The much-feared UK emergency budget speech was made yesterday, and amongst a raft of changes impacting every corner of the British society was an increase in the tax on insurance purchases. The rate is to increase to 6%.
A new peculiarity to this system is that tax on insurance sales will rise to 17.5% where the insurance is sold by seller of another product, e.g. mechanical breakdown insurance (on domestic electrical appliances and secondhand cars), travel insurance, and insurance sold with TV and car hire.
The challenge for the IT department is to respond in a timely fashion. Older legacy systems will have charges codified in several places, and reflecting this increase is not a simple matter. And once the change is made in several systems and many other places, a round of testing is required. This whole cycle of change can last up to nine months, depending on current workload and dedicated IT test slots.
In a conversation with a CIO on a different set of regulations, Solvency II, she raised the prospect of potentially having to replace incumbent legacy systems if the company could not capture the additional data elements required at a reasonable cost. Adding new data elements to a core system, and having this reflected in the appropriate screens is no trivial matter. And, once again, requires serious investment of IT staff for testing for production.
These real-life use cases highlight the need for IT systems to be able to keep up with the change of the business without crippling costs. In choosing new systems, IT folk must focus as much on functionality as on the cost of ownership. As this week has shown once more, fleet of foot should be a key mantra in new system investment.
This blog has been reprinted with permission from Celent.
Catherine Stagg-Macey is a senior analyst in Celent's insurance practice, and can be reached at email@example.com.
Readers are encouraged to respond to Catherine using the “Add Your Comments” box below.
The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.
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