P&C Insurers – Migrate from Legacy Systems to Save Costs and Retain Customers
Recently, the P&C insurance industry has seen a decrease in demand for its products, and consequently a dip in profitability. Factors such as economic recession, the forecast of a moderate hurricane season and lower prices for commercial insurance are the primary drivers for this decline. Additionally, the profitability of insurers is also affected by expenses – such as commissions paid to brokers/agents and other overhead costs. A company that is able to generate premiums with lower overhead costs than its peers will tend to be valued higher1.
Property & Casualty insurers need systems that reduce administrative costs and tackle today’s challenges. If insurers want to be successful in a slow growth economy, they need to set their sights clearly on cost savings and improved customer retention. They can achieve both through implementation of a technology platform that suits their business processes. Though there are insurers who have invested in advanced systems to see a long-term reduction in expenses, many insurers are still relying on homegrown or legacy systems for internal processes like commissions processing and policy administration. Although perceived as saving money, these systems can actually cost insurers millions due to incorrect calculations, manual processing and dependence on valuable IT personnel.
With advanced systems in place, insurers will benefit from reduced expenses in the areas of data management and system support and maintenance. Management teams could focus more on business process, workflow redesign and business rule management, rather than worry about data integrity issues.
Over the last few years, software vendors for the insurance industry have designed a solution:incentive compensation management, which features improved configuration tools, business rule engines and workflow technologies. Processing complex commissions and incentive programs becomes easy, reduces reliance on IT, and saves effort, time and money. The advanced architecture enables the core application to integrate better and faster with surrounding applications, including customer relationship management (CRM) and producer portals. With these integrated solutions, insurers can motivate sales teams by providing clear performance measures and trusted payments.
When soft market conditions prevail, P&C insurers need to look beyond aging technologies and migrate to advanced systems to lower overhead costs, improve distribution channels’ efficiency and retain customers. Although these systems require an up-front investment, P&C insurers stand to gain ROI quickly and equip themselves to emerge as strong competitors when the economy improves.