Group Insurance Obstacles: The Origins and Effects of Fragmented Systems
As many of my friends and family know, there are two things I really love to do in my free time during the long days of summer. One is to go fishing, although as an animal lover, I do have a firm catch-and-release policy; my fishing activity is purely for fun and not dinner. My second and more frequent pastime is to curl up with a good book. It can be on most any subject, as long as it’s well-written and piques my interest. One of my more recent favorites was a sales book that emphasized connecting with customers by partnering with them to diagnose their specific problems, understand the root causes, and work with them to envision – and ultimately reach – a future state where the current problem(s) have been addressed and resolved.
This strategy made me consider how Vitech works with our group insurance clients to solve their technology transformation problems, and subsequently gave rise to our new blog series, “Group Insurance Obstacles.” The four-part series will examine group insurance companies’ collective issues and their origins, and how they can be solved for companies to achieve an optimal, transformed state. In this week’s segment, we examine how many insurers’ legacy systems and traditionally conservative cultures lead to a group benefits ecosystem rife with complex and antiquated technology. These often-outdated systems, coupled with their inability to seamlessly work with data from external sources, generally result in a domino effect of manual processes and reconciliations, extra work for staff, and ultimately, difficulty in adding or updating products to appeal to new customers.
The Legacy System Ecosystem
The group insurance “ecosystem” refers to the internal and external systems and data sources that a group benefits insurance company needs to access seamlessly to drive efficiency and a compelling experience for users – employers, employees, brokers, and internal employees. Every group benefits implementation involves a different combination of integrations with the external ecosystem (brokers/TPAs, enrollment vendors, human resource system vendors, payroll vendors) and different plan rules and data types for each employer client. This complexity has resulted in a witches’ brew of manual processes, data reconciliation requirements, and general inefficiency. Employer client onboarding, list bill reconciliations, and accessing plan rules for claims processing are important examples of manual processes that disrupt group insurance company operations.
It’s important to understand that a large, interconnected ecosystem by itself is not a bad thing, but in most group insurers’ case, legacy administration, billing, claims, and other systems were not engineered for easy data exchange and rules management and make it very difficult to support this increasingly complex market ecosystem.
Today’s API-first, configurable, cloud-native technology can circumvent these issues by greatly streamlining data exchange and overall rules management. This can greatly increase insurers’ efficiency, provide a better digital end-user experience, accelerate speed to market for new products and services, and provide the foundation for advanced analytics and reporting that can be used to continuously optimize the business.
Different Historical Priorities and A Change-Resistant Culture
The fact that so many insurers still depend on these legacy systems begs the question of why they continue to maintain them? Until the past five to 10 years, individual lines of business, the largest part of the life insurance industry, has received the most investment in modern core systems. This has changed as growth for individual lines of business has stagnated, while growth for group benefits business lines has increased, often with higher operating margins, to boot. A change-resistant corporate culture has also contributed to the delays. But many companies have reached the breaking point with overall manual processes and the poor user experience, lower operational inefficiency, and slow speed to market that ensue. They now understand the significant competitive advantages associated with modernizing their core systems, with policy administration an important component.
Group insurance companies have to navigate through the complex, interconnected insurance benefits ecosystem, which makes it difficult to improve processes and deliver a compelling user experience to employees, employers, and brokers. Antiquated legacy systems and a historically change-resistant culture have led to an over-reliance on manual processing that now undermines competitiveness. Investment in a modern policy administration system can help group insurance companies to become more competitive in this otherwise very attractive market.
To see how Vitech’s V3locity solution can transform insurance administration operations, provide an effortless digital user experience, and offer world-class information security, click here.