Talent Pools
The aging insurance workforce is of particular concern to life insurers. Legacy systems and the hindrances attached to them make replacing retiring employees especially difficult. Younger agents, IT talent, and business associates are unlikely to accept working with complicated, aging systems. And with Millennials slated to constitute half of the American workforce by 2020, carriers will have to deal with this issue sooner rather than later.
A younger workforce can also include a greater focus on innovation. Carriers are exploring InsurTech capabilities in increasing numbers to improve their analytics and user experience functionality. Traditional solution providers are following suit, and many are working with InsurTech startups to enhance their core systems capabilities. Insurers may need to prioritize a PAS solution with flexible architecture that allows for integration with InsureTech startups to benefit from future technology. A plan for system modernization should be in place from the outset.
Carriers’ priorities are changing to meet customer expectations, and vendors are evolving their offerings to meet those needs. A growing number of life/health/annuity core system solutions are providing flexible architectures and modular capabilities. Conversion and risk management are still concerns, but life/annuities carriers are using core systems transformation to reduce costs, increase speed to market, and improve the customer experience.