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For the Life, Accident and Health Industry - the Change We’ve Been Waiting for has Already Arrived

By Michael Learned, Senior Product Manager

CIOs Leading the Charge

I meet regularly with insurance executives, industry analysts, thought-leaders, and stakeholders at all levels of insurance operations. I enjoy hearing the many points-of-view on challenges, potential resolutions, and priorities, but of all these conversations, I generally learn the most from CIOs, CTOs and other senior IT individuals.

CIOs and their deputies now come with serious business backgrounds and are equal partners with the business and well informed about business pain-points, industry trends and priorities. But in contrast with their counterparts on the business side, it is mostly the CIO who arbitrates the tension between the ubiquitous demand for technology against the limited supply of resource, budget, and time. CIOs also provide some of the best overall insight into the decision process and rationale.

So, when I need to better understand where insurers are making investments, and more importantly why, I will often start with the CIO.

Where is the Smart Money?

Increasingly, CIOs are telling me that there is a steady redistribution of IT investment dollars moving from front-office customer engagement to middle-office administration systems (e.g., policy administration, billing, claims, etc.).

The rationale is multi-fold, but generally centers on the premise that improvements in mid-office administration systems will:

  1. Unlock the value of their newly minted front-office customer engagement investments
  2. Enable them to attain growth targets with improved flexibility in product and service features
  3. Provide the ability to scale operationally through automation and best practice.

The evidence for this is clear: Novarica[i] placed Policy Administration as the top priority IT project in 2015 and Celent [ii] found that nearly two-thirds of insurers are well into a program of replacement and/or modernization of their core administration systems.

LA&H insurers need flexibility to move up or down markets, into new areas or new lines of business, providing broader services, enabling consumer choice, facilitating partnerships, and more.

Investment into customer experience may be paying off but pain and costs have transferred to legacy systems that are not engineered for new rules of engagement and are now buckling under the strain.  CIOs want their systems to support growth without the presumption of long timelines, huge costs, and significant risks.

What Got Us Here Won’t Get Us There

Core administration systems last an average of 15 to 25 years.  Replacing them can be costly, risky and disruptive.  Benefits and ROI need to be crystal clear before any insurer will embark on replacing an administration system. New core administration systems must be built on the most current technology to ensure that they will integrate easily with upstream and downstream systems for many years to come. They must be “future proof”.

Configuration flexibility is key. Business personnel need to be able to shape and deploy new products, features and service options independently of IT, and to deploy new features in minutes and hours rather than weeks, months and years.

One thing is certain – continuing to leverage existing legacy technology developed in the 1990s and early 2000s (or earlier) will not position insurers to meet the market needs of the Group LA&H industry over the next 15 – 25 years. Time is running out for those who continue to kick the legacy core system can down the road.

We at FINEOS spend a lot of time talking to business executives and CIOs, but we spend more time listening to them.  What we learn informs the heavy investment we make in their future.

[i] Novarica – Research Council CIO Survey 2014Q3

[ii] Celent – Is the Dinosaur Dead Yet? Tracking the Evolution of Core System Legacy Replacement in Insurance – Aug 2015