Tag: insurance

Pension Risk Transfer: The Next Greenfield Opportunity in Retirement and Insurance | Blog

With pension risk transfer (PRT) activity hitting post-pandemic record highs of $53 billion in North America market volume last year, this growing market represents a massive untapped opportunity for technology and services providers to leverage their retirement and pension expertise to deliver new solutions. Read on to learn about the possibilities this option opens. 

Even with the general shift towards defined contribution (DC) plans, defined benefits (DB) assets still contribute to the majority of retirement Assets Under Management (AUM) in the US. However, defined benefit plan providers often struggle to guarantee the security of retirement benefits because of the following risk factors:

  • Unpredictable investment returns due to variable interest rates, market volatility, and the geopolitical environment
  • Volatile interest rates
  • Increasing life expectancy and longer service tenure of plan participants
  • Underfunded pension liabilities

To shield against this unpredictability, plan sponsors are adopting pension risk transfer strategies to guarantee retirement and pension benefits for DB plan members. Under this approach, DB plan providers transfer their entire/partial pension liabilities to other firms, usually a life insurance firm, to remove their obligation to pay plan participants guaranteed retirement income or post-retirement benefits.

In the past four years, PRT transactions have increased as DB plan providers seek to de-risk huge pension liabilities. Many large and mid-sized plan sponsors are hedging these risks through PRT transactions with the intent of transferring or terminating existing DB plans.

The pension risk transfer market peaked in 2022 as retirement plan sponsors urgently felt the need to secure pension benefits in an increasingly uncertain world following the pandemic.

The growth momentum is expected to continue due to favorable transaction terms for sponsors and insurers’ continued desire to de-risk pension assets. North America accounted for approximately two-thirds of global PRT sales (US$60 billion) in 2021 and grew by 40% in 2022. In both these years, almost half of the PRT transactions were near US$1 billion or more, according to the LIMRA Secure Retirement Institute.

Pension risk transfer types

The following two PRT transactions are most prevalent in the market:

  1. Buy-in – The insurance firm takes the liability of benefit payments for plan participants to the plan trust. The sponsor retains fiduciary and administration obligations and holds the pension plan contract as an asset on its balance sheet
  2. Buy-out – The insurance firm takes the liability of benefit payments for plan participants entirely and all of the administrative responsibilities. This is the most common transaction type, as the entirety of pension obligations are transferred

Picture1

Implications of pension risk transfer for services and technology providers

Transferring pension liabilities to an insurer comes with many challenges. Providers have several opportunities to support insurance enterprises, recordkeepers, plan sponsors, and third parties involved in such transactions in the following key areas:

  • Technology systems: Insurers need support to transform their technology landscape to meet the increasingly complex market requirements, including data migration, fund transfer, benefits administration, contracts and provisions management, and pension administration for the full participant lifecycle.

Varying technology maturity levels among recordkeepers, insurers, and plan sponsors presents a big challenge. A service provider or platform provider’s solution can help with the entire process of transferring liabilities (sometimes along with plan termination) and all the relevant data, provisions, rules, funds, and critical participant details. This presents an opportunity for system integrators (SI) and platform providers to work together to efficiently manage the process lifecycle

  • Strategic partnerships: As this business achieves scale, insurers will strategically view this as an alternate revenue stream. Insurance firms can partner with technology and service providers to enable user-friendly onboarding, payment/annuity processing, automated query resolution, and analytics-based PRT transaction pricing, as well as building newer underwriting and actuarial capabilities for deciding PRT transactions’ premiums
  • Regulatory compliance: Technology and service providers need to assist insurers and sponsors in complying with the changing regulatory environment, varying state and regional taxation laws, and accounting nuances of different transaction types such as buy-ins and buy-outs
  • Cyber security: The significant amount of sensitive participant data being exchanged between recordkeepers, insurers, and sponsors’ systems poses substantial security risks. With the varying complexities and formats for different plan sponsors and record keepers, traditional file formats of participants’ data are difficult to maintain. Technology and service providers can securely manage the migration of pension data from on-premise systems to cloud, on-prem systems to other on-prem systems, and between different cloud environments

Picture2

With the transaction volume increase in the PRT market expected to continue, technology and service providers have many opportunities to seize this underserved industry segment by leveraging their existing business expertise in the retirement and pension domain to build new solutions catering to this market.

To discuss pension risk transfer further, please reach out to [email protected] and [email protected].

Learn about the evolving digital requirements for the insurance industry in the blog, Reinventing the P&C Insurance Claims Value-Chain: Moving to the Claims of the Future Vision.

Group Life Policy Administration Systems (PAS) Products PEAK Matrix® Assessment 2023 – North America

Group Life Policy Administration Systems (PAS) Products PEAK Matrix® Assessment – North America

Group life insurers are increasingly looking to modernize their core platforms to address the limitations of their legacy core systems and drive transformation to future-proof their IT infrastructure. They are seeking cloud-ready platforms that can enable extensive API integrations and provide out-of-the-box functionalities for rapid product configurations.

In response, technology providers are developing deep expertise across various product types and demand themes. They are expanding their talent pools, building configurable solutions to address key concerns around on-budget and on-time implementations, and supporting insurers to become digitally enabled.

PAS PEAK 2023

What is in this PEAK Matrix® Report

In this report, we assess 15 technology providers featured on the Group Life Policy Administration Systems (PAS) Products PEAK Matrix® Assessment 2023 – North America. Each provider profile provides a comprehensive picture of its service focus, key Intellectual Property (IP) / solutions, domain investments, and case studies.

This report examines:

  • Provide an overview of the group life PAS market, including its size, growth, and drivers
  • Assess 15 technology providers that focus on North America
  • List the characteristics of Leaders, Major Contenders, and Aspirants
  • Examine providers’ key strengths and limitations

Scope:

  • Industry: insurance
    Geography: North America
  • The assessment is based on Everest Group’s annual RFI process for year 2022-23, interactions with leading group life PAS technology providers, client reference checks, and an ongoing analysis of the North American insurance technology market

DOWNLOAD THE FULL GROUP LIFE POLICY ADMINISTRATION SYSTEMS (PAS) PRODUCTS PEAK MATRIX® ASSESSMENT 2023 

Related PEAK Matrix® Assessments

Low-code Technology
PEAK Matrix®

Low-code Technology Providers in Insurance – Products PEAK Matrix® Assessment 2023

Cloud Services in Insurance
PEAK Matrix®

Cloud Services in Insurance PEAK Matrix® Assessment 2023

Insurance BPS
PEAK Matrix®

Property and Casualty (P&C) Insurance BPS PEAK Matrix® Assessment 2023

LATPA PEAK 2023
PEAK Matrix®

Life and Annuities (L&A) Insurance BPS and Third-Party Administrator (TPA) PEAK Matrix® Assessment 2023

Our Latest Thinking

Cloud Services Price Benchmarking Catalog
Market Insights™

Cloud Services Price Benchmarking Catalog

Insurance BPO Price Benchmarking Catalog
Market Insights™

Insurance BPO Price Benchmarking Catalog

Insurers are Prioritizing Low-code Solutions for Speed-to-market and Cost Benefits
Market Insights™

Insurers are Prioritizing Low-code Solutions for Speed-to-market and Cost Benefits

Notable Low-code Solution Demand Trends Among Insurers by Size
Market Insights™

Notable Low-code Solution Demand Trends Among Insurers by Size

What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

LEARN MORE ABOUT Top Service Providers

Banks Expected to Increase Risk Technology Budgets after March Crisis | In the News

Regional banks are likely to upgrade their risk management technology as the recent problems in the industry raise concerns about all elements of their risk positions, experts say.

Most regional and super-regional banks previously sought to spend as little as possible on risk management technology to meet minimum regulatory and compliance requirements, said Ronak Doshi, Partner at Everest Group. However, over the past six weeks, banks have felt pressure from their boards, employees, and other stakeholders to prioritize risk assessment.

“Banks are suddenly saying, ‘Risk management is a key component of who we are as a bank,'” Doshi said. “It’s not just the cost of doing business. That’s business.”

Read more in AMERICAN BANKER.

Reinventing the P&C Insurance Claims Value-Chain: Moving to the Claims of the Future Vision | Blog

Heightened momentum for technology-first and automated operations is elevating customers’ need for greater convenience, instant gratification, faster turnaround time, and more self-service options. Today’s digitally-immersed consumers have grown accustomed to doing business anywhere, at any time, and with any device, and this is shaping up the new normal of the insurance industry; transforming the insurance claims journey becomes a pivotal priority for Property and Casualty (P&C) carriers to meet demands for a customer-centric hyper-personalized experience driven by digital technologies. Read on to learn more about the zero-touch claims of the future vision and how to achieve it.

Leading InsurTechs with pure-play digital models are heating up the competitive landscape, making it imperative for traditional insurers to optimize their claims functions. An insurer can achieve future goals by accelerating the adoption of next-generation capabilities.

Amid the digital shake-up and rising demand for delivering an “Amazon-like” experience, insurance operations are plagued with workflow complexities caused by multiple intermediaries and legacy systems. Digital and emerging technology solutions can help insurers reshape the customer claims journey and improve turnaround time while reducing information leakages and fraud and delivering a superior customer experience.

Foundational pillars of a digital-claims future

To embark on a transformational claims journey, insurers need to go beyond traditional after-the-fact claims management, tap into the plethora of available data to unlock immense value, and focus on offering omnichannel experiences powered by intuitive digital technologies. P&C carriers will need to excel at the 3Es: experience, efficiency, and effectiveness.

Winning P&C digital claims offer a compelling digital experience and strengthen customer loyalty. Insurers can differentiate themselves by supporting each touchpoint in the claims journey – starting even before an incident occurs – with data, artificial intelligence (AI), analytics, and other emerging technologies—all while retaining the human touch.

By offering seamless omnichannel customer experiences across claims registration, disputes, timely process updates, final settlements, insurers can improve customer satisfaction and retention rates. This is crucial given that Everest Group’s research shows ~35% of P&C insurers’ priorities across claims management are focused on enhancing customer experience (based on an analysis of 60+ case studies involving claims modernization/transformation).

Insurers also need to drive superior efficiency by enabling data-driven and analytics-driven claims processing. This ensures focus on effective service delivery to reduce claims expenses, while improving claims handling accuracy and ensuring greater customer satisfaction.

Bridging the gap between current and future digital claims-processing

With innovation growing throughout the P&C insurance industry value chain, AI/Machine Learning (ML)-enabled tools eventually will help insurers redefine their roles from claim handlers to claims preventers. P&C carriers flourish when they embrace this mindset shift from a risk transfer to a risk mitigation model.

Insurers can unlock value in the claims industry by employing the internet of things (IoT) and telematics capabilities combined with the connected devices ecosystem and third-party data to identify red flags and alert customers of risks before any loss occurs.

Insurers need to look beyond mere cost-savings, accurately utilize the wealth of data they possess, and transform claims from a necessary back-office function into a source of competitive advantage and market differentiation. Below is a look at the key steps to reach a seamless claims settlement:

Exhibit 1:

Future Enables Carriers
Source: Everest Group

Rigid legacy systems for claims processing can present challenges for insurers and prohibit them from adapting to the evolving customer requirements and optimizing their operations. Legacy IT processes slow progress and innovation, eventually affecting the end-user experience that holds the potential to make or break insurers’ reputations. Taking a one-size-fits-all solution approach for different business lines, failing to adopt modular design principles, and having limited advanced systems skills add to the overall complexity and further weaken the ability of insurers to thrive in today’s competitive environment.

To attain a competitive edge, insurers require instant resolutions and digital experiences on the go. Leading insurers are harnessing the power of unified and custom low-code/no-code platforms with advanced AI and analytics tools to streamline claims processes, modernize systems, and build modern layers on top of existing legacy systems or other core platforms without involving time-intensive and expensive upgrades. This allows insurers to build reusable codes and design “plug and play” environments to deliver enterprise-grade solutions at speed and scale. Low code makes it easy for carriers to simultaneously focus on profitability, enhance customer experience, and fulfill the vision of balancing quick wins with strategic initiatives.

The need for digitalization of workflows and customer interfaces, convenient user journeys, reusability of components and faster configurations, cost optimization, and skill management are the top drivers fueling the demand for low-code/no-code technology for insurers in modernizing the claims process.

For instance, a leading global insurer used a low-code platform to create an intuitive and dynamic first notice of loss (FNOL) prototype application in just 90 minutes and transformed it into a fully functional mobile application for 2,000-plus users in four weeks, delighting customers.

Where do the opportunities lie?

A combination of agile insurance claims process/operating model transformation, adoption of advanced technologies and telematics, a skilled workforce with technical and domain expertise, and a connected partner ecosystem are the fundamental facilitators for the probable future of zero-touch claims.

In the future of claims processing, P&C insurers will be able to facilitate touchless claims decisions, accelerate payment settlements, assess indemnity obligations accurately, prevent fraud, and mitigate claims litigation losses.

Exhibit 2:

Industry Frontrunners
Source: Everest Group

Below are the key elements needed to move from the current state to claims of the future:

  • Acting quickly and flexibly: The rapidly changing environment is compelling insurers to keep up with the pace. Incumbents need to act fast, develop and launch new products, accelerate FNOL processing, and streamline claims management quickly to stay relevant. The need for agility is greater than ever. Adopting the latest technologies and processes will propel P&C carriers to move faster and separate leaders from laggards
  • Adopting advanced analytics and AI: Real-time sensor and IoT data coupled with AI and ML-backed algorithms will enable insurers to process claims efficiently and manage fraud without any human intervention. For instance, leading insurers are using an AI model embedded within the claims workflow to assign a complexity score to each claim based on multiple parameters and process all low-risk claims under a certain threshold. Low-complexity claims are routed for straight-through processing while high-complexity claims are sent to the right team depending on the claims adjuster’s specialization and availability, thus ensuring speed and accuracy
  • Transforming talent management strategy: Modernizing the claims journey requires relying on advanced technologies and a skilled workforce to manage emerging risks. Insurers need to enhance their long-term value proposition to attract skilled workers with technical and domain expertise
  • Partnering with digital claims solution providers: Building partnerships with solution providers can support carriers in extracting maximum value by utilizing the provider’s end-to-end digital claims solutions portfolio. Advanced capabilities across core functions include claims notification, adjudication, and settlement to fulfill P&C carriers’ needs across the claims value chain

To achieve the zero-touch claims of the future vision and keep up with leading competitors, insurers will need to invest in advanced technologies and drive value creation by taking a more proactive and customer-centric approach.

Successful insurers who can deliver a hyper-personalized experience will generate superior efficiency and leverage data and ecosystem insights to proactively detect fraud. Above all, this transformation improves the claims ratio by building predictive and preventive capabilities. Insurers who take these steps will emerge as industry frontrunners.

To discuss transforming digital claims, please reach out to [email protected], [email protected], and [email protected].

To learn more about technology-first, automated customer experiences, watch our webinar, Strategies for Customer Experience (CX) Success in an Uncertain World, for trends and recommendations on what to prioritize to deliver exceptional customer experience.

IT Firms Seen Bracing Themselves for Spending Cuts by Clients | In the News

Indian IT firms are expected to submit lackluster report cards for the fourth quarter and warn about demand in the year ahead as their clients curtail spending amid global economic uncertainties, inflationary pressures, and a banking crisis.

“There is definitely a slowdown from the torrid post-pandemic levels. Discretionary spending has come down and the market is in a pause waiting to see what will happen regarding the recession,” said Peter Bendor-Samuel, CEO at Everest Group.

Read more in Deccan Herald.

Tech Vendor Risk Raises Vetting Stakes in Wake of SVB Crisis | In the News

Tech leaders with suppliers who banked with SVB could set aside immediate concerns about the viability of those vendors when federal authorities stepped in to shore up existing deposits shortly after a run forced the bank’s seizure. But uncertainty about the stability of tech startups, which are volatile by nature, persists.

SVB’s support role went beyond banking, according to Ronak Doshi, technology practice Partner at IT consulting and research firm Everest Group. It extended to “networking events and summits and to product, risk, and financial advisors,” he said.

Read more in CIO DIVE.

Banking Crisis: India’s $245 Billion Business in Crisis, Millions of Jobs at Risk, Know What Is the Reason | In the News

Banks in North America lead the way in technology investment in the retail banking sector worldwide. According to the data of financial advisory firm Celent, in the year 2022, the IT budget of these banks was US$82 billion, while the world budget was US$250 billion. Indian IT companies benefited greatly from the banks’ spending on tech budgets.

According to Peter Bendor-Samuel, CEO of Everest Group, TCS, Infosys, Wipro, and Mindtree have exposure to regional banks in North America through their banking verticals, and the banking crisis will impact their BFSI growth in the short term.

Read more in Newsday Express.

This Is How Global Banking Crisis Can Impact India in Different Ways | In the News

India is seen to be relatively sheltered from the shocks of the crisis. It is unlikely to impact India’s banking system or its broader macroeconomic stability unless more banks in the US or Europe fail and the crisis gets pronounced. Yet, analysts and some economists believe the indirect impact of the banking crisis might ripple through India’s economy and manifest in India’s tech sector, markets, and startups.

However, there will be some positives. Firms like TCS and Infosys are best placed to win the cost optimization projects that will come up now due to the stress in the sector, and “even one large deal win can bring a substantial positive pace of growth for the companies,” according to Peter Bendor-Samuel, founder of research firm Everest Group.

Read more in The Economic Times.

Banking Crisis: Indian IT-BPM Companies May Feel the Heat | In the News

The banking crisis in the US and Europe could take a toll on the Indian US$245 billion IT business process management (BPM) industry, which draws close to 41% of its revenues from the banking, financial services, and insurance (BFSI) sector, analysts said.

“Companies like TCS, Infosys, Wipro, and LTIMindtree have exposure through their banking vertical across North American regional banks. Over the short term, there will be an impact to BFSI growth due to this crisis,” said Peter Bendor-Samuel, CEO at Everest Group.

Read more in The Economic Times.

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

"*" indicates required fields

Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.