When it mapped out a "scorecard" listing of requirements for a new annuity administration system in early 2000, Security Benefit Group Inc. was living in the green eye-shade era of COBOL, two mainframes and "bolt-on" systems.To make matters worse, the carrier's IT department was trapped beneath a mountain of application changes.
Typically, it took the 110-year-old Topeka, Kan.-based financial services firm 12 to 16 months to get a new annuity product to market. Outdated technology didn't support the commonplace Windows desktop or support the use of a mouse. Cost/benefit analysis of product changes was impossible.
And, Security Benefit Group's two-mainframe system layered unacceptable costs and complexity into the administrative process. For example, it took an eight-hour shift and a staff of two or three working overnight to back-up the legacy system.
By the beginning of 2000, Security Benefit Group's top management was fed up and wanted to apply the advantages of the promised New World of modern information technology to its annuity line.
As part of its vendor selection process, senior management created a list of five major objectives for a new annuity administration system:
* Increase the speed to market of annuity products.
* Support an increase in annuity sales without adding head count.
* Minimize the number of resources and hours that the carrier needed to enhance current products and produce new releases.
* Implement an architecture in alignment with SBG's newly formulated IT strategy and that met its information technology needs for five years out.
* Reduce the number of system interfaces in annuity administration.
"Whenever we needed to upgrade our system for new products or existing products, we would have to spend a lot of time making application changes," explains David Keith, senior vice president and CIO of IT at Security Benefit Group. "In today's competitive world, you can't do that. We needed to get products to market more quickly so we could gain market share faster against other companies competing for the same asset dollar."
Today, new annuity product introductions at SBG take from two to six months. IT operating costs have dropped 40%. Service costs per policy have dropped 30%. And, IT and customer service staffing has been reduced 20% to 25% since a new annuity policy administration system went live in January 2001.
Implementing Edison, N.J.-based NaviSys Inc.'s Home Office administration system has already helped SBG reap cost savings of about $4 million a year in IT and customer service expenditures, Keith says.
"Policy service costs were decreased by reducing staff and training requirements because the new system is easier to learn," Keith explains. "We reduced our touch costs-fewer people have to touch information or even see it, because we have fewer applications and just one system."
Eliminating the two-system environment also helped reduce staff. "For example, we had a dedicated staff of six to eight trainers who coached new hires in the customer service department in the rudiments of the legacy systems," says Keith.
In the new environment, "we don't need that level of staff support, and those jobs will be reduced to zero in the next few months."
Moreover, the former system required eight hours to back-up; the new system takes 2.5 hours and staffing has been reduced to zero.
The new system reduced IT operating expenses 40% because "we no longer had major hardware and software maintenance expenditures," Keith says. "The UNIX-based environment is less costly to operate and maintain."
Another bonus: Customer service has improved.
"Consolidating all product information onto one system lets us respond more quickly to customer inquiries, process new business faster using one uniform method, and decrease customer service representative training time," says Keith, who also heads up the customer management function.
By accelerating product development and speed to market to less than six months, SBG has realized millions of dollars in additional product revenue.
"Those sales would have been a lost opportunity under our old operating environment. Getting to market faster has also strengthened our competitive position and enables us to leverage first-mover advantage," Keith notes.
Speed to market
In January 2001, Security Benefit's IT department was asked to create a new unbundled annuity product for the registered investment advisor market.
The product has 38 investment options, featuring support for sector rotation and asset allocation and complete contract design flexibility. In the first eight months, product sales exceeded $70 million. "We did that one in seven weeks," Keith notes. "No coding was required. Our business analysts worked with the product development group and customer service group to get everything established. It didn't cost us anywhere near what it would have cost in our former IT environment."
Security Benefit's annuity business grew at a 40% clip in 2002 and the company now processes 250,000 contracts annually, up from 160,000-all with lower headcount.
"We didn't make new releases in the past," quips Keith. "We were just constantly making changes." Overall, NaviSys has touched 12 products-either introducing new products or enhancing existing products in the two-year period ending in January 2003.
"Overall, we have been able to triple our variable annuity product release due to NaviSys," says Keith.
"Today we no longer say to our marketing group that we can't meet those product introduction dates . . . or the system isn't capable of producing them . . . or it will cost too much," he says.
Brian S. Moskal is a business and financial writer based in Chicago.
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access