Wrangling Rabbits: Why Insurers Can’t Change Faster

Warning: some of the information in my post is based on information that is six to seven years old.

In 2012 and 2013 I was an analyst with Ovum responsible for guiding their global insurance research stream. During both of those years, Ovum sent me to Sydney for a week to meet insurance clients and prospects.

(As an aside, I had been very fortunate to have gone to Sydney before. In 1990 / 1991, I worked for Arthur D. Little and we had several business process re-engineering assignments with an insurance company. The BPR assignments that my team did lasted seven months. We were in Sydney for the last 3 1/2 months of 1990 and the first 3 1/2 months of 1991. Australia is a beautiful country with wonderful people, a thriving cattle industry, very good beer, great wine, and the quay and Opera House in Sydney are beyond awe-inspiringly gorgeous.)

In Australia, most of the insurance companies are owned by banks. In 2012, I had an opportunity to meet with a CIO of one of Australia’s insurance companies. He was relatively new to the role having recently moved as the CIO of the bank that owned the insurance company. He talked to me about a variety of topics but his primary focus was mobility and the disconnect between what the bank wanted him to accomplish deploying mobility and what he could accomplish.

He told me the bank had deployed mobile solutions for their clients the previous year and expected him to accomplish the same within 12 months for the insurance clients.

He told the bank executives he couldn’t get it done. He understood the importance of getting the initiative done. He wanted to get the initiative done. But still, he told them he couldn’t get it done. Not within 12 months. Not within 24 months. Not any time in the near term.

Why?

Wrangling rabbits

The insurance CIO was, in my terms, facing the challenge of ‘wrangling rabbits.’

In more explicit terms of what we talk about in the insurance industry, he was challenged by having to manage a multiplicity of core administration systems. He had 6 or 7 policy administration, billing, and claim systems. Before he could deploy a mobile solution, he (correctly) stated that had to rationalize the number of core administration systems running his insurance operations. He absolutely wanted only one each of policy, billing, and claims systems. However, he told me he could get his mobility goal accomplished if he had three of each. But six or seven?

Six or seven different core administration systems? I told him that having that number was a definite impediment to deploying a mobile solution. I also told him he was fortunate to have so few core administration systems.

I wasn’t being glib. But how did I know that he was in a somewhat fortunate situation?

Surveys of P&C and Life Insurers

During the years I was at Ovum, as well as the years before I got to Ovum, we surveyed hundreds of insurance and financial services firms around the world about a host of topics. One of the topics we surveyed P&C and Life insurers about was the number of distinct policy administration, billing, and claims systems they had. We asked if they planned to reduce the number of each of the policy administration, billing, and claims systems they had, and if yes, to what number (we provided ranges for their answers just as we provided them ranges of numbers of each of the distinct core administration systems they had).

The results for the P&C and Life insurers were more similar than dissimilar. The results for North America and Europe were similar for both types of insurers. Most of the insurers had more than a dozen of each type of core administration systems. More than a few insurers had 15 or more of each type of core administration system.

The next-to-last year I was at Ovum, we also asked if they planned to add each type of the three core administration system (even if they had multiple core administration systems). I almost didn’t include this question because it seemed like material for the late night comics you can watch on television.

What did we find? I bet you know. More than a few insurers, whether P&C or Life, stated they would be adding new, distinct policy administration, billing, and claims systems.

As I warned at the very top of this post, this article is based on old information.

Has the situation changed?

I’m willing to bet that between 2013 and now, the survey results haven’t changed all that much, if at all. I could be wrong but reality always intervenes between ‘what we want’ and ‘what really exists.’

It takes time, money, and other resources to reduce the number of each of the type of core administration systems. It takes needing to see ROI for deploying technology applications, if not immediately then within a ‘reasonable’ time frame (which will differ for each insurance company).

I don’t doubt that insurers know they need to consider, and more quickly deploy, applications of technology such as mobility or AI to better serve their clients. Several P&C and Life insurers have already implemented mobile technologies.

Realism is continually in play

However it is unrealistic to expect any insurance company to deploy any technology any faster than they believe is prudent.

Any person blaming insurers for their slow pace of adopting technology, regardless of how much money they are investing in startup insurance firms or how high the level of ‘entrepreneurial enthusiasm’ they have for their startup insurance firm or IT firm that supports insurers, accomplishes nothing except displaying a vast, Grand Canyon-level of ignorance about the insurance industry.

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