On March 1, Novarica hosted our most recent special interest group meeting for insurance technology senior leaders focused on specific lines of business. The sessions, which provide an opportunity to share recent targeted research, also create an environment for significant networking between carriers, many of which are dealing with strikingly similar issues as they look to address both business and technology issues in very competitive environments. This week’s session was focused on COLI / BOLI, a niche space that is the domain of a small number of carriers offering highly specialized services which support the use of life insurance as an investment vehicle for funding specific types of benefits programs.
Complex Product Requiring “White Glove” Service
As became clear immediately in our discussions, these are complex vehicles that can generate notable top line premium volume, coming from a group of specialized and highly demanding producers. There is a notable amount of plan customization, generally with the degree of customization being highly correlated with the size of the individual cases. A number of the participating carriers noted that this is a “white glove” business that is characterized as a concierge oriented set of programs and business processes where relationships between the carrier and producer communities (as well as servicing TPA’s) are particularly critical for success.
Legacy Systems and Lack of Customer Intimacy Impeding Speed to Market
We also previewed an upcoming report which will be published in May through our Research Partners Program. From a technology platform perspective, this research highlighted the age of core systems (average PAS platform: 19 years old with a number now at 30+), which is creating both flexibility and speed to market issues.
While the number of truly new products in this space is sharply lower than it might be for consumer products lines such as personal lines P&C, these carriers face a truly interesting challenge. Since they have little or no direct interaction with plan sponsors, they take their market research queues from top selling producers and TPA’s. That makes modern analytics of generally limited value on the marketing and product development fronts and requires that product development investment decisions be based on relationships and “market feel.” With inherent inflexibility in systems, the recovery time for reading a market wrong can be substantially elongated.
Different Needs to Support Today’s Channel and Attract Tomorrow’s
With producers in this space also aging (note the average agent is now 59+) carriers face an interesting challenge. The self-service/digitally-enabled capabilities that may be of limited value to top producers today could quickly become table-stakes for attracting and retaining production capacity in the future. Our discussions generally confirmed the research which said that this is an important near term planning consideration for carriers looking to maintain or extend their position in this space. One of the key items that came from these discussions was the need to start to truly think bi-modally with respect to distributor support. In other words, continuing to cater to the needs of top producing (and more mature) agents may be an important near-term tactical mandate, finding ways to also engage younger and more digitally savvy producers who expect easy information access and mobility as the basis for considering the placement of business with a carrier may become a critical strategic capability in a surprisingly short timeframe. Some notable examples are now emerging of life carriers starting to mimic the experience of banking IT organizations which have them developing “mobile applications first.”
Security Even MORE Important Given Customer Profile
Another area of considerable concern for carriers is security. While security is generally a “hot topic” for carriers across all lines of business, and other research done by Novarica has highlighted this blossoming as a Board level consideration, the issue is magnified in this space. Particularly in the case of BOLI, with banks as customers, the security gauntlet is elevated given that banks are both particularly tuned into risks (given the nature and frequency of their transactions) as well as the oversight of their own industry regulators. These security concern elements lead to a direct impact on carriers looking to support BOLI business for these institutions.
This led to another fascinating discussion about handling suppliers that carriers may use for key functionality who do not, themselves, pass the security tests required by BOLI plan sponsors. We explore a range of remediation options that may exist for carriers concerned about both viability and liability.
More Special Interest Group Discussions at Novarica Council Annual Meeting
These sessions provide for a terrific exchange of information, both in terms of new research, and practical experiences as shared directly by carriers. We plan additional Special Interest Group sessions in the near future, with our Annual Research Council Meeting in Providence, RI on April 20-21 providing an opportunity for us to explore Individual Life, Group Life, Annuities, Workers Compensation, Personal Lines P&C and Commercial Lines P&C in more detail. In addition, we are planning a stand-alone session focused on Disability Insurance products that will be scheduled in Q3-2016.
In many ways, 2015 was the year that the future arrived. For carriers, 2016 is the beginning of what carriers need to do in order to respond effectively to a brave, new, transparent world.