The success reported by U.S. life insurers is impressive but doesn't match what the report showed in Europe. "You can build a good business case if you can make the case for 15 percent business cost reduction and 15 percent IT reduction," Hollander says of the U.S. numbers. "However, if you look at Europe, it's almost a 40 percent reduction in IT application resources. [European insurers] have been very aggressive."The reason behind this, Hollander believes, is the Europeans have been working on consolidation longer, allowing them to reach a higher degree of benefits. "They've been much more aggressive in consolidating many more sets of systems, and it's a little bit earlier in the life cycle of that happening in the U.S.," he says.

One reason the Europeans have addressed the issue of consolidation, Hollander continues, is because many European carriers are owned by banks. In fact, 30 percent of the European respondents to the Accenture survey are subsidiaries of banks. "You find the banking sector has been far more aggressive at seeking to eliminate redundancy and taking out every bit of cost it can," he says. "Culturally, in the banking sector, it has had to do this to survive. In the insurance sector, that's not necessarily the case."

European insurers are being told it is unacceptable to have redundant systems. "Seek to simplify so you can industrialize the process," says Hollander.

He doesn't believe the merger and acquisition activities that have gone on in the insurance industry are the sole point of blame for the overabundance of policy systems. Often, when a carrier wants to introduce a new product in the market, such as a variable annuity, the new product, in many cases, has led to the selection of a new policy processing system, which usually is embedded with a commission system, a payment system, and maybe a workflow system. Insurers allowed this because of the need for speed in introducing the product into the market. "If you are trying to be responsive to a market but your older product platform won't allow you to do this without a lot of work, there is a new software product introduced," says Hollander.

Companies at last are realizing their multiple processing systems are a "house of cards," according to Hollander. It is not uncommon for a company to have 10 to 15 policy systems supporting different products, he points out, many of which are closed blocks of business. Every company is different, but he contends it is an imperative to industrialize the back office. Still, he acknowledges all companies cannot get down to a single policy system. "That's nirvana," he says, "but it's not reality."

Carriers need to do everything possible to reduce redundancy in their systems, though. "Let's not have redundant infrastructure," he says. "That causes redundant processes. As companies are looking at acquisitions–blocks of business or whole companies–they have to get their house in order or assimilating a new company will add to their overall cost."

Carriers need to start with a focus on making progress–not eliminating the problem completely. "Figure out what your business case is–a combination of business expense reduction and IT expense reduction–and then quantify what impact that will have on your ability to get your products on the market sooner," concludes Hollander.

– Robert Regis Hyle