Who has the best life insurance new business and underwriting system?

Who has the best life insurance new business and underwriting system?

Celent has published a new report, North American LHA New Business and Underwriting Systems: 2016 ABCD Vendor View, in which Celent profiles fourteen providers of new business and underwriting systems. Each vendor responded to a request for information. Seven vendors met the criteria for inclusion as a potential Xcelent winner. The seven vendors eligible for the awards provided a demonstration and briefing of their billing solution.

Due to the ongoing economic conditions that continue to have an adverse impact on life insurance application volumes, insurers have strong interest in reducing the cost of acquisition, processing and issuing life insurance applications. Automating the new business and underwriting functions are critical components in reaching a level of straight-through processing (STP) for new business. Insurers hope that these systems will help reduce unit costs and improve margins. Celent believes that these initiatives are necessary to help the insurers address growth, service, and distribution mandates, in addition to reducing the cost per policy issued.

After years of development that started almost 30 years ago, automated underwriting systems have become highly flexible in allowing insurers to define and configure underwriting rules and workflow. Most systems include or integrate into eApplications. Data from the applications drive reflexive questioning and identify risk classes associated with application data. They offer high levels of automation when gathering third party medical requirements and flag risks when the third party data results are outside of the ranges set by the rules. They also can deliver decisions to the point of data entry or to an underwriter.

New business image

The interest in new business and underwriting systems is on the upswing. Deciding the best new business and underwriting system is unique to each insurer. The goal of the report is to provide detailed information so that an insurer will be able to make an informed decision on which systems may be the best for them.

Three things to consider when choosing your vendor partner

Three things to consider when choosing your vendor partner
Choosing a vendor can make your head spin. There are so many things to consider. I know I have been tempted to create a dartboard and throw a dart to make the final decision. After hearing multiple presentations, most with similar pitches, the result can be “vendor soup.” So how do you decide? There are three things that I consider when making a decision that have nothing to do with the system itself. It is important to keep in mind that each insurer is unique, and there is no single answer that is right for all. The goal is to find a partner who is a good match for you.
  1. Delivery Approach
Aligning on how the deliverables will be carried out is critical. Project success depends on having everyone on the same page. Some questions to consider are:
  • What is the project methodology?
  • What is the development methodology?
  • Do you want the vendor on-site during the entire project?
  • How involved do you want the vendor to be with requirements and user testing?
  • How involved do you want to be with construction and unit testing?
  • Will the delivery schedule match your in-house schedule – not too short or too long?
  • How often does the vendor provide fixes?
  • How will the vendor work with your current vendors and/or outsourcers?
  • What is the vendor’s experience providing system deliverables along with the existing business priority deliverables?
  1. Culture
Projects that appear headed for success can take a nose dive because of a mismatch between insurer’s expectations and what is possible based on the vendor’s culture. Culture cannot be changed in the short term so it is essential to ensure a good match. Questions to ask:
  • What is the experience in the domain?
  • Are you more comfortable with a mid-size or large vendor?
  • Will the project team be dedicated to your project?
  • What is the profile of the staff who will be assigned to the project team? How deep is the bench?
  • What percentage is on-shore vs off-shore?
  • Will the project require 24×7 support to meet deadlines?
  • Who will be the main contact? How many domain experts are available?
  • What is the turn-over rate for developers, project managers, business analysts and business architects and is there a good mix of each of the skill sets?
  • What is the organizational structure?
  • What is the governance structure? How are issues escalated and resolved?
  • Are the vendor’s values and behaviours a match for your company?
  1. Industry Experience
Everyone enjoys a good marketing story. However, to run a successful project, it is a necessary to understand the vendor’s actual experience. The following questions will provide a good assessment:
  • How long has the vendor been selling systems? How many similar sales has the vendor made?
  • Does the vendor have the capacity to run multipe projects simultaneously? Can the vendor provide successful references?
  • Does the vendor use system integrators?
  • Do the estimated time frames match the actual time frames for the implemented projects?
  • Do the projects expected benefits match the actual benefits?
  • Is there an active user group?
  • What is the vendor’s financial strength?
  • Will the vendor provide thought leadership and best practices from actual experiences?
  • Is there a five year roadmap? Is the roadmap innovative or does it reflect the addition of common features or functions?
There are no guarantees that the decision will be the right one. However, having a set of vendor specific questions and expectations will assist in highlighting the best choice for your company. One of the keys to program success is to choose the vendor understanding that delivery approach, culture, and industry experience are as critical as the features and functions of the system.

Same old, same old – which vendor did I just see?

Same old, same old – which vendor did I just see?
As part of my role as an industry analyst, I attend a number of vendor sponsored analyst meetings. Some are vendors entirely focused on the Financial Services space, but most are larger vendors with a much broader perspective. The meetings are interesting, as we hear from their leadership team about their perspective on both modern technology needs as well as what their company is doing to meet those needs. What surprises me, and perhaps it should not, is how the presentations are so generic and common. We see the same buzzwords: Cloud! Digital! Mobile! Innovation! Yes, usually with the exclamation points. I honestly believe you could change the logo from one vendor to another and their CEO could happily and easily give the presentation. Worse, at a recent conference, three different executives gave essentially the same presentation but with different slides. At least they agreed. The vendors do differ, however, on their approach to these meetings. I have a new theory on how to rate these vendors, which is based in humor, but I often wonder if it could be validated with data. 1) Let me talk to your customers The majority of the vendors hold their analyst days completely separate from the customer meetings. Usually they are back-to-back, so the customers are nearby, but they don’t let us talk to them. My scoring system would rate a vendor higher based on their willingness to let us mingle in a completely uncontrolled manner with their customer base. An example could be:
  1. Analysts attend the customer meeting and are given total access to the customers
  2. Analysts attend part of the customer meeting and are scheduled with select customers in a controlled manner
  3. Analysts attend a separate meeting, but are given one-on-one access to company leadership
  4. Analysts attend a separate meeting, attend lectures on how great they are and go home
One vendor gets the highest rating because they combined 1 and 2. We were in shared sessions, shared meals and shared entertainment plus they scheduled one-on-one meetings to discuss projects interesting to my specific speciality. 2) How well do you organize a meeting? If you claim to be the company that should come in and revolutionize my company, you ought to be able to manage a decent meeting. The best meetings are well-organized with personalized agendas that focus on the analyst’s speciality and with one-on-one meetings with the right people. The worst meeting I recently attended started off poorly when they didn’t have a name badge for me and cancelled my hotel room. I certainly didn’t feel loved. Worse, they never did get me a badge or an agenda, so I suspect I missed many one-on-one meetings. Since that was the last session of the day, I did the only thing I knew to do. I went home. One vendor put the analysts front and center, at tables, and each spot had both power and a wired internet connection. Outstanding. 3) What are your production values and who are your presenters? Again, if you want to transform my company, you should be able to do an amazing job in your pitch. You should at least upgrade to purchased photos from clipart. I am amazed at the number of presentations that look like they were prepared on the plane ride to the meeting. Some don’t even have the company’s logo. Oh, and don’t forget, I’ll recognize the templates that come with Microsoft Office. Perhaps even coordinate the presentations to ensure they are not all the same, or worse contradictory. At the other end of the spectrum are the professionally prepared presentations, clearly not done in Powerpoint, that include appropriate use of videos, etc. The vendor mentioned above again wins this prize as their materials were outstanding. They also understood that they needed to be both informative and entertaining to keep our interest. The corollary to production values is the concept of who is presenting. At a recent meeting, I heard from a range of company execs but noticed one thing was missing. Not a single customer presented. At the other end, virtually all the presentations were customers, sharing their unique, positive experiences with their customers. I suspect you get the point by now. Hopefully any vendors reading our blog will too. To the vendors: Feel free to call me to discuss! (exclamation point mine). If you’ve read this far, you’re probably wondering what this has to do with financial services or research. Well, nothing, but now you know a little more of the pain that we go through for your benefit.  

Looking past the functional arms race

Looking past the functional arms race

In our recent work in Latin America, it is clear that in the process of selecting core systems for countries such as Argentina, Brazil, Chile, Colombia, Mexico and Peru, Insurers have been more focused on delivery and support capabilities than in the product.

All vendors claim quick time to market, low TCO, quick ROI, strong product configuration capabilities and more. And when dealing with the top vendors, there is little material difference in features and functionality. Although functional requirements account for most of the items in a RFP the weight of non-functional requirements including delivery and support capabilities has matched and even surpassed the first. This is an approach that we have been advocating in other regions.

Functionality is now an arms race. Insurers, even in emerging regions like Latin America, must invest more in evaluating service and delivery capabilities.

With a plethora of new vendors in the region offering solid solutions proven elsewhere in the world, regional insurer have three important questions that vendors need to address:

1 . “Will the vendor have the capabilities to deliver and support the product in this region? “

2. “What will I need to change (people, process) in order to take advantage of these new highly configurable systems that promise to put everything, well almost everything, in hands of the business users?”

3. “How do I really validate that the product will support our lines of business, the products we sell and the channels and processes we want to have in place to better serve our distribution channels and customers?”

In response to these questions, there are several interesting points to make.

It is clear that vendors in the region bring a wide range of different business models. Insurers in most Latin American countries have been used for decades to have local/regional support from vendors which acts as a high entry barrier for new participants. While some of the new players have decided to work through system integrators or implementation partners, they still need to demonstrate how successful those relationships can be to deliver in the short term and to supersede in the long term. Insurers are looking for credible relationships (between vendors and partners) and processes in place in advance for knowledge transfer. Domain expertise, sufficient trained staff and delivery capabilities in similar projects are key aspects they will consider when evaluating the local/regional partner. Finally, how involved is the vendor going to be in the implementation process is also under consideration. Vendors who are amongst the first to prove some track record in the region will be the vendors who succeed in the future.

When it comes to validating the product against the insurer business model, Celent points insurers to the process of the RFP. There are smart ways of validating and engaging with vendors early in the review process to strike a balance between what the solution is capable of and the organizations willingness to change its business model. This new approach focuses more on system review in early stages of the process and making stakeholders and users engage in the quest of understanding what is possible and the transformation required within the organization since start.

This focus on service delivery and business transformation over functional requirements is the new reality in Latin America and one that Celent will continue to support.