There have been different strategies adopted to contend with the many challenges facing life and annuity insurers today, from tactical product and service offerings through more strategic programs involving significant front and back office developments to support them. The use of a centralized robust calculation capability can be a key element in the life and annuity product supply chain.
David Punter, Global Product Specialist at Oracle, discusses the topic in today’s post:
I’ve been looking at market trends recently, around Insurance specifically, around Life and Annuity even more specifically. There is growth and there is contraction, it all depends on where you look, what cannot be denied is that it is sometimes a disappointing experience. But beyond that last bit, I see a realization amongst insurance carriers that in order to do more than survive in this capricious market, some significant investment in revitalizing their infrastructure is in order.
This is not the now classic tinkering around the edges with a spot of workflow here, a code conversion there or some productized patch from another insurer’s system to deal with enrolment from somewhere else. There seems to be something more to it this time. The image below outlines some statistics to substantiate this view.
But where to start, now there’s the rub, to borrow a quote from Shakespeare’s Hamlet. The “big bang” approach is pretty daunting, lengthy and costly, and ROI can be a long awaited thing. It can get out of control quite quickly, bringing in an additional intangible element of reputational risk. So who wants to go there?
Nope, the key to breaking down the barrier resides in starting with something that gets you off on the right foot with measurable incremental results, as well as having a long-term controlled strategy. So let us turn our attention to identifying significant and common stuff, which all carriers rely upon, and most have a problem with.
Take an insurance business with upwards of fifteen (15) significant legacy platforms, with some variable endowments, traditional annuities, annuities in payment, group retirement arrangements amongst others – spread across the lot. Then consider annual statutory report time, when all policyholders of all status are required to be issued with statements that meet with pretty strict regulatory requirements around precision of benefit projections across products and format of documentation.
Co ordinate and standardize all that between a multiplicity of systems and silos, each of which has its own individual and specific ways of producing these things, and you have quite a project on your hands. Each year, the process is vulnerable to going wrong every time, subject to regulatory scrutiny constantly and generally something of an overhead. This exquisite quandary is in line for being made more exciting by trying to maintain consistency across the market as well as managing regulators on a regular basis, for reasons of product and charge transparency.
The common aspect of this process is that of chunking through the calculations. The disparate aspect is that in our scenario it’s done in upwards of fifteen different places, the results of which all ideally end up on one piece of paper per product line. Actually, from personal experience I know this latter piece rarely happens; my own provider (who shall remain nameless) sends me ten separate documents, in ten separate envelopes, each year.
This requirement can be achieved by putting in a centralized engine. You can see evidence of this being performed in house, or by use of a purpose built product from a vendor. Still quite a task, but it does have a clear benefit across the business as it addresses much more than the benefit statement enchantment that I’ve experienced with my own provider.
We also need to discuss the need for carriers to have a long term strategy associated with the implementation of a system that helps stabilize calculations. Using a centralized calculation repository is just an initial step on the way towards far more rewarding consolidation, ultimately to be manifest into reality through manageable low risk increments. Support for this greater journey is quite beyond the capability of most calculation solutions. Therefore, you need additional and suitably aligned enablement.
Oracle has committed to help solve these challenges and offers Oracle Insurance Calculation Engine to streamline operations in key business areas, around process, development and reporting.
Don’t forget to keep up with us year-round: