Products, Market Impede Investment in Systems for Life Insurers
Robert Regis Hyle | February 12, 2014
Carriers are not as quick on the draw when it comes to investing in new policy administration systems.
By Robert Regis Hyle
The life insurance side will never be as fastest-growing area for software solution providers compared to what goes on with carriers on the P&C side.
“You can see it in the number of vendors,” says Karen Monks, an analyst with Celent and author of a new Celent report on policy solutions for life insurers (North American Policy Administration Systems 2013: Life, Health, and Annuities ABCD Vendor View). “There are many more P&C insurers as well, which is part of the reason, but the market is fairly stable from year to year.
Life insurers investigating new systems generally face two issues: There’s a long tail to the process of pricing; and it is harder for them to justify the expense because legacy systems run well for them.”
“Older systems are stable, but insurers have difficulty introducing new products,” says Monks. “Depending on how often they want to introduce new products, that’s a decision they have to make, whether they are going to replace their legacy systems or not.”
One reason they don’t do replace their systems is the life side has long-tailed products, which on average last for 40 years. Also, there is not a lot of interaction between life insurers and policyholders, which is nowhere near the amount of communication a P&C company has with its customers. The main driver for new systems is modern platforms have the ability to introduce new products.
“If life insurers think there is cost effectiveness, they may replace their legacy system,” says Monks.
It normally takes insurers about a year to replace its legacy systems, but with new systems insurers get varying points and Monks thinks carriers could bring that timeline down to a more reasonable three or four months.
“Sometimes the difficulty is not in the systems, it is in the state insurance departments,” says Monks. “You’ve got so many tied systems in life insurance. You have to develop a new product on the policy system, but also on the illustration system as well. The application and the rates have to be approved and once those are done it flows back into the policy system. The illustration system may be a critical path, but more times than not it’s the insurance regulators.
Newer systems allow carriers to configure the products, but Monks explains that it is important they have the template or, at the least, the ability to clone a previous product and the ability to change rules based on the template.
“Quite frequently, that’s what speeds them up,” says Monks. “Having web services and open architecture that interfaces more frequently allows them to work quickly,” she says.
Conversion of old data usually is the last thing done, according to Monks. Normally, carriers take new business and go forward and slowly convert the old data. The conversion of old is a carriers’ biggest headache because the systems don’t open easily and because matching the data fields is difficult.
“There may not always be an equal place for it to go or data points are missing that the new system would require,” says Monks. “Depending on how old the product is, it is not unusual to have many policy administration systems running at the same time. Forty percent of all premium today is closed book, but the policies are still being administered.”
Since some policies may be 30- or 40-years-old, Monks feels it might not be worth the conversion.
“I always look at it as the majority of the new products are frequently sold for new product lines,” she says. “The existing system might not have the capability of handling the policies or getting into a variable product. If they are going to replace older legacy systems it is to move forward with the conversion of older policies coming later.”
Newer systems are able to collect a lot of data and quite a few are moving toward where the system can pull out data related to policies themselves, but with the core features of policy systems—issuing the policy, being the system of record, underwriting—it’s not as clear cut as P&C insurance.
“There are quite a few systems where, if a carrier decided to use all that data, they could potentially go into applications, underwriting, policy, and claims,” says Monk. “You can get a good picture. The ability to do something with the data is out there. Analytics isn’t the strong point, but the data flows fairly clean if they are using all the life-cycle aspects.
Monks believes some of the new systems that have come into the market since 2011 have been eye opening for some of the staid carriers that had been using the same systems for years.
“About 45 systems were sold over the last 30-month period,” says Monks. “This market is a lot smaller than the P&C market, so I don’t see life insurers introducing a lot of new products. What we have found is insurers are so concerned about sales that they would rather spend money on the front office, with things like illustration tools and then spend the data to the back office.”
- Electronic Chat with Christopher Tramontano and Zbigniew Gawienczuk
- Data Science is Gelato
- Insurance Innovation: Alive and Kicking
- Independent Agents Divided on Digital Experience, New Survey Finds
- Electronic Chat with Michael Jones
- Electronic Chat with Paul VanderMarck
- As Auto Insurance Premiums Shrink, Insurers Need Mobility Ecosystem, New Study Finds
- Property & Casualty Insurers Raise Digital Games as COVID-19 Elevates Customer Expectations, J.D. Power Finds
- Electronic Chat with Bobbie Shrivastav
- Meet the Board: Marissa Buckley
- Big Data and Insurtech: A Carrier Perspective
- Traditional Insurers Need Open Ecosystems, Partnerships to Remain Competitive, CapGemini Report Finds
- Electronic Chat with John C. Siegman
- 4 Ways AI is Empowering Insurers During COVID-19
- 6 Big Changes to Insurance from the COVID-19 Crisis
- Electronic Chat with Christopher Ewing
- Independent Agency Staff Morale High During COVID-19, New Survey Finds
- Electronic Chat with Brad Epker
- Tapping AI to Improve Policyholder Experience
- Electronic Chat with Manisha Bhargava
- ITA Pro Magazine, March/April 2020
- COVID-19 a Game Changer for Workers’ Comp
- Electronic Chat with Steve Comer
- COVID-19 Pandemic Forces Cancellation of ITA LIVE 2020
- Leveraging Digital Resources in the Time of COVID-19
- Electronic Chat with Robert Hartwig on COVID-19 and Insurance
- Celent Study: Most Small Businesses Still Unclear on Importance of Cyber Insurance
- The January/February 2020 ITA Pro is here!
- Deloitte: New C-Suite Roles Mean More Opportunities for Women
- Electronic Chat with Pankaj Parashar
- Electronic Chat with Tara Kelly
- Electronic Chat with Chuck Wilson
- ITA, InsNerds Collaborate to Enhance ITA LIVE 2020 Content and Coverage
- How SMBs Can Compete in Digital Ecosystems in the 2020s
- 4 Ways Insurance Can Prepare for New Data Privacy Laws
- Brewer Lane Ventures Launches and Hires Insurtech Vet Martha Notaras as Managing Partner
- 2020 GIA Cohort Launches on January 14
- The November/December 2019 ITA Pro is here!
- Electronic Chat with Joshua Snead
- Electronic Chat with Wendy Aarons-Corman
- Simplifying the Move to a Third-party Print Provider
- Take a Business-Driven Approach to Continuous Improvement for Core Systems and Processes
- Electronic Chat with Ron Glozman
- Guidewire’s Data Guru Mike Byam on How Insurers are Using Internal and Third-Party Data
- Electronic Chat with Russ Bostick
- Electronic Chat with Rock Schindler
- Electronic Chat with John Siegman
- Electronic Chat with Martin Burlingame
- Insurtech Landscape 2019: Top 5 Takeaways
- Grinnell Mutual Tackles Massive Transformation -- in Stride
- A Candid Conversation with Paul Mang
- SageSure Insurance Managers Improved Competitiveness by Consolidating Payments to a Single Digital Platform
- Digital Does Matter in Insurance-- And Insurers are Missing the Mark
- The 22nd-Century Insurer: Taking a Cloud-First IT Approach
- The September/October 2019 issue of ITA PRO magazine is now available in digital format here:
- ITA Pro Magazine May/June 2019
- Spotlight on the 2019 IASA Conference
- ValueMomentum Selects Erie as Site of Regional Development Center
- Capgemini and Majesco Become Alliance Partners
- Electronic Chat with Dr. Dan Shoham
- Electronic Chat with Todd Greenbaum
- Martha Notaras: The “Outsider” with an Amazing Inside View
- Electronic Chat with Larissa Tosch
- Martha Notaras Will Join ITA LIVE 2019 as a Keynote Speaker
- Five Things to Consider When Evaluating Your Cyber Risk
- ITA Pro Magazine, January/February 2019
- Synergy Between Insurers' IT and Analytics Teams Key to Operationalizing Insights, Says Novarica
- Major Ransomware Attack Could Hit U.S. with $89B In Economic Damages
- ITA Announces 1st of Three Keynote Speakers at ITA LIVE 2019
- Electronic Chat with Jeroen Morrenhof
- Legacy Systems Are Dead. Really? Don't Count On It.
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- miEdge Founder Mark Smith Joins Zywave Advisory Board
- Quadient Introduces iX-Series Mailing Systems and S.M.A.R.T. MailCenter Management Software to U.S. Market
- Majesco Announces Latest Release to the Majesco Insurance Data & Analytics Platform
- Hi Marley Raises $8 million for AI Messaging Platform
- UDoTest Launches COVID-19 Employer Testing Platform
- Beazley Completes Guidewire London Market ECF Integration
- Aclaimant Raises $10 mil in Series A Financing
- Quadient, Kitewheel Partner on Customer Journey Explorer
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA LIVE 2020
ITA LIVE 2020 –SAVE THE DATE!
April 5th – 7th, 2020
The Diplomat Resort
Become a member today to receive updates – www.itapro.org/MR
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE