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North American Insurers Are Consolidation Laggards

Twice as many European insurers have consolidated their legacy policy admin systems compared with North American Insurers, according to an Accenture survey.

Few insurance executives would challenge the charge that North American life insurers are slow to consolidate policy admin systems. But some might be concerned to see how far they lag behind European and Asian carriers, which increasingly are pursuing new markets globally. According to an Accenture (Chicago) survey of 60 European, 40 North American and 12 Asia-Pacific firms, only about a quarter of North American respondents have consolidated their policy admin systems for traditional life insurance products, compared to about half of European respondents and a third of Asian respondents.

The survey also found European companies three times more likely than North American firms to say they expect to be involved in mergers and acquisitions. This drives European insurers to prepare their platforms for such an event, according to Dave Hollander, managing director and head of Accenture's life insurance solutions.

While 64 percent of North American respondents reported planning or implementation already afoot to consolidate their legacy policy admin systems, many insurers have yet to arrive at what they consider a compelling business case, particularly with regard to data conversion, according to Hollander. "But the facts don't bear that out," he asserts. "If you look at a business case that has business process savings as well as IT savings, the case is compelling." But North American carriers simply have a tougher challenge in consolidation, the study suggests. North American insurers have more systems to consolidate — 34 percent of respondents report use of 11 or more product platforms, compared to only 20 percent of European carriers.

The North American industry has seen a proliferation of product platforms in an effort to keep pace with market appetite for new products. But as the retirement market booms over the next five to 10 years and global companies enter the market, "You'll see the need to define and manipulate new products without putting in whole new policy admin systems," Hollander says.

The survey emphasizes the benefits of a business process outsourcing (BPO) solution. It shows that 45 percent of respondents used BPO as part of their consolidation efforts, and those firms were 26 percent more likely to report high levels of satisfaction and 16 percent more likely to report cost-reduction benefits than those that did not use BPO.

The survey can be seen in some measure as reflecting Accenture's own internal business case for its strategic commitment to the BPO space, which includes its 2006 purchase of life policy admin vendor NaviSys.

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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