While making a leap to that next level of efficiency in their operations is what many companies dream of, such leaps arent made easily, and they dont come cheap. Strategic projects are major differentiators, says Jack Tyniec, managing director of TCi Consulting and Research. But such projects typically have a multiyear horizon. They deal with issues that take a company or its operations into new areasa new level of service, new kinds of paradigms, new types of back-office service options, outsourcingwhereas tactical projects are pretty narrowly focused, Tyniec says.
Insurers love what the big-bang projects can do for them, but the money needed to make such investments is not available in todays economy. There simply arent the dollars available in todays budgets to justify substantial expenditures, Tyniec points out. Very few CIOs have a pool of discretionary investment capital available for a new opportunity that already hasnt been defined. By contrast, tactical projects are not so much a matter of preference, but rather a matter of necessity, he says.
One tactical approach favored by some insurers involves niche outsourcing arrangements, according to Tyniec. By taking closed blocks of business out of the processing areas and call centers, insurers can allow their customer service reps to concentrate on supporting open blocks of existing products with a target customer base, he explains.
Another tactical activity growing in popularity is benchmarking, Tyniec adds. Thats a natural outgrowth of todays economic environment in which companies have spent some time tuning up their expenses and are anxious to see what results they have achieved, particularly in comparison with their peers, he says.
TCi runs annual benchmarking surveys that focus on the life and annuity businesses as well as back-office operations and IT expenses for those lines. Were seeing growth in the participation levels for those surveys because companies increasingly are looking at their bottom line and seeing how efficient or inefficient they are, he says.
Still another tactical area of interest for insurers involves integration. All insurance companies have stovepipe systems in the background and have the difficulty of presenting a consistent client view to their marketing people and their customer service folks to see all the different types of relationships theyve got, says Tyniec.
The problem is the systems sitting in the background are product-oriented engines, and some of those engines are only supporting older products. No new products are being put on those systems, he says.
An additional complicating factor is the increase in mergers and acquisitions over the last few years. More companies are betting on growth through that arena than through internal growth, says Tyniec. I think were going to see more of them as the industry continues to consolidate, and that will simply exacerbate the problem of multiple systems.
Ideally, companies eventually would settle on one system and make an investment, but most of the capital is going out the door to buy other companies, not new systems. Its rare for companies to convert and acquire systems on their own, says Tyniec. Typically, they continue to let them go, and the issue of proliferation just continues.
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