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Author's profile photo Kirby Leong

Challenging the Definition of Insurance Suite

Insurance companies tend NOT to dedicate significant resources to upgrading core IT systems such as GL/financials, distribution and commissions management, and reinsurance. There are several reasons for this:

  • Considered as separate systems and are integrated with other core systems
  • Viewed as back office systems that do not provide a competitive advantage
  • Generally function as expected so why update them? However, what may not be considered is the cost of maintaining non-modular solutions that have been integrated through customization
  • Substantial numbers of systems already integrate into them, making replacement a difficult business case to sell internally• Historically, there have been no exciting or compelling replacement options.

According to Novarica, the top 3 Insurance IT priorities for 2013 in terms of business capabilities include implementing BI/data analytics, reducing operating expenses, improving the bottom line on a product basis, and improving ease of doing business with distributors as well as with customers (meeting their 24×7 expectations of support, information, and transactions). Firms are also under pressure to get new products to market and to improve existing products without having to change existing IT systems.

The Case for Modular End-to-End Suites (and then some)

To meet these challenges, modular suites are increasingly popular since they make maintaining individual components easier while simultaneously minimizing integration work. Modular suites allow end-to-end trickle down of new products and features. For example, when a carrier creates a new product, it can create everything else at once such as the billing plans, rules for claims, product stack, GL/financials, and reinsurance. They also enable carriers to reduce integration risks, effort, and costs as they replace core systems (but the conversion work still remains). Overall, the IT system architecture is simplified, enabling “insurer-in-a-box” type solutions through green field efforts and providing insight into the entire enterprise using BI/analytics.

The power of an integrated comprehensive solution has moved beyond the office of the CFO into the realm of core insurance processing. View the video Discover the New Insurance Solution Portfolio: Integrating the Value Chain

Achieving the Potential Benefits

How carriers implement the end-to-end suites determines the extent to which they can achieve the potential benefits. As a rule of thumb, select the entire set of solutions up front, if possible. This helps business users see what is available and to stay close to the “out of the box” offerings. Additionally, carriers should change business processes and practices to adapt to the new system rather than the other way around (that is, maximize the configuration and minimize the customization), where possible.

Historic Changes Ahead

Insurance companies are striving to have a 360 degree view of products and customers. While the goal is to offer more compelling products and services, since products are integrated into “legacy” systems, achieving the goal of a 360 degree view has been difficult to achieve. The next goal is to tie this insight into financial systems to understand 360 degree view of risk and return for the company and for the customer.

Read how Helvetia Italy gained a consolidated view of financial accounting with SAP software.

The vision is to obtain real-time insight across the front, middle, and back offices and applying it across all lines of business. For example, the front office could include better incentives and commissions, core operations could do better with underwriting, fraud detection, billing, and the back office could do better asset investment, accounting, and compliance and solvency.

The Insurance industry is facing historic changes in many areas, moving from in-house development to packaged solutions to core system suites to insurance suites today. According to IDC, by 2015, the industry will spend $5 billion on standardized software. The convergence of cloud, mobility, and in-memory technologies are fundamentally changing the IT landscape.

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