In today’s fast-changing, hypercompetitive business environment, forward-looking life insurance organizations are pursuing modern digital capabilities that will help them bring innovative new products and services to market as quickly and efficiently as possible.
In the race to transform capabilities, enhance data-based decision making and modernize products and services, leading organizations understand that relying on legacy administration systems can pose significant challenges that include agility and time-to-market limitations, a lack of data-based insights, high operational costs, and an inability to meet ever-evolving customer expectations.
Market leaders are increasingly turning to modern Policy Administration System (PAS) software to solve prevailing legacy challenges and manage in unprecedented ways a range of group and individual life, annuity and pension products. A modern PAS supports the entire life-insurance value chain, from product and business configuration through to new business processing, policy issuance, ongoing policy administration and claims.
We are even seeing market entrants and disruptors issue low-risk policies in less than a minute, using convenient digital interfaces that do not require an agent to provide quotes and services.
Consolidation is driving down costs
In the digital economy, accelerating time-to-market for new products has become critical as insurers increasingly cater to market trends and evolving consumer expectations. Life insurers typically face a complex, months-long process to establish competitive premiums for a broad range of customer needs and age groups. With modern PAS capabilities, the rigorous trial-and-error process needed to establish competitive rates is transformed to become far more rapid, agile and efficient.
PAS capabilities are also helping insurers to significantly reduce their operating costs while transforming core systems, business models, risk selection, pricing and customer strategies. Costs under traditional mainframe admin systems – such as licensing and renewals, maintenance, product upgrades – can affect 30-40 percent of an insurer’s profit margin.
We are seeing more insurers generating dramatic cost savings using digital technology to consolidate 10 or more policy administration systems into a single data-based system using PAS capabilities. Along the way, the decision-making process is being significantly enhanced to accelerate time-to-market. New capabilities to gather and analyze timely data have become crucial to supporting informed decision making as insurers look to deliver modern products that cater to evolving demographics, including younger customers seeking basic policies and a modern, digital customer experience.
Leading firms are embracing the advantages of technology
Our research shows that the insurance life-and-pension industry has made a major step forward in pursuing the power of modern digital capabilities. While in 2021 just 28% of businesses in the insurance L&P industry that we interviewed stated that their digital strategy was producing results, in 2022 a total of 40% of businesses surveyed reported progress amid their recent digital-innovation initiatives. This is well ahead of the average of all industries, including financial services, and we expect this digitization wave to continue as businesses embrace the game-changing advantages of today’s technology.
Among the industry’s digital leaders, 60% say they have already modernized more than 20% of their application portfolio, and our research also shows that budgets for modernization and operations are increasing year over year.
The focus among leading North American companies in the next two to three years will include significant investment in PAS consolidation and modernization in order to remain competitive and keep pace with today’s bold new market entrants and disruptors. ‘Policy servicing and administration’ innovation is considered a top priority for 37.5% of insurers, according to Omdia Insurance IT Enterprise Insights 2022 research.
At the same time, however, as the insurance sector’s market leaders transform for the future, the majority of organizations have yet to fully pursue a consolidation journey for life and health policies amid a shifting focus to wealth management capabilities and products. As market leaders drive progress on the PSA front, slower-moving businesses are losing competitive advantage.
Demographic shifts, evolving consumer needs, competition from new entrants and ongoing economic uncertainty are challenging life insurers as never before to find new ways to enhance competitiveness, growth and success. Today’s forward-looking organizations are turning to PSA modernization and the distinct advantages it delivers. CGI is helping more organizations forge a bold new path into the future and we believe there is no time to lose amid the rapid and accelerating pace of change in today’s hypercompetitive environment.
For more information on the capabilities of Policy Administration System and our work in this area, feel free to contact me.