What is the link between improving service technology and improving sales incentives?This was the topic of a very insightful conversation that I had recently with an insurance CIO.It highlighted how interrelated the processes are in the insurance value chain. Investments can be made in one area, but if other, correlated areas do not receive attention, the benefits from the initial investment may be less than expected.

The two areas in question are policy administration and distribution management.This company has determined that the key to managing their profitability properly is the ability to change their mix of business in order to respond to market conditions.This strategic imperative led to a recent investment in best-in-class rating technology to increase the responsiveness of product updates and the speed of new product introductions.The company also upgraded their BI and analytic capabilities, allowing their actuaries to develop new discounting and pricing methods.

The CIO shared that they were pleased with the cycle time reductions and productivity increases that resulted.However, he reports that they only got full benefits they sought after they updated their compensation system.They needed to be able to change incentives in line with product modifications in order to effectively modify their portfolio and manage profitability. In other words, they had to be able to give their distribution force a reason to sell the new products, not just deliver product changes.

This was a twist on the phrase “if you build it they will come” and a reminder to be sure and consider the interplay between separate processes when evaluating investments.In constructing a product administration roadmap, an assessment of incentive management should be made.Incentive system upgrades may be necessary in order to fully benefit from administration enhancements.