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8 September 2021
Dan McCoach

De-risking Life Insurance System Conversions

"Conversions are very risky, painful and are never on-time!"— is this old saying still true for insurance system conversions? Apparently, there are still significant risks—a recent Celent survey reveals that 92% are dealing with material issues.

And yet, the life insurance industry is encumbered by a surfeit of old technologies, particularly core administration systems. Legacy system debt remains a significant issue for life insurers—if the industry is to address mounting carrying costs and risks, then for many, conversion to new systems is not an option but a strategic requirement. Well, there’s another old saying about the inability to learn from one’s mistakes and it’s not a flattering point. Fair enough, what must we change?

To answer this question, we’ve recently started analysis and compiled a survey on the topic giving us insights from both insurers and providers. We will delve into the analysis in our upcoming report “De-Risking Insurance System Conversions”. We will focus on lessons learned, and on new tools that are making a real difference.

Until then, I’ll provide a preview—we believe two key changes are required to reduce conversion risks while simultaneously improving outcomes. The first is a fundamental change in approach to engaging a new provider, and the second is the use of new, AI-enhanced analytics and calculators to more efficiently reveal the buried secrets deep within legacy systems and their data.

Most insurance companies take a waterfall approach (at the broadest level, if you will), for legacy system conversions by setting up a process for a binary outcome for pass/fail (or to success/delay). Significant, up-front investments are made in an effort to project conversion scope and time frames (often based on incomplete and manually discovered due diligence). The process typically has the insurance company choose a vendor while executing contracts for the target platform including terms for conversion—establishing both significant contractual obligations and senior management expectations. Inevitably, issues accrue and resources become stretched—and at the worst possible time: while under significant pressure from contractual commitments and management’s expectations.

It's time to re-think.

Technology is changing rapidly changing for analytic tools to mitigate the old approach. New, AI-enhanced life insurance-specific calculators are emerging that are separate from, and independent of target administration platforms (with their native rules and calculators). Their independence from the administration platform is key and should be taken advantage of to allow them to more efficiently accelerate the discovery of aberrations and variations by bringing together and heuristically aligning both the conversion data and the associated calculations. Aside from any conversion effort, there are also benefits for risk and compliance management.

A blog is an opportunity to outline and summarize—if you’re interested to find our more, please watch for our upcoming report “De-Risking Insurance System Conversions” in which we dive deeper into conversions—still one of the most challenging technology modernization issues facing life insurance companies.

Insight details

Life & Health Insurance
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Insurance, >>Life/Annuities Insurance
Insight Format
Geographic Focus
North America