—Tom Benton, Vice President Research and Consulting, Novarica
Accelerating development cycles for new insurance products and product changes in response to changing market conditions has become a priority for insurance carriers. Market forces that were already putting pressure on insurers have only intensified during the pandemic. Now more than ever, speed-to-market is critical to maintaining or growing an organization’s market position.
Consider the following four critical changes that have had a large impact on carriers and have become drivers of ingenuity and accelerated innovation:
1. The race to product simplification
COVID 19 and the restrictions it brought, accelerated customer demand for, and insurer adoption of, Direct-to-Consumer (D2C) offerings. These digital solutions are in demand from customers who are self-educated about their products and want straight-forward products from a fast and clean online interaction. For insurers this means creating the right product offerings to match the delivery mechanism and customer expectation. Many insurers have introduced simplified products that don’t require medicals or fluids, have higher face values and can be automatically approved.
Those product changes need to be developed quickly—before competitors gain an advantage.
2. Regulatory change
Financial reporting reforms like IFRS 17 and LDTI require access to entirely new levels of data granularity. Privacy laws like GDPR and the California Consumer Privacy Act (CCPA) require carriers to be able to identify and redact, or remove all instances of a client’s data—which is no small challenge if multiple instances of the data are spread across a variety of databases and legacy policy admin systems.
In some markets, regulatory change is forcing carriers to make changes to certain products ahead of tight deadlines or even create entirely new products.
3. Demographic changes
Product development needs can be affected by advancements in medicine, lifestyle and technology which increase longevity. The changing mortality rates are reflected in updates to the Commissioners Standard Ordinary (CSO) mortality table. And that creates tight deadlines for creating new products which align with the new figures. (Read the case study)
These changes create opportunities for insurers to gain an advantage if they are able to adapt faster than their competition.
4. Demand from distribution for new products
Advisors are always looking for the newest products to sell—and put pressure on insurers to develop new offerings to match those available from other carriers. In this sense, advisors are drivers of innovation within many companies. Carriers must find ways to react quickly or risk their relationships with their top advisors.
Legacy systems slow the pace of innovation
All of those market forces create a strong need for accelerated innovation—unfortunately, for many carriers, there are limits to how quickly they can make products changes or develop new offerings. Those speed limits are imposed by their legacy policy admin systems.
Old core systems can create a drag on product development. These aging platforms are hard-coded, making it difficult to easily change features, benefits and riders. Unlike modern systems they don’t have built-in, business-driven, rules-based processes and almost all adjustments require changes to the base code, which is not only time-consuming, but requires expertise in old programming languages that is becoming increasingly scarce.
In some PAS, developers have to copy code or rules to create product changes. While this is quicker than writing new code, it creates a second set of similar rules—and adds to the complexity of rule maintenance and long-term overhead. This effect is multiplied by the number of times a given product element needs to be copied and altered to affect desired product changes.
The time to modernize core systems has arrived.
The variety and intensity of upheavals in all market areas has forced an acceleration of the digital transformation and modernization plans that carriers already had in place. Projects that were slated to begin in 3-5 years have been moved forward. Carriers that were content with just a few product changes a year, are now seeking to adapt dozens. Meeting these enhanced product development targets can only be done if the foundational systems—the core policy admin platform—is a modern, rules-based platform that enables quick configurations without the need for code.
Download the eBook to find out how to most effectively retire inflexible legacy back office systems and transform your infrastructure into a modern platform that accelerates innovation.
