Closed blocks closed minds

Few conversations with Life executives last too long before the conversation eventually turns to the topic of the vast back book of policies. Built up over decades, on the surface it is the gift that continues to give, a nice cash flow without too much servicing overhead. However, deeper investigation reveals several challenges and even risks.

From a system perspective, the heart of any insurer is the policy admin platform[1] (PAS). This stores all the client policies and enables an insurer to process those policies. It is not unusual for a life insurer to have policies older than 30-40 years. So, if the PAS that supports these policies dates to the same time and is running on technology that existed before the invention of mobile phones, then this presents the insurer with a few problems.

Trapped Data

The challenge though is it may reside on a 3-4 decade old storage device/ database technology making the data challenging / impossible to access. Additionally, outdated/deprecated programming languages and silo'ed architectures make it difficult to take advantage of the big data product/client insights this data might provide.

People

If an insurer has dated platforms, then experts in this technology are needed to maintain and support it. As many of the experts often hale from that generation as well, there are very few with numbers declining as they retire.

Growth

A way to achieve growth is through new product innovation and key to this is the product time to market. Technology enhancement is a critical part of any product innovation. Therefore, if few people know the technology and accessing and changing the code is fraught with problems, this could seriously impact the time to get a new product to market and hence to innovate.

Technical currency

Technology has advanced at an exponential pace, witness this through our smart phones[2]. If the PAS technology is dated to the previous century therefore, the insurer has a technology currency problem[3].

The implications of this are several, among them are:

-?????????Challenging to take advantage of modern technology such as cloud, big data insight tools

-?????????Slow to enhance, add new features or products

-?????????Components may not be readily available

-?????????There may be security vulnerabilities which are difficult to remediate

As we can see these represent some significant risks for insurers which call for speedy remediation.

One of the challenges though in a world of competing resources, is the temptation to postpone this work. It does not appear to be an immediate problem and, on the surface, it is easy to defer the decision to another generation of leaders.

However, kicking the can down the road simply exacerbates the issue: ?the book increases as new policies are added to it, experts in the legacy technology retire, the technology itself moves further out of vendor support and fast moving insurtechs reimagine products and get them to market much quicker. There is also of course ongoing risk of security vulnerabilities.

A closed mind is therefore not the solution.

So how do we solve for this? What are your thoughts ?

[1] https://www.gartner.com/reviews/market/life-ins-policy-admin-systems-north-america

[2] https://blog.adobe.com/en/publish/2022/11/08/fast-forward-comparing-1980s-supercomputer-to-modern-smartphone

[3] https://pwc.blogs.com/fsrr/2019/06/why-technology-currency-is-a-vital-component-of-an-operational-resilience-programme.html#:~:text=Technology%20currency%20is%20the%20ongoing,to%20the%20latest%20available%20version.

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