Partners in Strategy
Growth and Efficiency
Skepticism that insurers are genuinely focused on growth may have some basis, but the reality is that cost consciousness and revenue focus are compatible. In fact, major projects, such as core system replacements, are difficult to justify from a reduced maintenance or reduced cost of ownership point of view alone, owing to their inherent risks and costs. "There has to be a business improvement case," Josefowicz insists.
According to Glenn Sieber, Accenture's insurance industry managing partner, high-performing insurance companies continue to grow while streamlining their operations to be competitive. "It's not an either/or question," he asserts. "Every one [of the leading carriers] is focused on both strong premium growth and operational efficiency."
As examples, Sieber cites P&C insurers' investments in improvements in pricing segmentation and underwriting acumen. "Improving risk segmentation to help spur growth, streamlining claims processes, extracting distribution and manufacturing efficiencies, reducing infrastructure costs, and prudently investing technology in core business processes will be key requirements to achieve business success," he contends.
Life insurers are struggling with sluggish sales of traditional products and are focused on generating profitability from newer offerings, such as long-term care insurance, according to Sieber. However, such products require significant scale to achieve operational efficiencies and carry greater financial risk to the insurer, he adds. "Many life companies have yet to fully adjust their infrastructure overhead costs to reflect the changing business mix and realities of the market," Sieber observes.
Deloitte's Guastella also sees a preoccupation with the generation and timely issue of product. "There's a much bigger focus on product generators, product systems, rules engines - things that would allow companies to bring products to market sooner, and that will probably also allow product administration consolidation to happen more smoothly, by eliminating certain legacy system functions," he says.
In addition to attention on claims, P&C companies have a revenue-focused eye on agency integration and the goal of SEMCI, notes Curt Stevenson, VP of professional services, Back Bay Technologies (Boston). But Stevenson insists that cost-containment concerns are not to be underestimated, and he calls attention to increasing regulatory pressures and related technology spending.
As Deloitte's Guastella observes, "A big focus on regulatory compliance issues is not new. But we're seeing it move from something more like an emergency response footing into the realm of 'business as usual.'"
'Behind the Curtains'
Back Bay's Stevenson singles out compliance audit and access control as areas of increasing interest and investment. "People have known that there are issues lurking behind the curtains, so to speak, and have started to do things about it," he remarks. "But it's a huge problem, especially considering the prevalence of legacy technology."
Stevenson explains that today's compliance requirements demand an awareness of access to information at an individual level, and such awareness is difficult to achieve with mainframe systems. "Going in and trying to audit that is extremely challenging, and it's as much a business as a technology problem, if not more," he says.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio
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