Profitability is a key concern for any business, including the insurance industry. One significant challenge carriers face is premium leakage, a pervasive issue that siphons off potential revenue due to manual errors, disparate systems and the lack of an accurate “source of truth.” To effectively combat premium leakage and safeguard profitability, carriers must prioritize upgrading their core systems.
Premium Leakage and Legacy Systems
When a carrier is operating on one or more outdated legacy systems, it’s a lot like rowing a leaky boat. No matter how fast you try to bail, the leaks continue, and you can’t really row faster because your attention is diverted. Carriers have myriad workarounds to keep their legacy systems running. But in the big picture, it’s not efficient or effective. IT costs are higher. Upgrades are difficult. Speed to market for new products becomes grindingly slow.
Legacy Systems Fail to Stop the Leaks
Shockingly, the inefficiencies caused by legacy systems make 5% to 20% of insurance premiums vanish every year. Specifically, the common problems include:
- Siloed workflows
- Inaccurate data
- Manual errors
- Slow turnaround times
- Redundant processes
These pain points stem from legacy systems’ inability to share data seamlessly across the organization, integrate both internally and with ecosystem solutions, and automate rules and regulations.
That doesn’t consider opportunity cost. Legacy systems and processes prevent insurers from innovating their offerings quickly and in time to capitalize on the market.
How Core Systems Fight Premium Leakage
Core systems are the backbone of an insurer’s operations, impacting every facet of the business. Consequently, any deficiencies or inefficiencies in these core systems can contribute significantly to premium leakage.
There is a solution for carriers with the fortitude for change: Upgrading to a modern core system. A modern core system is integrated and allows data to flow freely and securely between the insurer and the employer. It is a reliable source of truth for current plan and policy information, as well as member data for employers.
What you can expect from a modern core system
- Streamlined Data Integration. Between 5% and 20% of annual premium is lost due to multiple systems that aren’t integrated. When core systems seamlessly share data, underwriters, billing specialists, and claims managers gain access to comprehensive information, reducing the chances of missing critical information.
- Advanced Analytics and Data Mining. Upgrading core systems to support advanced analytics and data mining is crucial. These tools can identify patterns and irregularities in policyholder data, enabling the early detection of potential premium leakage.
- Predictive Modeling for Underwriting. Predictive modeling can help insurers more accurately assess the risks associated with each policyholder and group, allowing carriers to price premiums appropriately, minimizing the risk of underpricing policies.
- Automation for Claims Management. An upgraded core system can handle routine claims processing tasks efficiently, freeing up claims managers to focus on complex cases. Automation can reduce the risk of human error and ensures that claims are processed consistently and accurately. This is also a market requirement in many cases, which adds to the impact to both top and bottom line.
- Regulatory Compliance. Compliance with regulatory requirements is non-negotiable. Besides avoiding liabilities like penalties and legal complications, compliance contributes to a transparent and trustworthy business environment.
Ready to Stop the Leak and Reap Premiums?
The path to profitability and success begins with replacing outdated legacy systems with a modern core system. Instead of dedicating time and resources to bailing out a leaking rowboat, your enterprise can set a course toward a new horizon – where the focus is on developing new products and raising customer satisfaction. And the ROI is measured in the potential for millions of dollars coming back to your bottom line.
The FINEOS Platform is the only modern core system purpose-built for employee benefits. To start the digital transformation in your organization, contact us to request a demo.