“Improving customer experience is the number one driver for everything
these days—I mean everything,” says Karen Pauli, TowerGroup research director,
calling it an “amazing shift” away last year’s primary catalyst for system upgrades
when “it was all about expenses.” Expense reduction remains important, she says,
but has been trumped by customer experience.
The focus on policy admin and the customer experience, Pauli notes, stems from
carriers’ acute awareness that people will hire a company that’s easy to do business
with. Additionally, agents’ newfound clout—gained through consolidation in the
distribution channels and technology that enables agents to easily move a whole
book of business—motivates carriers to be more responsive than ever. She asserts
that the trend has become established in personal lines and now is making its way
into commercial lines of business.
“Improving the customer experience is a very powerful driver of change because
in the increased competitive market we’re facing, outperforming on service is
a good lever for companies to pull—not the only lever, but a very good one,”
observes Craig Weber, Celent senior vice president.
better technology
Pauli and Weber both agree that vendors now can better deliver the technology
carriers need.
“The packaged systems and the tool-sets even beyond the pure packages into
the broader services that IT service vendors bring, like the core systems projects,
are pretty different today from what they were even two or three years ago,” says
Weber. He urges carriers to take a refreshed look because it’s likely that even the
hard-dollar business case is different.
He cites as improvements the amount of functionality in packaged systems
and improvement in core technology, such as the languages they’re written in, the
databases they support, integration and testing.
Pauli cautions carriers: “You can’t get lost in the snappy technology.” She advises
them to understand a vendor’s track record. Questions to ask:
• Is your technology installed in a carrier?
• Is it functional in a carrier?
• What are the metrics that have come out of those installations?
Weber also advises carriers to “pay close attention to what other customers of
a vendor have experienced.”
He also notes that integration issues typically are a huge part of these projects’
cost. “The ability of a new system—whether it’s a custom-built system or a
package system—to be integrated back into other systems either upstream or
downstream of the core system is hugely important.”
Weber notes that historically there was a disconnect between the kinds of
improvements that would be meaningful to carriers and the tools and packaged
solutions available to address those needs. “One reason the tide is shifting is the
solution quality and the tool set quality are much higher today.”
He says that the vendors heard the objections to core systems change and have
been able to address those. From the carriers’ point of view, a lot of work has been
going on developing integration tools and techniques, high-cost items that the
carriers had to address anyway.
“The good news is that investment in integration is finally paying off and can
now be leveraged in these major system efforts,” Weber explains.
non-technical considerations
Weber says that people who have been paying attention have noticed
that it’s not all about the technology. “The most important thing probably is
to not underestimate the culture change that core system change requires,” he
advises. “If you want to get the benefit of changing your core system, you’ll need
to look at your process and improve that before or while you’re making core
system change.”
That requires people to think and act differently. It’s also changing the
mindset of the company to do things differently to deliver product faster and
leverage new capabilities.
“It’s hard to get organizations to think differently about themselves and the
services they provide,” Weber says. “But if you don’t do that, you’re not getting
the value for the large investment you’ve made.”
collaboration
Pauli identifies a mistake carriers continually make with core systems upgrades:
business-side people fail to get involved in choosing a vendor. She says it sounds
obvious but, “If you can’t get close collaboration between what the IT people
know is possible and what the business-side people need, you never push the
envelope far enough.”
Too often, she says, they think they’re collaborating but the business-side is
merely restating what they’ve got today, and the IT people accept that as the
business specs instead of sharing their knowledge of where the technology can
take them.
“When you’re looking for policy administration, you need to have a full vision
of where you want your business to go,” she says. “The policy administration
system needs to be a critical part of overall business-development strategy.”
That requires executive involvement, according to Pauli, who says that too
often policy administration is seen as functional. Instead it should be viewed
strategically along with underwriting, claims administration, and billing.
immense effort
The insurance industry has a poor record of delivering major systems on time
and on budget, though that’s changing, says Weber. He notes that most carriers
are trying to move projects to productivity faster.
“Companies are deciding to pursue their goal a little more aggressively and
lower the risks of non-delivery,” he says. “That seems to be a major shift over the
last few years. There’s this realization that core systems change is very difficult. It
requires an immense effort. You have to throw your best people at the problem,
and probably more of them than you thought.”
Weber again stresses what carriers have neglected: “There’s always been
something of an arms race among vendors to bring the latest and greatest in
technology and functionality into the picture. But culture considerations—change
management, program management, creativity and other drivers of successful
core systems projects—have not gotten enough attention.” n
