With unpredictable returns from the equity market and consolidation in the individual annuity industry, carriers are looking for ways to manage multiple blocks of business that are tied to aging technology platforms, according to “Business And Technology Trends: Individual Annuity,” a business and technology trends report from Novarica, an insurance business and technology consultancy.
Variable annuities offer guaranteed minimum withdrawals and have become popular with consumers, but carriers now are confronted with differences between actual and expected lapse rates, forcing earnings charges and write-downs on these products, Novarica said.
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Options for managing risk arising from higher-than-expected lapse rates and increasing market access are numerous. In addition to core systems replacements, which are costly and typically require lengthy implementations, alternatives to hosted systems include third-party administrators and business process outsourcing.
Many individual annuity carriers also are looking to expand the use of business intelligence to avoid underestimating lapse rates, and many are expanding their business intelligence capabilities to include predictive analytics, Novarica said. Further, many now are applying predictive models to underwriting through business rules. Individual annuity carriers also are turning to specialized applications, such as marketing tools and sales support capabilities, including e-applications and e-signature to manage this line of business.
Other technology priorities include:
- Agent portals: Novarica said important functionality includes straight-through processing and electronic front-order entry to increase agent efficiency and productivity, Novarica said.
- Customer portals: Self-service capabilities are a priority but must be balanced against concerns of alienating independent distribution channels, Novarica said.
- Distribution management: Compliance, including management of producer data and integration with third party credentialing services are important, as are flexible commission structures, self-service functionality and contract management, Novarica said.
- Core systems, including rating, underwriting and policy administration. These systems can help improve efficiency of internal workflows and speed-to-market in terms of new products, benefits and riders, and changes to existing products or pricing, Novarica said.
- Payouts. Managing business rules, the ability to make lump sum or periodic payouts, as well as annuitizing; and the ability to allow variable investments to remain “in the market” while receiving living benefit payments are top concerns, Novarica said.
Novarica found that most individual annuity carriers now offer e-application functionality, and that agent and customer portals are crucial elements of acquiring and retaining customers. Enhancements to customer portals to extend self-service and expand CRM capabilities are important investment priorities, but technology initiatives are more about enhancements than transformational change. Distribution management initiatives are mostly focused on streamlining onboarding and compliance, Novarica said.
Mobile is lower priority and focused on producers. Mobile access for customers is important for the future but most carriers don’t yet understand what functionality is appropriate. Producer mobility is a higher priority for most carriers.
