Australia’s life insurers are unable to deliver true innovation for advisers and their clients because of the burden of numerous legacy systems, one technology specialist has argued.
In a recently released report entitled ‘Life insurance snapshot: 10 industry trends shaping the landscape’, Director of Strategy at Bravura Solutions, Darren Stevens, investigated the impact of technology on Australia’s life insurance market. The key theme running throughout the report was the stalling effect legacy systems are having on innovation.
According to Mr Stevens, the Australian life insurance industry is bogged down by complexity and struggling to innovate and progress. This is largely due to a history of mergers and acquisitions, says Bravura, which has seen an increasing number of ‘closed books’ taken up by a decreasing number of insurers.
For advisers, who have been keen to embrace mobile and digital technologies to improve their customer service offering, the lack of innovation by life insurers is proving increasingly frustrating.
Mr Stevens’ report says in order for mobile or online interaction to be effective, insurers must deliver true ‘straight-through processing’ in real time. However, legacy systems prevent this because data cannot be consolidated and can be difficult to access, and because older administration systems do not ‘talk’ to modern workflow tools or software.
“Laying modern systems over multiple legacy technologies generally creates “brittle systems” that break easily when there are underlying changes to the products and regulations,” the report states.
Some of the other key areas that are being impacted by the maintenance of legacy systems are:
Claims management
The effective, efficient management of claims has been front of mind among many insurers in recent times, following a period of poor claims experience. According to Mr Stevens, there has been a recent rash of insurers looking at installing stronger claims management systems in an attempt to improve their handling of claims – but these efforts have often been hampered by multiple legacy systems and a range of complex integration issues.
“Inadequate and fragmented stores of information around policy conditions and the continued need for manual processes have rendered many of these projects ineffective,” he says.
“Until registry systems are consolidated, there is no way to truly integrate claims management and no real way to provide end-to-end processing.”
Product development
Product development in the life insurance industry has traditionally been sluggish, with slow time-to-market (12-18 months) at the mercy of complex technology configuration. However, Mr Stevens believes this paradigm is set to change with consumers demanding more responsive, personalised offers.
“The use of current real-time information about customers, such as their health, exercise regime and personal circumstances can allow insurers to fine-tune the way they price products and the way they interact with their customers.
“Life insurers are well placed to deliver these innovative offerings, provided they have the technology framework to flexibly and rapidly configure new products and allow them to evolve in response to market demands. The required levels of responsiveness can only be achieved with nimble, flexible, configurable systems.”
Regulation and capital requirements
“The catch-22 of regulatory change is that it creates a need for flexible systems but also an interference from actually being able to implement them,” Mr Stevens contends in his report.
“Insurers running multiple legacy systems need to make these changes, often in different ways, across different technologies.”
He believes systems should be quickly and easily configurable so that regulation can be efficiently accommodated, whilst allowing insurers to continue to offer innovative products, facilitate the customer experience, and provide accurate, consolidated data from which they can pre-empt behaviour.
Few in the industry have taken the plunge to rationalise to a single system
Despite the medley of issues caused by legacy systems, which tie the hands of organisations in terms of innovation, cross-selling and up-selling, Mr Stevens says the desire to keep this business often presents a challenge to clearing the decks of these systems.
“Few in the industry have taken the plunge to rationalise to a single system, as businesses have had difficulty quantifying the appropriate benefit in a cost/benefit case to justify taking the necessary risks to upgrade. Of the few that have undertaken such a rationalisation program, many have been unsuccessful as there hasn’t historically been a system that provided a single, integrated, solution coving the breadth of products required.”
However, he believes this hesitance to transition is slowly lifting as solutions are now emerging that can cover and consolidate broad ranges of products.
“IT consolidation, rationalisation and modernisation are buzz words for a reason. Undertaking these activities is an imperative in order to lay the foundation for future growth and profitability.
“We are at the dawn of a new era for life insurance. The demand for innovation is there, the market is growing and the technology is available,” Mr Stevens concludes.
Click here to access a full copy of the report.
Darren,
You’re dead right about a complete unwillingness by Life Insurers to innovate. They’d rather go down the tubes than address conventions which are holding them back, IT and otherwise.
You’ve just looked at all of them. In your view, which Life Insurer, and in particular, provider of Income Protection and Group, is the most willing to innovate?
Cheers
John
The personal retail life insurance sector will continue to lose clients unless they radically streamline their processes and administration.
Saying we do not have the budgets to implement change is a denial of what people are demanding and Insurers who ignore this, do so at their peril.
For years, IT departments have sucked millions of dollars into black holes that no one seemed to be able to justify, based on the results and it seems maybe the wrong people were in charge of the systems changes, as the core principles of doing Business, which is to make it simple for customers / Advisers to write new Business and administer it, seemed to have got lost in amongst a lot of STUFF that fluttered around the edges, while competitors were stealing thousands of customers each week because they made it easy for them to buy and administer.
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