Digital technology deployment by life and health insurers in Canada spans a multi-decade horizon.
Why? Because, quite often, this deployment must factor in insurance contracts sold 75 years ago. What’s more, because some of the guarantees in life insurers’ contracts will not be fulfilled for another 75 years, the industry must develop a digital strategy that covers a staggering 150 years.
So concludes a study by research firm Celent, commissioned by software producer Equisoft. To investigate digital tech over time, Celent conducted various case studies with insurers.
The study found that today, insurers are grappling with a motley assortment of IT systems. Some date back to the 1980s, and were intended to replace their predecessors acquired in the 1960s, while a handful of more recent modules were integrated in the 1990s or 2000s.
Focusing on the customer experience
How do industry players navigate through it all? The Insurance Portal discussed this issue with Equisoft executives François Levasseur, Grace Ata and Bruno Leduc respectively Vice-President, Alliances and Acquisitions, Vice-President, Account Management, and Senior Director, Insurance Carrier Solutions.
Will this tech disorder hinder life insurers? Only time will tell, the executives replied. Yet they all agree that insurers should seriously consider investing in the customer experience offered by their distribution networks, especially by financial advisors.
Ata points out that insurers are very good at developing electronic applications for advisors. She adds, though, that insurers now need to think about integrating these tools with other solutions, to promote their use.
Another problem then arises: electronic applications are often just copies of paper applications. “Insurers need to start thinking about the buying experience they offer, a bit like the Amazon model. There is growing awareness of this issue, but insurance is a more complex ecosystem than it seems. Especially when you look at it from the customer's perspective,” says Leduc.
Stop thinking in silos
Life insurers have a bad habit of thinking in silos, Ata continues. Sometimes even within the same company, Leduc adds. “They develop a solution for their own use, sometimes investing millions of dollars in it, thinking people will go to their website. But they don't have the vision to integrate it with other systems. That's the number one problem,” Ata explains.
All the same, the industry is capable of innovation, Levasseur notes. Ata gives the example of auto dealerships, with whom life insurers have developed effective integrated solutions.
“Insurers are adapting,” Levasseur says. “The COVID-19 pandemic is fuelling this shift. The way people buy the product is changing. The industry is increasingly delivering personalized service. The report we commissioned from Celent demonstrates how important it is for insurers to be agile and innovative. However, insurers are concerned about losing the people who know their current platforms well. Their distributors are facing the same issues.”
What about financial advisors?
Levasseur says that financial advisors are asking the same questions as insurers regarding their digital shift. He points out that advisors tend to select an insurer based on technology.
“In the past, advisors focused more on the service component. Advisors who have changed distributors told me that they have moved because technology hasn't kept up, in terms of e-signatures, portals, etc. They also want access to their data. They don't want to be stuck in a prison. They want to manage their stuff themselves. Then they'll add other elements, like an online conferencing module, depending on their appetite for innovation,” says Levasseur.
However, a shift of this magnitude cannot be planned overnight, Ata says. Case processing has to be quick. You can have all the technology in the world, but you still have to provide an extraordinary customer experience, she explains.
MGAs will be affected too, Levasseur adds. “They have always acted as the link between insurers and advisors. If they cannot serve as the conduit to facilitate the life insurance transaction, what will their role be? MGAs will remain communities for advisors, but without that, their value will be diminished,” he says.
That's why it's important for MGAs to become more efficient, to keep their operating costs in check, Levasseur continues. He already sees fintechs becoming MGAs.
“These firms are 100% digital. Insurers will want to work with innovative firms, while advisors will want to work with top-tier firms that can manage policies at a glance. Just look at mutual funds, where the firm that doesn't offer that is in rough waters. MGAs who aren’t technologically equipped five years from now could be in big trouble,” he says.
Levasseur adds that changes are occurring at an exponential rate. “Insurers are open to sharing tons of buying experience with their network. Given the current pace of acceleration, what took us 15 years to achieve will now be done in two or three years,” he says.
All the same, Levasseur is confident that life insurers will succeed at implementing the digital shift. He gives the example of iA Financial Group, which wants to expand on the U.S. market. “It's more difficult for smaller distributors. They are slower and have fewer resources.
Practice automation: A long, drawn out process
Financial advisors are facing another challenge: process automation. “It's a war we've been fighting for a long time,” says Levasseur. “Advisors need a foundation. By automating their processes, they gain access to quality data in a centralized location. Once they have that data, they need tools, which the MGA will provide. Also, this automation lets advisors integrate all their compliance, which is a major advantage.”
The automation of firms affects more than advisors. Grace Ata adds that insurers often tend to pay more attention to their front office tools, but their back-office tools expand their options for attracting advisors. By integrating their back office well, they can integrate other things. It's a turning point. The pandemic has accelerated it. Advisors realize this, and MGAs are feeling the pressure to meet their demand, she says.
