Policy Management Systems: Prepare for Tomorrow
Insurance Experts' Forum, August 1, 2013
When insurance first began, life was simpler. The risks that insurers covered were few compared to today. As for policy management, well, there were no computers or technologies used. A man, a plume, and a ledger book managed what data existed.
In 1752, Benjamin Franklin founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire which was the first mutual fire insurance company in America -- one company with one focus. The primary risk covered, clearly, was fire. Houses were mostly wood-framed, built close together, and at risk due to the use of flames for cooking and lighting. How would Franklin, being the innovator that he was, handle all of the risks carriers cover today as well as the flood of data and new customer demands in today's world?
In the "modern era", computer systems were developed to better manage policy information while expanding offerings, diversifying geographies, and growing the client base. What many didn't realize at the time was that these same solutions that were created, decades ago would still be running insurers' businesses in the 21st Century. Yes, there are some insurers running 30 year old core policy management solutions!
While cutting edge in their day, developers hardly foresaw what was to come such as real-time rating and inquiry, micro-rating, collaborative underwriting, mobile technology, innovative new products, expanding distribution channels, and collaborative customer interaction. Most insurers cannot meet these demands with their legacy policy management systems.
This leaves insurers with two options: patch or replace. Well there is a third … obsolescence.
Continuing to patch and fix and jury-rig core policy solutions to try and keep up with change can help a bit … but it's just a short-term solution that is not addressing the need for innovation, change and speed. As many have come to realize, not only is this costly and throwing good money after bad, but by the time you patch and fix, you're still behind the competition, placing you at a significant disadvantage with your customers, agents and partners.
Based on industry research, replacement is the option of choice. Studies show that the pace of replacement of core policy management solutions is high and expected to remain that way. Primary drivers for this movement are the foundational and disruptive changes, particularly new customer demands and expectations. This is based on experiences they've had with businesses like Google and Amazon that provide new innovations to meet personalized product and service demands, availability anytime, anyhow anywhere and new channels that reach existing and new customers.
Modern policy management solutions meet these requirements and can quickly adapt and embrace change through the use of robust business and technical architectures.
It comes down to this … you need an agile business and technical architecture based on strategic planning to compete!
To prepare for the future, you need to plan for the future by creating a business, solutions and technological roadmap. Ask yourself some serious questions:
What will I need not only today but more importantly in the next three years to be competitive?
- Am I prepared for agile change in response to increasing demands in minutes, hours or days instead of weeks, months or years?
- Can I introduce new products and update them quickly to capture market interest and market share?
- How can I use data with analytics to provide underwriting or service insights?
- What data do I need from external sources to provide underwriting excellence?
- Can I provide information to my customers on whichever platform they choose be it online, on a tablet, or on a smartphone?
- Do I have the ability to respond immediately to my customer needs whether products or service, creating a great customer experience and loyalty?
- If I don't keep up with changing demands, will my agents and customers go elsewhere?
You also need to consider the architecture, data model and robust configuration; customer centricity, real-time decisioning and more accurate rating to drive underwriting performance; multi-channel options; and product innovation to capture new customers, market and revenue.
And don’t forget about deployment options and upgradeability that keep you future-ready.
Finally you need a partner with vision and insight not only in insurance but from other industries so you gain knowledge from the broader influences and transformational changes today and those yet to come.
It's a lot to think about … but isn't the future of your company worth the effort?
While Franklin said a penny saved is a dollar earned, today he might think, a penny invested in my future is a customer and policy earned.
Denise Garth is the executive vice president of strategic marketing and industry relations, and global head of market strategy for Innovation Group North America. She can be reached for further comment or information via email at email@example.com
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