Reinventing Core Systems for Group and Voluntary Insurers: A Time for Change

Carriers competing in the employee benefits space have long recognized the benefits of aligning to their distribution partnerships. In fact, they did this extremely well for the past 30 years as carriers custom built their own core systems based on the products that they sold, to the markets they sold them and the channels they sold them through.  It was a comfortable silo and it worked, until... 

Change has finally made its way to the group benefits insurance world via a ricochet from healthcare reform.  The industry has become increasingly individualized and personal – a fundamental shift that affects a carrier at its core.  Everything changes:  product, distribution, compensation, marketing, pricing, underwriting, service, operations.  For carriers to compete in this new market, they’ll need to architect core systems capable of a greater level of connectivity and support mass distribution – the opposite of today’s legacy systems. 

But in light of the unprecedented new opportunities to respond to and thrive in this new market, I’m seeing too many carriers attempting to increase business capabilities by continuing to piecemeal aspects of existing systems that were built for a different world, instead of addressing the root of the problem: the core system.  The term is, kicking the can down the road. Unfortunately, this type of strategy comes with a steep price – in increased system complexity, increased administrative costs, lost business opportunities and a much bigger problem to fix – down the road.

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The concept is simple. Core systems need to evolve with industry changes.  Technologies, business models, products, and markets will all inevitably change, and the cycles will only continue as the market grows.  To succeed in the group and voluntary benefits market, carriers need to replace legacy systems built for a different time with core systems built to evolve and to connect in an interconnected world.   

These are the new core systems – designed from the inside out to be outside in, and capable of connecting seamlessly with external systems. More than just another one-off fix, they’re part of a holistic ecosystem that’s engineered to operate over the next 50 years – or longer. 

How fast do you think change is taking place in the group benefits market?  Will the system requirements you’re building for today still hold true in two or three years?