Ernst & Young noted in their 2013 Canadian Life Insurance Outlook, “Many Canadian life insurers continue to use legacy systems that require significant resources to operate. In addition, these systems are not flexible enough to provide the kind of business and regulatory information required for strategic, operational and compliance purposes”.
While known by a variety of different names – policy administration systems, back office systems, and “&=+%@#” (you get the point) systems, they remain the administrative backbone of all life insurance companies. However, legacy systems are a significant budget line item for ongoing maintenance expenditures (year after year after year) and, as one Senior Executive once told me, they restrict your product suite.
I cannot tell you how many times I have heard “…our system can’t handle that”. The result? Missed opportunities and inhibited growth!
Many companies struggle with decisions around what to do with their aging policy administration system(s). However, such decisions, with their operational and financial implications, must be made within the context of a 3 – 5 year strategic and operational planning cycle. And there are no shortage of issues that need to be considered – including but not limited to:
- Maintaining the status quo (while always an option, it demonstrates a lack of leadership when problems are just punted into the future for another person to handle)
- Upgrading versus replacing
- Building a fence around existing system(s) and deploying a new system for new opportunities
- Converting now or later…or not at all
- Licence fee – based system or Software as a Service (SaaS) (NOTE – SaaS, while in the emerging phase, must be given serious consideration)
- Impacts on peripheral systems
- Outsourcing closed blocks of business to BPO providers and reallocating resources to a new, more flexible system in support of open blocks and emerging opportunities. Again, take a serious look at a SaaS environment.
- Change management
- Expectation management
- Determining which policy administration system (of the roughly 25 systems available in Canada) best meets your needs – we can help you do that!
Critical success factors? Internal alignment, extensive planning, ongoing communications, and the setting (& ongoing management) of expectations are big ones for me.
I would love to hear from you about your:
- Experiences – the good…the bad…the ugly
- Critical success factors
Leave your comments below!