As insurers upgrade their financial and billing systems to meet regulatory mandates for more transparent reporting, they are seizing the opportunity to enhance the customer and distributor experience as well. Carriers that get billing right will reap the rewards of improved customer satisfaction and retention, easier regulatory compliance, and lower operating and maintenance costs. But many insurers are hampered by inflexible legacy systems. What are the capabilities of the new generation of financial and billing systems, and how can they help insurers improve their competitive positions? Is it imperative that carriers undertake a rip-and-replace approach to upgrade their capabilities, or are there other options? And what are the risks of these initiatives? --Peggy Bresnick Kendler
Billing systems are an important component of ease-of-doing-business initiatives with policyholders and agents. For most customers, a bill is the most frequent touchpoint with their insurance carrier. An efficient billing process and automated billing options have a noteworthy impact on customer retention and should be a priority. Further, new billing and financial systems often facilitate the self-service capabilities that carriers want to extend to policyholders and agents.
However, based on a recent Ward Group survey, only 14 percent of carriers have plans to replace their billing systems within the next 18 months. Insurers are trying to tackle their legacy system challenges across their application portfolio and are more likely to begin with policy administration and claims applications. As such, if a carrier does not have the capabilities within its current billing system, it is common to add on to the system rather than do a full billing system replacement.
One risk carriers face when undertaking a billing systems migration is not fully retiring their legacy systems. On average, carriers support 1.6 billing systems, with large carriers supporting an average of 1.9 billing systems. If companies do not streamline their solutions into one application, this causes a support burden for the IT department.
Eighty percent of companies plan to use a third-party product for their next billing and financial system. There are affordable, reliable solutions available in the marketplace. This suggests that companies should do a full technology upgrade with a new system if they are able to prioritize appropriately. If the carrier needs the capabilities and there is not room for a new project in the current portfolio, add-ons are effective in shortening the timeline associated with developing necessary capabilities.
Leah Hollstegge is manager for Cincinnati-based Ward Group.