FCA urges Life Insurers to speed up claims and replace legacy technology, Mike Daly

'The FCA review, based on data from 15 insurers representing three-quarters of the UK life protection market, found that it can take some firms up to four months to process a bereavement claim. “Most firms were unable to meet some of their own bereavement claims process service performance levels within the period we looked at,” the FCA said. “Claimants are therefore likely to be experiencing delays resulting in poor outcomes and customer harm.”'

FT Nov 22nd 2024

Insurers are bound by Consumer Duty rules i.e. to act fairly and promptly when handling claims, consider consumers’ best interests, and deliver good outcomes for them. Life insurers have generally lagged behind both personal lines and commercial insurers when it comes to escaping the chains of legacy technology.

From the initial process of selling policies to the settlement of claims. Potential customers are dependent on their GPs filling in paper forms to describe thir current state of health and this is the first bottleneck.

At the other end of the process insurers could save time by using more digitised processes — such as electronic “verification of death” to avoid the need for sending paper death certificates. But this requires firms to accept higher “risk tolerance” in how much documented evidence they need.

EIS is one company that is focussed on helping insurers escape the restrictions imposed by legacy technology and the policy-centric set-up of even the current policy admin and core system gorillas in the market.

It's eagerly awaited ‘Top Insurance Trend Predictions & Imperatives for 2025’ report mirrors and adds to the FCA's own observations: -

'5. Life and Health have significant potential to address the coverage gaps we are currently seeing, and with the right foundations, could be a major revenue driver in 2025.

In 2025 millennials will make up 75% of the workforce, and while the traditional trigger points for life & health insurance are fading, they will still need protection for their income and valuables (out of home).
Embedding insurance in various consumer touchpoints, will see improved accessibility, and provide personalized customer journeys across all channels (direct-to-consumer, brokers, aggregators, etc.).

Imperative: The path to growth lies in adopting embedded insurance models and integrating into broader ecosystems. Financial institutions in the credit protection space, in particular, are set to lead in delivering these solutions to the market.

6. 2025 will be a pivotal year for life insurers as the sector grapples with transformation challenges on multiple fronts.

Legacy systems will reach end of life, forcing insurers back into the technology market. In parallel, shifting demographics are deprioritizing life & health, at a time when the sector faces an urgent need to reverse its structural decline.
Alongside this, we will see life insurers reinvent their business models on new technology, creating customer-centered and relationship-based businesses capable of diverse product-based models.

Imperative: We expect the introduction of intelligent broker & advisor portals offering a more empathetic experience that deepens relationships between consumers and their advisors. This is critical. As highlighted in the recent Capgemini report, customer experience is a key differentiator, and insurers that excel in this area will outperform those that don’t.

(You will find five other key issues for all lines of business in the full report link in ‘Further Reading’ below. )

Bryan Falchuk publishes many books describing the future of insurance. When I asked him whether or not insurers are organised for change he stated “Overall, no. I can say that objectively. And for all the opportunity I’ve had to get inside insurers, I know the majority of staff feel that way despite what the headline statement on being innovative or flexible is”. When asked if staff find the block is the C-Suite he replied, “In some cases. In others, it’s bigger than any one leader. It’s a cross-org, cultural issue. Just can’t get the momentum going.”

Technology was a limiter to getting momentum going but today MACH-architected platforms and software are enablers of customer-centric, ecosystem-powered innovation e.g.

ICE recently announced a stregthened partership with claims rechnology partner RightIndem to deliver innovatio. EIS has a good case study with UK carrier esure migrating the whole business to new MACH platforms and applications including: -