Many insurers, especially in Europe, face the challenge of conducting business in different countries. Having activities in different geographies is both good and bad. On the good side, it allows them to diversify their risk, but on the bad side, doesn't aid insurers that want to define a strategy in terms of core applications deployment. Insurance markets that have very different distribution dynamics and risk pricing experience in one market might not be relevant for another. In addition, differing tax and regulatory treatment, as well as different currencies and languages can act as further roadblocks. Overall insurers can choose between two strategic alternatives: deploy a single core application cross-borders, or implement a dedicated core application in each market.
There are many important factors that have to be taken into consideration when making this decision. A cross-border deployment requires insurers to consider specific issues such as the following four points:
1. The complexity of the project: Implementing a core insurance application in one market is already something difficult; therefore, deciding on a cross-border deployment is certainly very complex. In this context, it is important insurers take the necessary time to carefully analyze and plan all aspects linked to such a project. In particular, Celent considers it is highly important that insurers use integrators that already have experience working in cross-geographical projects.
2. Shared service centre requires multiple language skills: Providing a service centre for different European countries implies that multiple languages have to be offered without giving the impression to customers that their needs or requirements might be misunderstood for cultural reasons.
3. Product complexity: Beside the project complexity, a core application such as a policy administration system, has to offer a high level of flexibility if insurers want to have a single platform to deal with different set of regulations, taxes, requirements, etc.
4. Change management: Such a project has more to do with managing complexity and change than process and technology. Therefore, Celent thinks that the project management side must be perfect, and coordination of activities and tasks between stakeholders during the implementation and deployment cross-borders have to be delicately thought out and then professionally executed.
In Europe, some insurers prefer prioritizing the approach consisting in implementing a dedicated core application in each specific market. In emerging markets (Eastern Europe, for instance) where it is important to acquire market share rapidly, they believe that priority should be given to a partnership with a local vendor having a certain experience and expertise in the market. Then, as soon as the market has reached maturity, these insurers can start rationalizing their core application landscape in order to gain competitive advantages. But for the moment, these players prefer acquiring market share as quickly as possible before the markets reach maturity.
Both approaches are interesting and deserve a careful attention. This is why Celent is planning to publish a research about this topic before the end of the year. In the meantime, Celent recommends insurers to have a look at the following report: Policy Administration Systems for General Insurers in Europe 2009 (Celent will publish a report about policy administration systems in the life sector in Europe in the 3rd quarter of 2009 too).
Indeed, whatever the strategic approach insurers choose, they still need to find the best policy administration system(s) to help them optimally execute actions supporting their long-term strategic objectives.
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