Who will be the Steve Jobs of the life insurance industry?14 December 2016
2017 marks ten years since Apple first launched the iPhone. Flash forward to today and these devices are so heavily relied upon in our lives that it’s hard to imagine life without them.
The iPhone has evolved to perform many different roles within our lives. It’s not just a phone but an entertainment system, a camera, a news delivery system, a translator, a GPS and so forth. Its genius was in combining functionality that already existed into a single device. It opened up a whole new world of opportunities for those with the imagination to see past what it was, and to imagine what it could be.
But like many innovations throughout history, there were the nay-sayers; those that thought that the functionality provided was unnecessary or would just not resonate with the general public. What these people failed to see at the time was that by combining these functionalities into a single device, the iPhone became a next generation technology platform, whose sum was greater than that of its individual parts.
A similar parallel can be made with the life insurance industry. A myriad of systems currently exist that support different parts of the life insurance policy lifecycle. Your typical life insurer will have quoting and application software, multiple policy administration systems or databases, specialized claims management systems, workflow support, commission systems and many more – all tied together via some form of integration. Each system performs a specialized function because, traditionally, there hadn’t been any one system that could support all of these functions. The development of the modern policy administration system has facilitated a new reality, opening up new opportunities for those insurers who take the step towards system modernisation.
Unfortunately, the life insurance industry has been painfully slow in adopting new technologies, compared to its financial services peers. Group life insurance in particular has lagged in terms of innovation and development, despite covering a significant proportion of Australians via default insurance within superannuation.
Group life insurance continues to be administered on a range of basic databases and supported by clunky and inefficient manual processes. Excel spreadsheets are still commonly used to process annual reviews of group life insurance plans with the data often out of date or incomplete. This is the currently accepted ‘status quo’ business operating model for most insurers and for the most part it works. So why fix something that isn’t broken?
Einstein once said “If you always do what you always did, you will always get what you always got”. The life insurance industry hasn’t been completely devoid of innovation. Up until about 10 years ago, life insurance applications were paper-based. New technology made electronic applications a reality. Over time, processes have evolved resulting in the development of underwriting rules engines and their integration with policy administration systems. Today, a typical life insurance company may receive close to 80% of applications electronically. Modern systems have made it possible for an application to be received, underwritten, and issued immediately without any human intervention whatsoever.
This one innovation has led to changes that have revolutionised the industry. Were underwriting rules engines or straight-through processing envisaged from the outset? Probably not, at least not to the extent that they are now used. Ever so slowly, manual processes and outdated legacy systems are beginning to bow down to more sophisticated policy administration systems that allow true game –changing innovation.
As an industry we need to embrace modern technology to remain relevant to the consumer. This can only be achieved when we can look beyond the ‘what is’, to imagine the ‘what could be’.