Application management services for the life insurance industry: Optimizing the application portfolio

Transcription

1 IBM Global Services Application management services for the life insurance industry: Optimizing the application portfolio Introduction In today s cautious economic climate, growth in the life insurance industry is tempered by a reduction in available investment income, as well as declines in reserves and surpluses. In spite of this slowdown, customers still expect personalized service, innovative options and their choice of interactive channels. Meanwhile, insurers are grappling with the complexities and increasing demands brought upon them by massive mergers and acquisitions. In a bestcase scenario, information technology (IT) can provide a magic bullet helping insurance enterprises address these concerns, optimize processes, enhance productivity, increase service levels, and prepare for sustained profitability. The reality is more problematic. Dynamic technologies have delivered their own set of challenges to the life insurance industry: increased price transparency...alternative risk transfer mechanisms...and the emergence of complex, interdependent products and relationships. Plus, mere maintenance of a company s existing infrastructure and application portfolio can drain nearly 70 percent of the total IT budget for the average insurer making it all the more difficult to get and stay ahead.

2 Optimizing the application portfolio Enter application management services a comprehensive approach to overseeing the enterprise application portfolio. Through proper selection, deployment, management and maintenance of critical applications, application management services can provide insurers with cost reductions of up to 40 percent. Add to this the fact that application management solutions can provide insurers with capabilities to more than double speed-tomarket and productivity, and improve quality tenfold. On a qualitative level, application management services helps insurers achieve a single, realtime view of the business and its customers; proper alignment of business and IT strategies; a renewed focus on core values and competitive differentiation; and adaptability to respond to market dynamics, customer demands or strategy shifts. Working with the IBM AMS team, life insurance companies can: Improve responsiveness and productivity by linking seamlessly with suppliers and partners in realtime Integrate the enterprise by connecting applications and operating platforms across networks Achieve differentiation by developing customized applications for consumer and enterprise markets at less cost, and with a faster time to market Retain customers and increase customer satisfaction by utilizing customer data to align expectations with products and services, better understand customer value and automate services Cut costs by outsourcing non-core, labor-intensive processes to a trusted services provider with worldwide reach; reinvest savings in new initiatives To achieve the greatest value, an enterprise s business and IT strategies must be tightly bound and highly interdependent. Otherwise, no matter how sound one or the other is, shareholder confidence and return on investment can quickly decline. 2

3 Today s imperatives: Control costs, build capabilities and drive the business forward The challenges to profitable growth in the life insurance industry are significant. A declining equity market... underwriting earnings reductions...deferred acquisition costs...low interest rates. All are placing pressure on insurance executives to reduce costs while supporting new business capabilities. Tomorrow s ideal business model is focused, responsive, flexible and resilient a strategic mix of key characteristics that together make up what IBM calls e-business on demand Ṭ M The on demand model grants insurers a highly transactional, flexible and self-healing IT environment designed to facilitate collaboration and productivity, enhance capital efficiency and enable realtime responsiveness and personalized care. A well-managed application portfolio can help fuel this transformation and, in turn, drive growth and shareholder value. For example, an AMS-supported application portfolio can help insurers: Control or reduce costs by integrating, updating and standardizing core business applications and eliminating redundancies. Increase operational efficiency through multichannel integration and efficient enterprisewide information exchange. Facilitate strategic imperatives to create focus, flexibility, responsiveness and resilience across the IT organization and operational levels. In the case of life insurance companies, these efforts are centered around: Core insurance transformation breaking down established management silos and modernizing legacy systems to enable realtime responsiveness along the insurance lifecycle from underwriting, claims and policy administration, to billing, collection and disbursements. Organizing around the customer achieving differentiation through proactive customer relationship management. An open, responsive and integrated application portfolio can enable comprehensive customer insight and care across products be they traditional, variable, investment, annuity or disability offerings. Developing a flexible and responsive business model establishing an application framework that will support intelligent growth through integrated and informed business processes and operations. In this way, the application infrastructure helps enable insurers to develop and support new producers...speed time-to market...implement new distribution channels... defend niche markets...enter international markets... and offer integrated financial services. Enabling insurance services on demand utilizing highly sophisticated and responsive underwriting techniques; 3

4 Optimizing the application portfolio just-in-time policy building and automated policy services to integrate and personalize marketing capabilities and enhance customer intelligence, for example. On the whole, the success of these initiatives depends on aligning business and technology strategies and, in turn, reallocating supportive funding. This requires squeezing every ounce of value from an insurer s application assets, in a way that helps enable the business to anticipate and respond dynamically to virtually any requirements that come its way efficiently and cost-effectively. Real-world results A leading American mutual life insurance company home to over 10,000 agents in 50 states aimed to update and optimize its legacy application portfolio. IT executives were concerned that the company s key legacy applications lacked documentation and that the knowledgeable programming experts were nearing retirement. The company contracted with IBM Application Management Services to maintain, enhance and manage 14 critical applications. The transition to IBM management included comprehensive code review and interviews, and was completed in six months. The result? Reduced unit personnel costs...lower overall costs for application maintenance... performance enhancements...up-to-date documentation...and built-in workload flexibility. Application management services have the potential to not only reduce costs and enhance capabilities, but can also provide an insurer with significant funds to undertake key transformation initiatives. 4

5 The case for application management services: Aligning applications with business priorities Now more than ever, life insurance executives must weigh the cost-to-income equation to assess shareholder value. This demands constant appraisal of the application portfolio to determine whether IT investments are pulling their weight in terms of supporting partners, producers and customers, and safeguarding and revitalizing the business. Ideally, an insurer s application mix should be able to pay for and renew itself, allowing the institution to better manage risk, lower operational costs, adapt quickly to change and improve service across channels from the field to the call center and the Web. Typically, this entails consolidating, upgrading and replacing applications on a regular basis a complex task that must take into account both business and IT variables, as well as cost. For application management professionals, this kind of application evaluation and optimization is second nature. Application management services help provide conviction that a company s applications will be utilized to their full potential, without the need to pay for full-time specialists and supporting resources. Services can be performed rapidly locally or globally with confidence that the application portfolio will remain current, and equipped to respond as needed to deepen customer insight, integrate channels, enhance operational efficiencies and raise service levels. Add to this the possibility of strategically outsourcing part or all of your enterprise s application management to a qualified vendor such as IBM and you can realize significant savings which, in turn, can be used to support evolving business and IT initiatives, including sophisticated on demand efforts. The U.S. life insurance and annuities market is divided between individual and group Total life industry USD billions, percent $473 billion = 100% Individual life industry USD billions, percent $264 billion = 100% Individual $264 billion Individual A&H $28 billion 11% Group $209 billion 44% 56% Individual annuity $141 billion 53% 36% Individual life $95 billion Total insurance industry size and premiums written

6 Optimizing the application portfolio An IBM AMS engagement can help life insurance companies redirect focus to core business concerns... respond to customers, partners and the marketplace with newfound agility...pay for only what they need when they need it...and have confidence that the resiliency of the IT infrastructure and the enterpriseat- large is dependable. More simply stated, an IBM-empowered on demand life insurance provider is designed to: Deliver products and services on demand, in realtime Adjust cost structures and business processes to reduce risk and strengthen performance Utilize the infrastructure and the application portfolios to lower cost, elevate productivity, support resiliency, heighten service and drive higher returns Real-world results In the face of stringent economic and competitive pressures, one of Canada s largest life insurance providers opted to outsource its application system, end to end. IBM Application Management Services worked with a leading industry-specific software provider to create a customized, hosted solution to the insurer s application development and management requirements. The result is a world-class insurance infrastructure, rolled out across two sites for availability assurances. On a more granular level, the insurance company has realized a 25 percent reduction in total cost of operations (TCO) and, at the same time, enjoys rapid and relevant software and hardware upgrades for the term of the agreement. 6

7 IBM Application Management Services IBM Application Management Services (AMS) approaches a life insurance company s applications as strategic business tools that can be used to fundamentally improve how the enterprise operates and communicates. Our services address the entire application management process oversight and execution, development, maintenance, enhancement and transformation. Our expertise applies to virtually every type of application from legacy mainframe systems to newer e-business and Web-enabled applications, as well as package solutions from some of the world s leading software companies. From underwriting enhancement and CRM, to multichannel integration, policy administration and HR initiatives, life insurance companies can call on IBM for assistance with a single application, a subset of non-core applications, or the entire portfolio. IBM Application Management Services provides demonstrated technologies, solutions, intellectual capital and a strong heritage of expertise in the insurance industry. These capabilities enable us to help companies foster business change and reduce costs through carefully managed applications all supported by proven methodologies, tools and skills, including those from IBM Business Consulting Services. The IBM AMS life insurance team, part of IBM Global Services, comprises IT professionals and insurance consultants with deep skills in the industry. Today, these resources are helping life insurance companies transform their application portfolio into an on demand, service-focused business environment. Prior to assuming any level of application management, IBM AMS professionals work to thoroughly assess a company s technology and business challenges. Although we adhere to a structured methodology, we also know that every company s requirements are different, and we model our services accordingly. This helps assure an integrated, security-rich and Web-ready environment that aligns technology and business strategies in the best and most cost-effective manner. Global optimization As one of the world s largest providers of application development and maintenance services, IBM has developed a global optimization model a set of processes and facilities that help ensure economical, uninterrupted support and a single point of accountability for our customers around the world. We employ these assets to help life insurance companies reduce labor costs while mitigating the risks associated with utilizing global resources. Our reach, as well our proven migration methodology, give us the flexibility to transfer work to different countries if political or economic conditions dictate at a moment s notice, and at little or no extra cost to our clients. 7

8 Optimizing the application portfolio The IBM AMS life insurance team oversees the various aspects of global relationships including cultural, language and currency differences. This offers more confidence, economy and flexibility, since our services can be delivered quickly, reliably and economically virtually anywhere in the world. underwriting, policy administration, claims adjudication and customer relationship management. The Centers help insurance providers deliver faster, more efficient customer service and, at the same time, integrate new blocks of business cost-effectively and without any service disruptions. An ROI framework IBM has developed a sophisticated ROI toolkit that can help life insurance providers gain a reliable estimation of the returns they can expect from their application transformation initiatives. Prior to starting transformation activities, IBM utilizes this toolkit to form various application scenarios. This assists in informing decision making, and can be leveraged during the actual transformation process to track results and evaluate cost to benefit. Insurance Solutions Centers IBM Insurance Solutions Centers deliver applications on demand and provide insurance companies with specialized industry knowledge and technological expertise, facilitating a quicker response to industry and competitive pressures. The Centers focus on design, development and management of software applications for insurance providers, and deliver cost savings of 15 to 30 percent, improved customer service levels and enhanced application capabilities. Insurance companies can also benefit from services that consolidate group, life and health administrative services, as well as core activities such as Global Test Centers The IBM global test organization provides access to leading-edge test centers to enhance business application development. We offer a full range of software testing solutions, accessible worldwide. These services, which can be employed separately or together, encompass Test Process Evaluation; Requirements Validation; Systems Integration Testing; Performance/ Stress Testing; Test Automation; National Language Support; e-business Testing; Test Project Management, and Full Test Outsourcing. A globally consistent set of processes, methodologies and tools The IBM AMS life insurance team employs a proven management system and an integrated, disciplined approach to software and systems engineering. We continually test our processes and tools to confirm compliance with evolving standards and to verify rapid, cost-effective delivery of services and a potentially faster ROI. IBM offers insurance-specific technology enablers such as the insurance application architecture (ISS) and the insurance information warehouse (IIW). 8

9 IBM AMS Offerings for Life Insurance IBM Application Management Services encompasses a set of complementary offerings that can be deployed separately or together. These services extend from management of an insurer s entire application portfolio to toe in the water offerings relevant across a particular set of applications. IBM Application Portfolio Management Services (APM) involves a comprehensive evaluation of an insurer s application portfolio including business, industry and technology priorities. With these services, IBM provides ongoing assessment, transformation and management of a company s applications to help ensure appropriate focus, as well as financial and resource allocation. ROI scenarios help forecast the probable benefits and can be used to track and measure returns on an ongoing basis. APM is a flexible offering with an end-to-end focus on portfolio assessment and transformation. IBM Application Portfolio Management Services assessment helps life insurance companies gauge and coordinate their current application environment and business strategies and identify transformation opportunities. The goal is to prioritize overall IT needs, including the IT infrastructure, systems architecture and high-level functional requirements. IBM Application Portfolio Management Services transformation utilizes results of the assessment to implement a blueprint for aligning an insurer s applications; identifying key business drivers and monitoring their effect on the portfolio; providing governance over projects; and measuring the business value of those efforts. Application portfolio transformation helps reduce redundancies and optimize productivity, and is highly relevant for enterprises that have undergone mergers and acquisitions. IBM Legacy Transformation Services Most life insurance companies have allocated a significant portion of their IT budgets to supporting legacy applications. When faced with fewer dollars, growing competition, dwindling resources and larger expectations, enterprises must carefully examine how to reap the most value from their assets. Legacy transformation thus becomes key to supporting new business initiatives, linking IT strategies to business goals, responding to market changes and optimizing ROI. IBM Legacy Transformation Services can 9

10 Optimizing the application portfolio Real-world Results A Fortune Services 500 company and one of the nation s largest insurance companies, contracted with IBM Application Management Services to provide development and maintenance for all policyholder administration, agent compensation and reporting, and financial systems. The solution encompasses outsourced computing and networking, a hosted Web site, and the provision of proven, consistent processes and procedures to address service and productivity concerns. Indeed, the company has seen a 77 percent reduction in service outages, increased application development productivity of 45 percent and on-time service delivery improvements of 40 percent. As well, the IBM engagement helped to substantially decrease the time-to-market for product launches, enabling seven new launches per year as opposed to one. help insurance providers incrementally transform legacy applications to adapt to the evolving needs of the business, customers, employees and partners. For example: IBM Legacy Transformation Services for consolidation and migration focuses on streamlining the portfolio to reduce operating expenses. IBM Legacy Transformation Services for application integration assists insurers in incorporating legacy applications with other enterprise software package and homegrown alike to achieve near-realtime access to critical business information. IBM Legacy Transformation Services for Web enablement takes legacy applications to the next level bringing them online to optimize information access among all stakeholders. IBM Legacy Transformation Services for application renovation documents, extracts and centrally manages the business rules held in legacy applications transforming them into reusable, network-based resources that can be leveraged over time, via a standardized architecture. IBM Accelerated Solution Delivery Services IBM has in place Accelerated Solution Delivery Centers locations that apply best-of-breed techniques to speed product development and reduce time to market. This methodology, which leverages collaborative development practices and documented acceleration techniques, has been proven to reduce development cycles by up to 45 percent. 10

11 Package and custom application services is designed to help providers predict and manage the costs, risks and resources related to the innovation and ongoing maintenance and support of e-business applications. Life insurance companies leverage the skills, expertise, tools and methodologies provided by IBM to help develop and implement applications...accelerate time to market...improve application quality...reduce risk...and lower ongoing costs in a significant, predictable way. IBM assumes responsibility for enhancing and maintaining selected applications according to service-level agreements, and can even manage the end-user help desk. IBM strategic partnerships with industry-specific solutions providers, including Castek, InSystems and Crystal Decisions, underscore our ability to configure, deploy, maintain and evolve your missioncritical applications. This helps enable an insurer to concentrate more on the core business and less on the daily aspects of application management. IBM Application Management Advisory Services assists enterprises in identifying and evaluating options for increasing the value of application development and maintenance. IBM Application Management Resource Services supplies and manages an insurance provider s application development and maintenance resources, including the provision of supplemental staff to help develop, enhance and maintain a company s application portfolio. Our vast reserves of professionals enable insurers to access skills on an as-needed basis. These resources can be drawn from a local pool of IBM talent, or from IBM locations worldwide. IBM AMS life insurance consultants are also available to help enterprises optimize the value of subcontractors and predict the need for those resources over time. Find out more IBM Application Management Services is a world leader in helping life insurance providers make the most of their application environment. Our highly skilled, globally based AMS professionals, including industry and IT experts, deliver IBM AMS capabilities to customers worldwide supported by data centers and business partners across the globe. To learn more about IBM Global Services and IBM Application Management Services, contact your IBM sales representative or visit: ibm.com/services 11

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