Harnessing technology to accommodate shifting trends in insurance distribution
Emerging diversity in distribution – what does this mean for technology?
“Forward thinking insurers are leveraging distribution channels as one way to capture the opportunities that exist in the fast growing Asia Pacific markets” – More than one approach. Alternative insurance distribution models in Asia Pacific, Deloitte Touche Tohmastu, 2010.
According to a recently published report by Celent, Distribution Trends in the Asian Insurance Market, Asian insurance companies are moving away from agency based distribution towards a more diverse model that encompasses other channels such as banks, direct sales and financial advisers. In order to accommodate this trend, technology solutions need to evolve to be more functionally rich and adaptable to support such a growing variety of multi channel distribution models.
To better support this diverse range of channels and remain competitive, insurers now require increased levels of flexibility in the software that they employ. This flexibility can come in the form of communication links to the distribution channels, as well as in the form of adaptability of the application to facilitate ongoing change.
In terms of communication, Celent’s 2010 paper, Wealth Management Business and IT Priorities for 2010: A Global Perspective, highlights Service Oriented Architecture (SOA) as an important area for the future as firms focus on open standards. The report states that SOA enables firms to respond quickly to the changing demands of clients, distributors and regulators. SOA also enables insurance providers to expose various insurance business services to their distribution partners outside of the enterprise.
This has traditionally required the development of replicated functional logic in a separate internet layer. However, using today’s modern n-tier architecture, insurance providers can now readily and more cost effectively service their distribution partners by providing secured web access directly into the core insurance application, without the need to replicate code, functions, or processes in the internet layer.
The aforementioned Deloitte Touche Tohmatsu report states that bancassurance will continue to grow as a distribution channel in Asia and, according to the Celent paper Distribution Trends in the Asian Insurance Market, in some markets the premium income for new life insurance businesses generated via banks has exceeded that of the traditional insurance model of selling via individual agents. To accommodate this trend and meet the needs of insurers, forward thinking technology vendors are tailoring their offering to support the inevitable continued growth in this area.
Global financial software provider, Bravura Solutions, has recently launched its next generation life insurance software solution, Sonata. This new Java SOA solution is database independent (running on Oracle, Sybase or SQL). Its browser technology enables bancassurance partner banks to securely key in new business applications directly from branches into the insurance system over the internet. The software is designed to embrace the benefits of web enablement for life insurance providers by harnessing recent advances in Rich Desktop Application (RDA) and Rich Internet Application (RIA) technology.
Additionally, Sonata encompasses automated underwriting. Recent experience from a Bravura Solutions customer (one of Thailand’s largest bancassurance life providers) shows 50 percent of new applications being auto-accepted and auto-issued without manual underwriter intervention. These advances in Straight Through Processing (STP) open the door to complex levels of operational cost savings and benefits by streamlining and automatically underwriting clean skin applications within minutes.
Technologically advanced web enablement may also provide support for a direct sales channel. Prospective customers could go online and either get a quote, or submit an application directly into the policy administration system. If the application fulfils the automatic underwriting rules, then within minutes the applicant will be advised that their application has been approved; otherwise the applicant will be advised that their application is pending underwriting review.
According to the 2009 InFinance article, GFC brings life insurance back to the future, the uptake of such web-based distribution is becoming increasingly important in netting the all important emergent Generation Y market, which uses online distribution channels for a large proportion of its shopping, trading and research.
With the evolution of local and national wireless broadband network grids, this automated underwriting technology can be further harnessed for agents. For example, an agent could in effect visit a client, do an online needs analysis and electronic application capture and provide an underwriting decision in a matter of minutes – all on (as an example) a touch screen iPad. Bravura Solutions is currently developing such web based services with Sonata.
In terms of adaptability in a software application, there are two areas of the business that require flexibility with respect to supporting multichannel distribution.
The first area is flexibility to develop and rapidly launch new and innovative insurance products to the marketplace. In order to differentiate themselves from their competitors, bank partners are continually looking for additional customised life insurance products for their customer base and financial advisors are looking for new, innovative investment life insurance products for their clients to invest in. Modern, rules-based and table-driven life insurance applications with product cloning capabilities provide this flexibility. Using these tools, new products are simply configured (not coded) for rapid launch.
We are now seeing real life examples of this with a Bravura Solutions customer, a large Asian life insurance provider that, using such modern product development features, recently launched a new bancassurance product for its primary bank partner in under six weeks – contrasting markedly with the typical six months time to market seen previously.
The second area is flexibility to effect changing workflow processes, in line with the needs of each of the different distribution channels. Currently most life insurance applications require changes to their software code in order to change a work process. However, according to the aforementioned Celent report, Wealth Management Business and IT Priorities for 2010: A Global Perspective, organisations are looking towards scaling back on customisation and leveraging configuration options.
Modern, more technologically advanced software systems now encompass built in workflow management that effects changes to workflow processes simply and quickly by merely changing a table or a workflow diagram. Online requests from agents, brokers, financial advisors or similar can launch a series of measurable workflow processes to ensure that nothing is overlooked.
Employ modern technology and reap the benefits
By harnessing the features of modern technology and modern insurance administration software solutions, life insurance providers can reap the benefits of deploying a flexible administration system that is designed to meet the challenges of an ever changing and perhaps more discerning insurance marketplace, as well as position themselves to take advantage of new, alternative distribution channels.