New York - European and Asian life insurers are outpacing their North American counterparts at streamlining and centralizing their policy administration systems--the core systems that support and deliver insurance products for their customers, according to a global survey of more than 100 insurance technology professionals, which was commissioned by Bermuda-based Accenture.
The survey revealed that 24% of North American respondents have consolidated their policy administration systems for traditional life insurance products, compared to 49% of European respondents and 33% of Asian respondents. Nearly two-thirds (64%) of North American respondents are discussing or implementing a strategy to consolidate their traditional life insurance policy administration systems.Globally, respondents that have consolidated their policy administration systems on average reported a 19% reduction in operating costs, a 25% reduction in IT costs and a 35% increase in the speed at which they are able to introduce new products to their customers.
"Our research indicates that the relatively high degree of systems consolidation among European insurers, if properly leveraged, could bring real strategic advantages as these insurers pursue new markets domestically and abroad," says Serge Callet, global managing director of Accenture's insurance practice. "Indeed, for any insurer facing the challenges of product diversification, service-quality improvement, and merger integration, having a streamlined and nimble policy administration system will be vital."
European respondents were three times as likely as North American respondents (30% versus 9%, respectively) to say their companies will, within two years, be part of a merger or acquisition--a major cause of system redundancies, according to the survey.
The survey also suggests that North American life insurers are operating a greater number of policy administration systems than insurers elsewhere. One-third (34%) of respondents in North America say their companies use 11 or more product platforms, compared with one-fifth (20%) of European respondents.
"The abundance of legacy systems among North American life insurers is perhaps their greatest roadblock to competitiveness and efficiency today," says Dave Hollander, managing director and head of Accenture's life insurance solutions. "In order to succeed, North American life insurers must simultaneously pursue growth and cost reduction by simplifying the policy administration process and reducing the number of systems in order to more quickly and efficiently deliver diverse and innovative insurance products to their customers."
The survey also revealed:
- 43% of respondents that have consolidated their policy administration systems used business process outsourcing (BPO) in the effort--most of them for both closed and open books policies.
- Respondents that used BPO in their consolidation efforts were 26% more likely to report high levels of satisfaction and 16% more likely to report cost-reduction benefits than those that did not use outsourcing.
- 75% of respondents in Asia-Pacific reported a significant proliferation of policy administration systems over the past five to seven years, compared to 40% in North America and 43% in Europe.
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