I had the opportunity to lead a Special Interest Group discussion with life insurance carriers at Novarica’s 11th annual Insurance Technology Research Council meeting, and the conversation highlighted some of the biggest challenges and opportunities stemming from outside entrants, systems modernization, regulation, and cybersecurity.
InsureTech and Emerging Technology
Disruption from outside entrants has made its way over to the life industry, and insurers are facing a changing landscape. That being said, it’s important to distinguish between truly disruptive technologies and solutions that only offer short-term relief. As one IT leader noted, strategies for engaging with InsureTech and emerging technologies are often a matter of “what you say no to.” Attendees generally agreed that robotic process automation (RPA) is one such technology that merits careful scrutiny: while there are valuable use cases, it can also be a convenient excuse to avoid investing in more effective systems integration. Conversely, digital distribution looms ever nearer on the horizon, and carriers may look to partner with InsureTech startups that can offer direct-to-consumer capabilities.
Legacy Systems Strategy
The decision to replace and consolidate legacy systems has been a perennial thorn in the side of life insurers. For many, converting to a new system involves tradeoffs: can modern vendors scale to accommodate the quantity of policies that many large insurers need? If a legacy environment is running soundly, is a full rip-and-replace the right strategy when resources might be better spent on product and business model innovation? Many insurers have responded to legacy issues by wrapping systems with modern user interfaces or running platforms in the cloud to enhance speed and security. Even so, most legacy environments are nearing the end of their usable shelf lives. As one attendee noted, “we’ve reached the wall, and legacy platforms simply won’t do.”
Security Planning
Cybersecurity regulation is only going to increase, and carriers are finding themselves on the defensive rather than proactively getting ahead of risk. Insurers in the room generally agreed that the best way to keep stride with compliance is to align with a standard framework such as NIST or ISO 27001. Although NIST is the newer framework, it’s gaining traction: it clearly outlines parameters for success and failure, and it’s the basis for the New York State Cybersecurity Regulation and the NAIC Model Law. Regardless of approach, the threat of data breaches looms nearer, and insurers are working to engage their boards and senior leaders to define metrics and enhance maturity in dealing with cyber risk.
In addition to these three themes, we discussed other topics ranging from analytics to IT organizational management. For more on issues and trends facing individual life insurers, see our latest report on Business and Technology Trends in Life Insurance, or contact us at [email protected] to learn more about our research and advisory services for life insurers.
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