When we think of the term “gotcha” it conjures thoughts of stealth-like issues that catch us by surprise and often disrupt the way we think or act, and potentially force change. It’s a fitting term for the digital disruption we’re experiencing in the life insurance and annuity industry. While some insurers may be caught by surprise, many have been preparing for digital disruption by modernizing their technology platforms to drive profitability from both new and existing business. We’ve seen total investment in insurance technology nearly double from $800 million in 2014 to more than $1.7 billion in 2016.1
Many industry leaders believe we are at a critical juncture in technology. Insurers that want to avoid becoming “Amazoned” must migrate to flexible digital technology platforms to remain competitive. Some would even argue that legacy platform modernization is essential to remain in business at all. And consumer expectations of more product choices and faster, personalized service across any device, among other expectations, continue to drive significant change.
Insurance carriers must change, and do so at an accelerated pace. Accenture research found that 86 percent of insurers say their organization must innovative at an increasingly rapid pace just to keep a competitive edge.2 In fact, of the nearly 300 senior insurance industry executives we interviewed, 73 percent told us they’re currently dedicating moderate to significant resources to change.
But with change comes risk. How do you balance the need for accelerated change while mitigating business risk? Kym Gully, ALIP engineering and technology lead, highlights in a recent article published in Digital Insurance Magazine, five pitfalls to avoid when implementing a modern policy administration system. We hope you find it helpful to your digital business initiatives.
GOTCHA! 5 pitfalls to modernizing PAS … and how you can avoid them
By Kym Gully, engineering and technology lead
Accenture Life Insurance and Annuity Platform (ALIP)
Modernizing your life and annuity policy administration system (PAS) feels a lot like piloting an ocean liner through a sea of icebergs. You’ve read all the “how to’s,” “glide paths,” and “roadmaps”; presented your idea to senior leaders, evaluated potential vendors and geared up your team. Now it’s time to forge ahead. Will you safely arrive in open waters, gently graze a harmless patch of floating ice, or … let’s not talk about the last option.
Success boils down to experience.
The Accenture team compiled from more than 20 years of modernization projects across all sizes of life and annuity carriers the top five gotchas—all those hidden and not-so-hidden issues—that threaten the gains you plan to achieve from your PAS modernization. Learn how you can avoid these common profit pitfalls.
1. Waive the waterfall fail whale.
If you’ve experienced the pain of creating a waterfall development plan only to learn that at the end of the months it took your team to create it, the requirements changed or you uncovered an unanticipated legacy “iceberg,” then you know the negative impact on project cost and timeline. Apply a development methodology that creates governance around first building the high-value segments of the project.
One way to speed development and quickly deliver results is with the agile scrum technique in addition to lean plan, do, check, act (PDCA) to perform continuous testing at the start of the project and throughout each development sprint. We also recommend a “back-to-base” strategy, so no development work is wasted and instead folded back into the base technology platform—this benefits everyone on the platform and gives you a stronger starting point for your current or future upgrade implementation.
Based on your business objectives, pinpoint the PAS elements that deliver the greatest value in the shortest period of time and apply a series of sprints to simultaneously build, test and implement them. Look for a provider that delivers updates on a regular frequency so as new templates, integrations and interfaces become available, you don’t have to wait more than a few months to receive them. Time to break into your haka dance!
2. Dodge downstream dead ends.
Insurers seeking to reduce operating costs from their legacy policy administration systems often overlook downstream operations that could sabotage upstream PAS modernization gains. Does this sound familiar: Your accounting team complains that they receive old data from your policy system. So, you upgrade your policy administration system. Now accounting is happy, but the upgrade didn’t include the customer portal. Now you efficiently process policies, but your clients can’t easily input information. Your modernization doesn’t look so modern to your customers. Consider modernization as an opportunity for IT teams to collaborate across the organization to drive efficiencies and potentially share modernization costs and benefits.
Look at your end-to-end process and identify quick wins downstream that if left untouched, could diminish upstream modernization efficiencies. Some of the most common downstream issues that negatively impact upstream gains include sluggish customer portals, slow underwriting systems and vintage document management systems. Depending upon the age of your downstream systems and your business objectives, identify which of the downstream components to tackle first. In our experience, carriers that execute a broader multi-year plan and apply a phased-in approach that delivers added upfront value, can apply efficiency gains and cost avoidance to fund later phases of the program.
3. Embrace the ecosystem.
An ecosystem of efficiency is key to becoming a digital and connected insurer. That means having a platform with an extensive library of out-of-the-box, ACORD-standard integrations. They should be pretested and validated in a production environment, so you’ll shorten the path to implementation and experience few to zero issues upon going live. In fact, with sufficient upfront preparation, we’ve seen one Tier One carrier convert tens of thousands of policies from its legacy system over a weekend—and operate business-as-usual on Monday morning.
A flexible technology platform for policy administration is often forced to work with an ecosystem that’s not as flexible. Accenture research found that 94 percent of insurers say adopting a platform-based business model and engaging in ecosystems with digital partners are critical to their success.3 Look for a platform that provides frequent updates at predictable intervals, bringing you the latest interfaces and integrations—backward compatible and forward looking.
4. Mind the gap.
Insurers face a potentially critical knowledge gap resulting from a shortage of IT and business skills, turnover and a lack of business context around how and why modifications were developed on these legacy systems over many years. Assign a strong project leader who is a change agent with experience leading large-scale change management projects and reports directly to executive leadership. With a broader change management perspective supported by the experienced legacy system operations team, the project leader inspires and guides the team to a new way of thinking. The goal is not to replicate analog or legacy processes in a digital workflow, but instead rethink the workflow and adapt it to benefit a modern digital business.
Be realistic about staffing. You’ll need dedicated IT and business resources. Consider both functional and technical resources to ensure a successful and timely implementation. We’ve found that dedicated teams retain continuity, and when combined with lean and agile techniques, deliver the project faster without jeopardizing daily business operations. Outsourcing can also help narrow the skills and staffing gap. Accenture research indicates that 75 percent of insurance executives believe leading organizations will seamlessly blend their internal and external workforces into a borderless enterprise within five years.4
5. Build a better business case.
Don’t create a massive modernization project that won’t get funded. Define a specific and measurable business imperative. For example, your company wants to expand into the indexed universal life (IUL) market. However, your current legacy system is unable to manage these complex policies without significant updates. Consider not only the top line growth from the new product, but also the bottom line benefits in your business case.
Bottom line benefits such as operational efficiency are common in most legacy system modernizations, however, look for downstream benefits that strengthen your business case. Are there capabilities that you and your agents can now deliver? For example, will your new system make it easier for today’s digital consumers to do business with you? Accenture research indicates that 80 percent of insurers are prioritizing ease of use and simplicity in the user interface to ensure a more human-like experience.5 A better user interface could deliver additional business and help retain existing clients.
PAS Modernization: Now what?
How should you modernize your policy administration system? The answer depends on your business objectives, current environment, human resource capacity and of course, budget. Modernization is about rethinking your processes. It’s an open sea of opportunity to modernize your thinking, free from the constraints of your legacy system shackles. Sure, you have processes that are effective, but be careful about limiting your new system’s potential by transferring, verbatim, legacy processes into your modern system.
We’ve helped many leading life and annuity insurers avoid the trap of wasting time and budget to re-implement non-value added process steps they thought were needed simply because “the old system did it that way.” It’s liberating to learn how much more efficient policy administration can be—and the implementation of a new PAS—when you focus on the areas that will drive value for your business operation.
The Accenture team can help. We’ve implemented our Accenture Life Insurance & Annuity Platform (ALIP) for a half dozen clients in just the last two years. We’ll navigate with you, and as your business and the environment change, we’ll make sure you’re ready for the future. Learn how you can become future ready. Download our free Accenture Technology Vision for Insurance 2017.