Industry Looks to Meet Challenge of Modernization

Insurance industry leaders are clamoring for information technology (IT) modernization but are inhibited by budget constraints, a recent survey conducted by Sapiens International revealed.

Sapiens, a provider of business and IT solutions for the insurance industry, recently held the annual ISOTECH 2002 conference in Orlando, Fla. Executives were asked to identify the major IT challenges facing the insurance industry and the top IT challenge identified by survey respondents was modernization (26 percent). The second biggest challenge was IT budget constraints (20 percent), while integrating new and legacy systems ranked third on the list (13 percent).

More specifically, about half of respondents ranked “modernizing key business processes” and “IT budget constraints” among their top three concerns. Forty-seven percent of those polled also cited “replacing core applications” as one of their top three challenges. For the majority of insurance executives, improving the quality of company IT is imperative.

“Carriers that want to survive in the 21st century will have no choice but to modernize,” Judy Johnson, vice president of Insurance Strategy for Sapiens Americas, commented. “The ones that do it more quickly, who really focus on modernizing their business processes, will be in a position to make the kinds of business decisions that will allow them to avoid threats and seize opportunities.”

Most companies indicate that modernization is imperative as the existing IT systems are often viewed as inadequate, with one-third of existing policy administration systems and one-quarter of billing and claims systems more than a decade old. Carriers reportedly feel an overwhelming pressure to streamline their processes, primarily through the use of the Internet.

Some large companies are focusing on straight-through processing, which is the end-to-end selling of insurance products without any real human intervention. By following that process, there is no re-keying of data.

People in the industry also reportedly like solutions such as the IVANS transformation station, which allows agents to do customer service and billing inquiries from within the same agency systems. IVANS, manufacturer of e-commerce solutions for the insurance industry, asserts that the transformation station is effective because customers receive responses to their requests immediately.

Other companies in the industry reportedly look toward traditional vendor packaged offerings for modernization, but find that they are expensive and time-consuming. As a result, many insurance leaders are turning to technology companies that can customize systems. Thirty-seven percent of executives said they want to have their systems built in-house rather than install a “fully baked” packaged solution that may be expensive and inefficient, according to Sapiens. The company offers such a system, called “Insight.” Sapiens experts work with clients to tailor the Insight solutions to accomplish the unique objectives of each company. Together, they can consolidate dissimilar systems and enable successful communication between legacy and third party systems.

But the current economic climate makes modernization increasingly difficult. Although some companies are taking in more money than they used to, operational expenses are extremely high, according to Johnson.

Despite the challenges and financial risks, however, “Everybody knows they must do it. The issue is how,” Johnson asserted.

Independent agents must prepare themselves to take the “technological leap,” since they will be working with carriers that are more technologically advanced than ever before. Only 31 percent of those executives surveyed reportedly use the Internet for over half of their communications currently, but 77 percent of respondents expect to do so within the next few years. Carriers are not necessarily looking to sell policies online, but see the Internet as a key way of conducting business with agents.

“It’s clear that carriers in the property and casualty arena are planning to do the bulk of their communications with agents over the Web,” Johnson went on to say. “Agents need to understand that to the extent that the carriers are spending money to upgrade their Web interfaces, [independent agents] need to look at their desktops and they need to be ready to deal with that.”

Johnson recommends that independent agents be willing to adapt their agency management desktop to carriers’ technology. They need to recognize XML as a critical technology, she noted. It is likely that the Web interface will be instrumental in communications between the carrier and the independent agent. This trend may spill over into agent-customer interactions as well.

Topics Carriers Agencies Tech Market