Three technology firms in the life insurance industry have announced a new “working relationship” that they say could reduce current policy administration costs “by more than 30%.”
The new “entity,” dubbed Vive-Life, brings together Indianapolis-based Vector Technologies, ProcessMind of Bangalore, India, and VerticalPoint, Inc. of Colorado Springs, Colo.
According to Harold Apple, CEO and founder of Vector, the new offering is “a service productthat is actually a product of Vector” that is enhanced by offerings from the other companies.
Vector provides policy administration software and associated counseling services, ProcessMind supplies offshore programming resources, and VerticalPoint provides a rules-based underwriting system, the companies say.
“The data we have show that average policy administration costs per in-force policy [among U.S. life insurers] have surpassed $200,” says Apple. He says the administration segment of that cost has seen a slower rate of increase than the information technology segment.
According to a report from TCi Consulting & Research, based in Cresskill, N.J., life insurer IT budgets decreased from 5% of projected revenue in 2000 to 4% in 2001.
“We look at these numbers, and also the trend for companies to turn to business process outsourcers, and a clear opportunity for saving money is presented,” says Apple. He claims insurers are moving toward outsourcing business processes because of the need to achieve process cost reduction and the desire to focus on core competencies.
Apple says the coalition is functioning as a policy administration systems integrator for life carriers. “But were integrating it on our nickel,” he adds, “and selling it to the client on an x dollars and cents basis for each new business case, and a policy maintenance fee–at 30% to 40% less than current costs” for administrative operations.
For a simple term policy, Apple explains, clients pay a $30 annual maintenance fee and $20 to put a new product into the environment. He adds that volume discounts will be offered.
According to Nimish Soni, CEO of ProcessMind, “employee overhead represents more than half of the IT operating costs to a company doing in-house processing. Outsourcing generally cuts that by more than 30%.”
He says Vive-Life eliminates the need for North American clients to keep investing in computer technology and process improvements, “because we become their surrogate operations and IT department.”
Apple says each company in the coalition will share in revenue from Vive-Life based on its contribution to a given client. Its a mix and match situation in which “clients are only charged for the pieces they use. “
“In effect, right now there are no systems requirements for Vive-Life,” he continues. “We will interface with the customer accounting system and handle all business processes. The customer focuses on his core competency, which is developing new products and underwriting.”
Apple adds that Vive-Life is targeted at smaller carriers “that cant take advantage of the same resources larger companies can. This is definitely aimed at home offices.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.