Behind the technical curve

European insurers are facing pressures on margins and greater competitive threats but a reliance on manual methods of working and legacy systems that require constant patching up has left the insurance industry several steps behind other markets such as banking. The insurance market needs to look to more widespread adoption of proven technology solutions to reduce costs, streamline processes and improve compliance.

The European insurance market is undergoing a convergence of solvency and accounting regulations. The demand for insurance in individual European countries remains largely driven by the level of wealth and financial innovation displayed by insurers and the actual penetration of life and non-life insurance products is unique to each country. However the technology challenges remain relatively consistent: do more with fewer resources, while meeting compliance requirements.

Modern methods
A variety of modern technology platforms allow these goals to be met and one such example is correspondence management software. It offers the possibility of replacing legacy systems without the major organisational impact and upheaval traditionally associated with ‘rip and replace' projects and can deliver significant added benefit from ensuring compliance, lowering costs and risk.

Correspondence management software allows business users to create and manage the output for business critical documents and supports template definition, multi-lingual content, rule-based content selection and efficient multi-channel communications. It automates key processes to achieve efficiency and compliance. Awareness of the benefits of dedicated correspondence management solutions (rather than functionality bundled as part of a line-of-business application offering) is only just becoming more widespread in the European market, which is surprising considering the significant impact it can make in a number of different business areas.

Core efficiency
This software can be used to drive out inefficiency, integrate with delivery, storage and electronic messaging technologies to improve and increase the speed with which core business processes can be performed. It can also enable greater compliance and increased customer service levels and in addition, multi-language support is better served, often through a ‘content management' approach. Recent analysis from Forrester Consulting has shown that the return on investment from such projects can be achieved in less than 12 months.

If the benefits are clear then shouldn't insurers across Europe be falling over themselves to sign up for these projects? The reality is very different. Correspondence management is seen as an activity that doesn't create and add business value. Without a clear appreciation of the business case or the risk implications from lack of compliance many European brokers and insurers are still using inefficient document production techniques resulting in a lack of conformity and control over the content of documents.

Lagging behind
The European insurance industry has been slow to adopt the concept of straight through processing. This involves the use of technology to automate key business processes and thus free up resources, while improving accuracy and business productivity.

In the banking sector STP projects have been commonplace for many years. In the asset management industry technology that allows greater STP is seen as vital to the provision of efficient services and in the foreign exchange market it is seen as necessary to minimise operational risk.

Empowering business
Attention has previously been focused on automating the financial element of a transaction. However, technology surely has a vital role to play in empowering business users to better manage and control documents, which are often key deliverables from business transactions. An efficient correspondence management solution can free up IT time to concentrate on supporting the core strategic business needs and this win-win situation ensures that there is a more effective separation of responsibilities between IT and business users. As business users are less reliant on IT departments to make changes this has the added benefit of lowering the total on-going costs of document production.

Essential automation
The automation of essential tasks in the document production process ensures that business documents can be produced in a reduced timeframe and to a greater degree of accuracy than before. The empowerment of business users to take a more direct role in managing documents also enables insurers with greater agility and flexibility to react to changes in the market. For example, Netherlands based ABN Amro implemented the standard correspondence management tool ITP and reduced the time required to make a change to its business documents ‘from two months to one day, without assistance from IT and without any concession to reliability on change control."

Greater compliance will become even more important for all European insurers as the Solvency II regulations come into force in 2012. However, it is interesting to see that the focus of opposition to the introduction of Solvency II has switched to lessening its eventual impact. For example, the French mutual insurance trade body ROAM is campaigning to delay the introduction and allow the mutual industry to take a collective pause of breath.

Adopting best practice
Different countries and different sectors of the European insurance industry are moving at varying speeds when it comes to the adoption of best practices around the composition of business documents and management of their content and associated business rules. In the current economic climate it makes sense for the industry to speed up the adoption of this software as it has a demonstrable and short payback time.

However, new technology should not be seen as a panacea. It needs to have a well thought out strategy behind it focusing resources on those areas where it will have the biggest impact, and with its potentially rapid return on investment, this software is one such project that meets this requirement. Those companies that fail to act will surely face extinction as the European market becomes ever more competitive.

Mike Davies is UK sales director at Aia Software