The Key of E

There usually is plenty of talk about electronic applications among life insurers, but in a recent survey of the life and annuity business, industry analysts found insurers are taking action, as well. "We're seeing them implemented with clients," says Steve Discher, senior vice president with Robert E. Nolan Co. "We have clients, in some cases, with 90 percent or more of their applications coming in electronically."

With that level of acceptance in e-applications, Discher asserts insurers can gain a number of efficiencies on the back end as well as improve service for their customers and agents. Providing service functions such as online status–where application, endorsement, or policy changes can be done–for agents and policyholders is much easier for carriers if the policies came to them through an electronic application.

The attraction of online applications for carriers also is found in the speed of processing that is accomplished, according to Discher. "If agents submit an application electronically, they can service both the customer as well as the agent without getting involved in other downstream Web technology," he says. "[Electronic applications] are reducing a significant amount of effort to process the applications from beginning to end."

At one time there was a big push in the industry toward electronic signatures, but that has slowed, notes Discher. "Insurers are going through transitional thoughts on whether they are going to have to follow up with paper, particularly when it comes to endorsements," he says. "The big thing that is changing business in the insurance industry is the e-application. That's where the big bang for the buck is."

The recent life/annuity survey conducted by Nolan, "Strategies for a Changing Industry," was weighted toward business executives, and Discher maintains their perspective on the quality of business process and technology support tends to be a little critical. Business respondents rated the quality of tech support average at best in areas of new business and underwriting, policy/member service, claims and disbursements, agent field support and management, premium billing and collections, financial reporting, and customer service.

IT respondents were gentler on themselves when it came to grades, but Discher points out despite giving low grades, the business side still is unwilling to commit to an increase in outsourcing. "One thing we noticed that is consistent with our P&C survey and our life survey is while [business leaders] complained about tech support and graded performance low, there is not much [BPO adoption] in outsourcing," says Discher. "That's fascinating because there is a lot of discussion about outsourcing in the industry, but when it comes down to what we're seeing in the survey and how it's applied, people aren't jumping on the offshore outsourcing bandwagon."

IT continues to be the proverbial whipping post for many on the business side, Discher contends, but when it comes down to doing something about it, those complaining aren't willing to offshore or outsource IT. "You see a lot of the traditional IT functions such as help desk, data center management, and those sorts of things [being outsourced], but we're not seeing extensive BPO relationships taking off," he says. "You see targeted silos of outsourcing, so it is being used," he comments. "But I think insurers have become savvy about where an outsourcer can bring value."

Such aversion to business process outsourcing, Discher surmises, goes back to the fact the industry is risk averse, but he doesn't believe value is being delivered by outsourcers. "When there has been full-bore outsourcing, just as the business side knocks its IT function, when the [business side] outsources and grades those outsourcers, the [business leaders] find things weren't so bad [internally]," he says.

One surprise from the Nolan survey for Discher is the interest expressed in consolidating commission systems. "Some of the most complex and costly systems to administer are your commission systems, simply because you get a lot of one-offs," he says. Discher indicates commission systems are easier to address than policy administration systems or core rating and issuance systems. "The commission systems often were a bolt-on technology, and where there are multiples of those, they are costly to administer," he remarks. "The stat [80 percent report they are likely or very likely to consolidate] is driven by the fact [commission systems] are easier to consolidate and multiple systems are complex and costly," he says.