End to End Modernization

How LATAM Insurance Companies are Reacting to Regional Market Conditions—End-to-End Technology Solutions

Latin Americans know about dealing with turbulent, uncertain, and ambiguous environments: inflation, hyper-inflation, currency devaluation, change of currencies, debt default, political/social instability, economic meltdowns, you name it. Moreover, add the impact of foreign policy in countries where economies are reliant on foreign trade (copper, oil, soy, etc.). In an interconnected world, Latin America suffers from its own deficits plus what comes from abroad..

‒Juan Mazzini, Senior Analyst, Celent; The Pandemic’s Impact on Insurance Business and IT Plans: Latin America Life & Health Edition

The LATAM region is diverse collection of countries and cultures, each reacting to and experiencing the pandemic in different ways. We’re seeing positive economic growth in countries like Colombia, Chile and Peru in the past year, whereas progress is slower in Brazil and Mexico. Just as the path through the pandemic has been uneven, the bounce back will be as well.

Changes in LATAM insurance today

Across the region, however, carriers are accelerating planned modernization projects in response to pressures put on employees and customers during the pandemic. Social distancing has forced insurers to adopt modern, digital sales and marketing tools that enable online self-service and accelerate policy on-boarding, so that new business can be written without consumers needing to go a company or advisor’s office in person. And these front office tools require modern policy administration systems (PAS) that are able to use APIs to exchange data as needed.

Carriers opening their solutions and infrastructure--exposing their functionalities over the Internet to provide products and services at a distance--represents a significant change in LATAM. It runs against the cultural tradition of face-to-face meetings being required to do business.

But after 18 months of growing pains and readjustments, as they implemented the initial technologies needed to communicate remotely and work from home, carriers are finding a comfort level with these new ways of working and interacting. And now, LATAM insurers are moving into a new phase of adjustment‒-a period of growth as the industry takes advantage of the lessons learned during the lockdowns, applying them to business development plans and growth strategies moving forward.

The challenge for carriers in LATAM is that, even today, not all insurers have the IT infrastructure necessary to excel in this new environment.

Going forward, carriers are looking to leave legacy technology behind--along with the old ways of thinking and behaving. And the need to modernize is impacting all stages of the policy lifecycle, from CRM to Claims. From carriers to clients.

The end-to-end IT landscape in LATAM

As organizations emerge from this period of turbulence, many are looking for end-to-end IT solutions that will allow them to significantly scale up. A recent Celent research report revealed that LATAM insurers are placing emphasis in different places across the policy lifecycle.

Front office (Marketing, Sales and Service)

L&H insurers in LATAM are not prioritizing their application investments on front-end components compared to other areas. Their emphasis in this area is on agent and customer portals, because they want to provide a better experience for their distribution partners and customers.

--Juan Mazzini, 2021 Business and IT Priorities in LATAM Life & Health Edition, Celent

Digital Self Service

Now that carriers are comfortable with the technology and security they put in place to enable remote access during the pandemic, they are looking to provide more self-service options for their clients. These solutions enable customers to connect with the carrier via a digital portal and make their own policy changes in real time. They provide enhanced levels of digital engagement and increased satisfaction for both customers and agents.

In some cases, these new self-service capabilities are augmented by automated service solutions like chatbots that can answer policy related questions. Because these solutions can scale to help many customers in real time without the need for increased headcount, they are an attractive addition for carriers looking to support aggressive growth.

Integration of digital solutions

What is emerging in the LATAM insurance industry is a complicated ecosystem of digital solutions that are interconnected. Integrations are critical to moving data to customer facing apps, making accelerated underwriting decisions, and ensuring the effectiveness of front-end tools like illustrations, eApplications and service portals. All of these internal and external connections need to be considered as carriers plan for and build out their end-to-end technology structure.

Back office (rating, underwriting and claims)

Life and health insurers in LATAM are focusing their application investments on back-end components, as many still run old systems, preventing them from further digitizing their operations. The policy administration system, including rating and underwriting are the back-end system that insurers are currently investing in.

--Juan Mazzini, 2021 Business and IT Priorities in LATAM Life & Health Edition, Celent

LATAM insurance organizations are seeking to replace legacy policy administration systems (PAS) in order to build a foundation for digital transformation that will support sustained future growth. They seek the agility to make fast product changes and develop entirely new products faster than ever before, in response to market changes, regulatory change, evolutions in demographics and customer expectations.

This accelerated innovation capability is only possible when they are able to leave behind their decades old policy admin systems that require time-consuming code changes for every innovation and don’t work with the APIs necessary to connect with modern forward-facing solutions like agent and client self-service & sales portals.

These aging core systems need to be replaced by a modern PAS that has the configuration flexibility to enable fast and easy changes to products in response to evolving business needs.

The importance of the SaaS cloud model to LATAM insurers

The cloud model is being widely adopted by LATAM insurers in almost all areas, from front-end tools to back-office systems to in-house development environments. Because migrating all systems to the cloud in a SaaS model enables carriers to simplify operations and significantly reduce administration costs the adoption of cloud-based services will only accelerate going forward.

Many front-end solutions are already hosted in the cloud, and an increasing number of PAS solutions now have the capability. Key considerations for carriers engaged in digital transformation are:

  • Build the business case for moving to the cloud
  • Identify the best organization and change management structures needed to facilitate transferring everything to a cloud environment
  • Modernize legacy IT systems to take advantage of new cloud capabilities
  • Standardize platforms and operations to streamline workflows and decrease costs
  • Choose the most appropriate vendor—identify critical selection criteria based on your unique needs

Data is the foundation

It is impossible to realize the full benefits of modernization until a carrier’s data is converted and migrated off legacy policy admin systems. Only then can the old systems be retired. Only then can a carrier stop investing resources and spending money in the patching and maintenance of aging core systems.

Data, analytics and artificial intelligence are increasingly perceived as key enablers by LATAM L&H insurers to improve many aspects of their business, including, among others: new business and underwriting, pricing, fraud mitigation and prevention/detection and customer services.

--Juan Mazzini, 2021 Business and IT Priorities in LATAM Life & Health Edition, Celent

In addition, end-to-end modernization and data migration enables access to all of a company’s data in a format that can be used in your analytics engines to produce knowledge that drives better decision making, more innovative targeted product design and more accurately priced products.

Having access to good data that you can trust reduces costs. If you have access to metrics on how long a process took, how many touches were involved -- then you can start to identify bottlenecks and work to streamline your business workflows.

Leveraging your data can also help to reduce fraud, automate underwriting, sell faster and cheaper. Make your actuarial models as efficient as they can be.

Today’s decisions determine the next generation’s success

The time is right for LATAM insurance carriers to define their unique roadmap for digital transformation. The first step could be a foundational shift from legacy PAS to a modern core system, or it might be an accelerated implementation of digital sales and service tools that will support new business growth. The choice depends on each organization’s current IT infrastructure, budget and strategic priorities. But the undeniable truth is that change in the region is well underway, and those who put off these important decisions will begin to lag behind the rest of the market.

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