Filed Under:Annuities, Variable

7 technology priorities for the individual annuities market

Individual annuity insurers are aiming to increase efficiency and facilitate compliance with technology innovations, according to a Novarica study.
Individual annuity insurers are aiming to increase efficiency and facilitate compliance with technology innovations, according to a Novarica study.

Technology is playing an increasingly important role in insurers’ ability to attract, retain and profitably serve clients, especially in the highly competitive individual annuity market.

New research from Boston-based Novarica found that individual annuity carriers are focusing on modernization of policy administration systems as well as improving agent portal functionality, business intelligence and risk management operations.

“With interest rates remaining low and competition for both clients and producers (including agents) high, carriers continue to look for both ways to improve their cost profiles while concurrently creating competitive advantage through enhancements to products and services,” Novarica wrote in its report.

Carriers have already focused on application functionality, especially if they work with third-party distributors. Priorities for individual annuity insurers are likely to include:

  • Straight-through processing.
  • Improvements to producer self-service functionality in agent portals.
  • More-sophisticated actuarial software.
  • Better operational tools to service new business, contract maintenance and call center functions, and analytics and sales reporting tools.
  • Social media marketing adoption.
  • Risk management tools with a focus on internal controls.

The Labor Department fiduciary rule could affect technology adoption when it comes to individual annuities, Novarica predicted.

“This product will face important changes in the future as both distributors and manufacturers adjust to a new compliance environment,” Novarica wrote. “It is highly likely that the 2016-17 period will see shifts in product features, compensation elements, and the tools required to continue to expand self-service capabilities while also simplifying the solutions to conform to the evolving retirement solution landscape.”

Following are seven business and technology systems that are evolving within the individual annuities market:

1. Front-end systems

Within this category are agent portals, customer portals and distribution management.

Priorities for agent portals will focus on improving efficiency and effectiveness through processing, electronic front-order entry, improvements in inbound paperwork quality, proactive electronic notification for agents, and managing regulatory and compliance issues.

Customer portals have advanced to include online payment, policy changes, allocation and transfer of funds, withdrawals and contract loans. Priorities within customer portals will center on increasing self-service capabilities for advanced inquiries and account changes, and preventing alienation of independent distribution channels and agents concerned about disintermediation.

Distribution management includes systems that support compliance, commissions and managing communications between distributors and insurance companies. Priorities will include managing producer data and integration with third-party credentialing services to ensure compliance, flexible commission structures, some degree of producer self-service functionality and contract management software upgrades.

2. Core systems

Within this category are rating/underwriting/policy administration systems, billing, claims and payout systems and reinsurance management. Ongoing billing is not a significant focus for individual annuity writers as most offer single-premium products.

Rating/underwriting/policy administration systems are a top area of investment for individual annuity insurance carriers as legacy systems are unable to support rapid product development and top producers are unwilling to deal with the challenges of legacy solutions. Other priorities will include improving efficiency of internal workflows, and speed to market of products, benefits and riders.

Claims and payout systems are important because they must be able to follow complicated product rules and track actual and protected account values. These systems also must ensure payments take place in a manner compliant with regulatory issues. Priorities will include management of business rules through the payout system itself or by interfacing with the administrative platform, developing the ability to make lump sum or periodic payments, and allowing individual investments to remain in the market while receiving living benefit payments.

Reinsurance management is a relatively new development. Hedging strategies are a major focus within reinsurance management. Priorities will include buildout of a hedging strategy and technology infrastructure that facilitates hedging decisions, and a focus on pricing, reserves, capital management and statutory reporting.

3. Financials

This is a stable area for most carriers, according to Novarica.

Priorities here are maintenance update and occasional system replacement.

4. Documents

Annuity processing requires a large volume of documents, including contracts, confirmations, statements and other correspondence. Carriers are focusing on developing business printing leadership and enterprise-level IT expertise to address this area, Novarica wrote. Priorities are likely to include workflow and imaging, digitization of statements, online accessibility for agents and consumers, support for mass customization, and flexibility in designing and customizing documents.

In terms of document management systems, priorities will include being able to store and manage multiple media types, integrating with core business systems and portals, capturing unstructured data to feed reporting tools, and ease of administration.

5. Business intelligence

This is been a slow area of adoption for insurance carriers, although interest is accelerating within the past year.

Priorities in this area will include the ability to gather, store and retrieve data elements to analyze; recognizing overall sales, geographic and demographic trends; and monitoring the agent force to determine appropriate incentives.

6. Customer relationship management

These systems allow carriers to interact with policyholders, prospects and the sales force. Technology in this area is typically focused on facilitating marketing and customer service functions.

Priorities will include managing and tracking interactions with wholesalers and the sales force through internal sales desks, integrating historical sales data and commissions to analyze sales force performance, the ability to initiate and manage marketing campaigns, and the ability to perform territory management activities.

7. Workflow and specialized components

Individual annuity insurers tend to use specialized components in the areas of illustrations and mobile access to customers and sales information.

Priorities in this area will include straight-through processing, illustrations, actuarial, sales force mobile access and other mobility features, and social media.

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Nichole Morford

Nichole Morford
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