Technology is playing an increasingly important role in insurers' ability to attract, retain and profitably serve clients, especially in the highly competitive individual annuity market.
New research from Boston-based Novarica found that individual annuity carriers are focusing on modernization of policy administration systems as well as improving agent portal functionality, business intelligence and risk management operations.
"With interest rates remaining low and competition for both clients and producers (including agents) high, carriers continue to look for both ways to improve their cost profiles while concurrently creating competitive advantage through enhancements to products and services," Novarica wrote in its report.
Carriers have already focused on application functionality, especially if they work with third-party distributors. Priorities for individual annuity insurers are likely to include:
- Straight-through processing.
- Improvements to producer self-service functionality in agent portals.
- More-sophisticated actuarial software.
- Better operational tools to service new business, contract maintenance and call center functions, and analytics and sales reporting tools.
- Social media marketing adoption.
- Risk management tools with a focus on internal controls.
The Labor Department fiduciary rule could affect technology adoption when it comes to individual annuities, Novarica predicted.
"This product will face important changes in the future as both distributors and manufacturers adjust to a new compliance environment," Novarica wrote. "It is highly likely that the 2016-17 period will see shifts in product features, compensation elements, and the tools required to continue to expand self-service capabilities while also simplifying the solutions to conform to the evolving retirement solution landscape."
Following are seven business and technology systems that are evolving within the individual annuities market:
1. Front-end systems
Within this category are agent portals, customer portals and distribution management.
Priorities for agent portals will focus on improving efficiency and effectiveness through processing, electronic front-order entry, improvements in inbound paperwork quality, proactive electronic notification for agents, and managing regulatory and compliance issues.
Customer portals have advanced to include online payment, policy changes, allocation and transfer of funds, withdrawals and contract loans. Priorities within customer portals will center on increasing self-service capabilities for advanced inquiries and account changes, and preventing alienation of independent distribution channels and agents concerned about disintermediation.
Distribution management includes systems that support compliance, commissions and managing communications between distributors and insurance companies. Priorities will include managing producer data and integration with third-party credentialing services to ensure compliance, flexible commission structures, some degree of producer self-service functionality and contract management software upgrades.
2. Core systems
Within this category are rating/underwriting/policy administration systems, billing, claims and payout systems and reinsurance management. Ongoing billing is not a significant focus for individual annuity writers as most offer single-premium products.
Rating/underwriting/policy administration systems are a top area of investment for individual annuity insurance carriers as legacy systems are unable to support rapid product development and top producers are unwilling to deal with the challenges of legacy solutions. Other priorities will include improving efficiency of internal workflows, and speed to market of products, benefits and riders.
Claims and payout systems are important because they must be able to follow complicated product rules and track actual and protected account values. These systems also must ensure payments take place in a manner compliant with regulatory issues. Priorities will include management of business rules through the payout system itself or by interfacing with the administrative platform, developing the ability to make lump sum or periodic payments, and allowing individual investments to remain in the market while receiving living benefit payments.
Reinsurance management is a relatively new development. Hedging strategies are a major focus within reinsurance management. Priorities will include buildout of a hedging strategy and technology infrastructure that facilitates hedging decisions, and a focus on pricing, reserves, capital management and statutory reporting.
3. Financials
This is a stable area for most carriers, according to Novarica.
Priorities here are maintenance update and occasional system replacement.
