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The life and annuities (L&A) industry has historically been guarded in its use of third-party administrators to manage legacy blocks of business, but the time may be right for change. That’s the rationale behind SE2’s (Topeka, Kan.) recently expanded partnership with NTT Data Services (Plano, Texas), according to SE2 CEO Gautam Thakkar. The two firms create what they call a comprehensive TPA capability centered on SE2’s Aurum administration platform that will include digitization, artificial intelligence, cognitive computing and advanced robotic process automation.
“Strategically, the expanded partnership’s main objective is to leverage the innovation and intellectual property investments of both companies to expand the Aurum platform as the foundation of the new, integrated solution for legacy blocks and dramatically reduce time to market for introducing new products across the L&A industry,” comments Thakkar.
The firms’ complementary capabilities include, on the SE2 side, insurance domain knowledge, end-to-end TPA capabilities, and expertise in conversion to drive enhanced product speed-to-market for L&A carriers. NTT Data has IT outsourcing expertise, digital systems transformation services, legacy system modernization capabilities, cloud lifecycle solutions and advanced automation solutions. NTT Data’s TPA expertise is centered around its extensive work in the industry through its LifeSys platform for life insurance, fixed and indexed annuities, and group and voluntary worksite products. While one of the objectives of the partnership is to serve clients by taking on closed books of business on SE2’s Aurum platform, NTT Data stresses that it will continue investments to modernize and strengthen the LifeSys solution to improve value delivered to existing clients.
“This partnership enables NTT Data to expand our strategic partnership with SE2 and leverage their platform, deep L&A industry knowledge and technology investments to better serve our clients,” comments Jim Milde, President, Financial Services and Insurance, NTT Data Services. “By leveraging best-in-class capabilities from both of our companies, we share the unique position of collaborating innovatively to offer combined, superior solutions to both our portfolios of life and annuity clients.”
While insurers have been cautious about using TPAs, the combination of SE2’s and NTT Data’s capabilities creates a strong proposition to help insurers variabilize their cost structure faster, with confidence that they have access to modern digital capabilities and the right skill sets to reduce the risk of converting large blocks of business, according to Thakkar.
“Many insurers have inherited large blocks of business over time through M&A, and legacy platforms require a great deal of investment, so there’s pressure to rationalize cost structure and manage those policies at a lower cost,” Thakkar comments.
As with other examples of ITO, BPO or cloud delivery of capabilities, insurers need to ask themselves what business they’re in, Thakkar suggests. “There’s always going to be some hesitancy about ease and cost, but insurers know that they need to be able to focus their resources on strategic growth objectives,” he says. “The reality is that once the policy is sold, the carriers don’t necessarily add tremendous value.”
Imperative for Carriers to Focus on Competitive Activities
Traditionally, carriers have focused on the use of BPO and ITO services to support specific types of services associated with ongoing operations, according to Rob McIsaac, Senior VP of Research, Novarica (Boston). Those activities have centered on closed blocks of business where one of the key metrics has been running the book at a specific price point and a targeted service level, he notes.
“Given the nature of these books of business, there’s not a significant differentiation that is taking place, nor a true competitive issue over the quality of those services, so long as they are reasonable,” McIsaac says.
That is a very problem than that faced by a carrier when addressing the challenges associated with an open and growing block of business—much less a greenfield one, McIsaac adds. “To address the latter need requires an ability to provide services in a fundamentally different way and with capabilities, such as bringing new products to market in a cost-effective and timely manner, that that are simply not relevant for closed blocks,” he comments. “Solution providers need to also think differently lest they run into the age old problem of having every problem look like a nail since the only solution in their toolkit looks suspiciously like a hammer. This agreement appears to be an example of a step to addressing this need in the marketplace.”