Why L&A Insurers Are Now the Smartest

Life and annuity insurers have long been thought of as significantly behind P&C insurers in terms of technology. No longer.

In many quarters, the above title could be fighting words! Because I can’t even watch an Olympic boxing match, much less an all-out fight, let me explain. For as long as I have been in the insurance industry, life and annuity insurers have been thought of as being significantly behind P&C insurers in terms of technology adoption and innovation. L&A insurers hung on to “build, not buy” strategies long after P&C insurers were advancing “buy” strategies. Technology providers with potentially cross-segment capabilities frequently did not even have a road map for selling to L&A insurers because, in their view, the front door was nailed shut! When STP (straight-through processing) started to become table stakes in personal lines operations, many life insurers seemed to feel that STP was simply a good motor oil. Every application for life insurance needed manual review. Let me enthusiastically state that those days are gone. L&A has most certainly caught up – and sometimes surpassed P&C – on many fronts. One of the measures of being “smart” is learning from prior mistakes. L&A insurers have had opportunities to learn, and not necessarily from their own mistakes. They have learned from P&C insurer mistakes, as well. See also: How to Insure the Gig Economy   SMA recently issued two research documents based on L&A insurer surveys: Many exciting insights are revealed through the survey data. Not the least of which is that, in 2018, 43% of L&A insurers indicate they are transforming. Eight short years ago, only 13% indicated this to be the case. While this blog cannot hope to recap all the findings contained in the two SMA research papers, what did jump out quickly was the differences between how L&A has approached some things versus P&C – lessons learned:
  • Digital isn’t all about fancy front ends and apps. When it became apparent that insurers needed to respond to the reality of a digital world, many P&C insurers ran headlong into introducing apps – most usually first notice of loss (FNOL) apps. Click to pay with a credit card on websites was another common feature. More examples could be cited. But to cut to the chase, the problem was that these digital capabilities stopped right at corporate walls, dropping into legacy technology and manual processes. They ceased to be digital. P&C insurers learned the hard way – through disconnected customer experience – that core modernization was necessary! L&A insurers have seemingly learned that lesson, with 55% having policy admin projects in 2018 – the No. 1 project overall.
  • Love the hand that feeds you. The mantra across most all insurer segments, and strongly for P&C insurers, is customer experience. “We Love Our Customers” T-shirts are on every desk. This is absolutely critical, but for many P&C insurers this focus went to the exclusion of distributors. Agent and broker technology fell to the bottom of the top priority lists at many insurers. Given that agents and brokers have not disappeared, and, in fact, are critical as advisers for many consumers, this created a gap. L&A insurers do want to show some “love” to the distributors who play a critical role in customer acquisition and service. 55% of L&A insurers are executing distributor portal projects for both sales/submissions and service.
  • It’s not all about BI. SMA research shows a historical trend among P&C insurers to invest in BI technology. In fact, in relation to other components of data and analytics such as dashboards, data and text mining and predictive analytics, 71% of P&C insurers indicate they are advanced users of BI tools. This is certainly good, but for many years P&C insurers have invested in BI and have not invested to the same degree – or at all – in other capabilities, which stalls advanced execution in this area. L&A insurers are investing in BI, as well, but, in 2018, 22% are investing in behavioral analytics, big data and AI. Getting into the game in these advanced areas is imperative, and L&A insurers understand that.
And there is one lesson that L&A insurers have learned from themselves:
  • Building it yourself is a long and painful road. Over time, L&A insurers have attempted to tweak internally developed technology to step up to new market requirements. Given the rapidly shifting technology landscape, most insurers are not positioned to keep up, both from an IT capacity perspective and in terms of general skills levels. When it comes to emerging technology, 43% of L&A insurers are partnering with others that have emerging technology solutions. Only 29% continue to leverage their own capabilities.
See also: 3 Ways to Keep Training Fresh   Many exciting things are happening at L&A insurers in 2018. Both of the SMA research reports, which can be found here and here, provide insight into strategic initiatives and projects. Clearly, there are opportunity areas that are challenges, but there is little evidence that L&A insurers are content to support the status quo. Smart L&A insurers are looking over the fence to see what they can learn from P&C insurers. Over time, the opposite may be the trend!

Karen Pauli

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Karen Pauli

Karen Pauli is a former principal at SMA. She has comprehensive knowledge about how technology can drive improved results, innovation and transformation. She has worked with insurers and technology providers to reimagine processes and procedures to change business outcomes and support evolving business models.


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