Here’s a scary thought: Many insurance companies are still using technology created decades ago — and for critical functions. Carriers are able to get necessary work accomplished, but are well behind other industries in terms of providing the level of service that customers increasingly demand in 2015.
Information Technology (IT) leaders sometimes use the term “technical debt” to describe the underinvestment in the industry’s systems. It speaks to the work needed — and/or price to be paid — to bring poor or outdated system design or software architecture to the point where it is modern and effective. Just like credit card debt, if you don’t repay technical debt, it will keep punishing you by “accumulating interest,” which makes your efforts to update the technology that much more challenging.
You may have experienced technical debt on a smaller scale if you’ve used an older version of Internet Explorer. You’re trying to do work online and are confronted with a pop-up window that basically says, “You’re using an outdated browser. Upgrade or you won’t accomplish much here.” Suddenly, your ability to do basic operations is restricted because the version of the software or the type of technology you’re using is outdated. You’re limited in terms of what you can do on the website.
That’s really no different than some of the infrastructure our industry built 20 to 30 years ago to support business processes. It is difficult and costly to maintain, and it may not have the architecture suitable for online functionality or the new capabilities, features and functions being demanded in today’s marketplace.
Attempting to replace this technology overnight would be cost- and business-disruption prohibitive, so the industry’s approach has been to chip away at the problem to achieve process improvements and determine where functions can be taken out of the outdated systems and managed elsewhere on a case-by-case basis. Over time, this approach leads to a smaller and smaller core in these old systems and, at some point, developing a “sunset” strategy becomes a lot easier.
Replacing critical systems with newer, better technology might include consolidating functions to eliminate the need for multiple billing systems across an organization, thereby reducing cost and improving efficiency. The real challenge is to ensure that this development is done in a way that’s cost-effective and adds value, rather than just keeping an old system running.
Technology and underwriting
One area where technology is adding value to the industry is in the underwriting process for individual disability income (IDI) insurance. Underwriting IDI has never been easy, but the pressure in today’s highly competitive marketplace to be faster and more transparent is greater than ever.
There’s no clear-cut formula to follow for determining when someone might become disabled. Every case is a little different and needs to be assessed on its own merits. The underwriter faces a number of challenges in evaluating risk, including a rapidly increasing amount and variety of data for analyzing and evaluating exposures. Too often, underwriters are asked to re-enter data to and from multiple, outdated systems.
In recent years, the industry has been moving to address these challenges with a more data-centric underwriting model. The ability to automatically request and receive data from medical vendors paves the way for using that data against company-specific underwriting rules, enabling consistency and the ability to report on and analyze it.