Individual life carriers continue to focus on product specialization, speed to market, reducing operational costs and better management of risk. In addition, carriers are modernizing by addressing technology platforms that are aging or consolidating platforms where there is redundancy. This modernization is being addressed while new uses of technology are being contemplated. For example, technologies that better enable product development, distribution or deployment of newer technologies, such as social media and mobility applications are being highly prioritized. This focus on technology is in continued response to a highly competitive carrier marketplace and rapid changes due to unpredictable equity market performance.

While companies can vary widely by product strategy, distribution model, state of current technology and attitudes toward innovation, Novarica has found consistency across life companies in six broad areas.

Legacy Systems Modernization. CIOs know that the journey to modernization will span many years. They also recognize that while the modernization journey is underway, projects need to get done and normal priorities must be executed, making the challenge even more complex. Many carriers admit to having a legacy core system architecture that is badly out-dated and not positioned to meet short-term and long-term needs for efficiency, information accessibility, ease of use and agility.

Product Development. This remains a priority, but for different reasons than in the past. Prior to the difficult market conditions beginning in 2007, the pace of product development activities was quite high, described by one CIO as an "arms race." New products, benefits, riders and combo-products were being rapidly developed and deployed in the market place.

This scenario placed a heavy burden on IT shops to innovate and deploy products quickly, but CIOs with legacy systems had a very difficult time keeping up. In addition, the continuously changing product offerings made it difficult for distribution to keep up with the pace. The net result of this period was tremendous growth in product types and a number of small blocks of business as life companies experimented with various products.

STP, e-App, e-Signature. Unpredictable economic conditions and declining sales growth have carriers taking a different point of view when looking at their product suites. Nearly all of the life insurers Novarica has spoken to recently indicated that they are reviewing, revamping and streamlining their life product suite.

Electronic submission is how business will be conducted in the future, and consumers have become more and more accustomed to doing business electronically. Distribution channels (especially large banks and broker/dealers) have an expectation that the sales process, from illustrations through new business submissions, will be done electronically. But while electronic submission of business is generally a high priority, life companies are in very different place, as some have mature capabilities and others are just beginning to grapple with how to approach it.

Automated Underwriting. The life business appears to be following the lead from P&C companies, where a high degree of automation is feasible for personal lines products. The issue for some life insurance products, similar to commercial and specialty lines, is that the underwriting process tends to be more complex and inevitably human intervention is still needed. So the typical approach appears to be a combination of auto underwriting algorithms that provide a recommended decision coupled with underwriter intervention for final decision-making.

Field Technology. Investment in multiple field technologies was expressed by life executives as a crucial set of capabilities; and while the broad initiative is highly prioritized, the specific area of focus tended to be different from company to company. CIOs are challenged to assemble a suite of technology tools to assist their distribution in a variety of ways. There is no single technology for distribution, as agent behaviors are so unique. Therefore, CIOs acknowledge having to build a suite of tools allowing the adoption of many diverse field technologies. This also requires architects to assemble a platform that is open and exposes services to many technologies, such as portals and mobility devices.

Social Media and Mobility. Life executives acknowledge that areas of social media and mobility are growing in importance. Some executives describe the technologies as "hot" while others look at it as something that simply needs to be incorporated into their business but is not "game changing." Most are trying to evaluate the direct applicability of both areas to their business, assess relative level of importance and build a strategy.

The responsibility for the social media strategy and execution typically rests on the marketing organization, with assistance from IT. Most life companies report having a presence in the marketplace, closely monitoring social media "mentions" so they can respond and react to anything said from a branding perspective. Those that are more advanced have created a holistic marketing strategy that incorporates social media with traditional print and media.

INNSight is exclusive commentary from Novarica. Don Desiderato is a principal in the insurance practice at Novarica.

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