Overhaul or be overtaken

By Freda du Toit, director at SDT Financial Software Solutions

Insurance companies have reacted with shock while consumers have rejoiced at recent pronouncements instructing certain financial institutions to refund money they summarily deducted from clients' portfolios as penalties. The Pension Funds Adjudicator, Vuyani Ngalwana, in making these findings, has cast a shadow over the business practices of these life assurers, coming close to painting them as greedy and even underhanded in the eyes of clients.

Of course, insurance companies are as entitled to make a profit as any other business, but they also have a responsibility to their clients who have their futures invested in their products and services. The consequences of the adjudicator's decisions will affect both of these areas, a no-win outcome for the industry as a whole.

Unfortunately, the latest revelations are only the tip of the iceberg as the insurance sector as a whole suffers from complex and ancient business processes that were designed decades, if not centuries ago. As anyone keeping current with the sector will know, insurers spend millions every year on the latest technology. And while IT allows insurers to speed up processing and offer products and services via different media - such as the Internet - it has done little to make business more efficient and to lower costs.

We need to give them credit that they have been trying for years to use technology to create efficiency and save costs. Unfortunately, the people involved in managing the business processes are generally so absorbed and smothered by what they are doing, and keeping up with the competition, that they do not have the time to see how a new approach could work. Hence, technology solutions are implemented to conform to existing processes and are therefore doomed to automate existing costs and faults; or at best they will achieve only incremental benefits.

Solutions such as simplified administration with embedded workflow and business process blueprints mean these companies have the potential to streamline their business processes, cutting time, costs and people from the equation and delivering better, lower cost service to customers than ever before. Simply using IT to copy traditional, paper-based processes is a waste of time, money and effort.

The solution to the woes of the insurance sector therefore lies in both technical and business process rethinking. Executives need to start at the beginning and simplify their business requirements and the processes that will best serve them. A business process with 80 steps is no longer something to be proud of - it is merely an indication that this needs some serious rethinking and that a lot of additional expenses are incurred without adding the necessary value.

First, identify where the most profitable new business is coming from and redesign all the processes involved without mercy and without the restrictions that already exist in people's heads. Technology can then be used to support and automate the new processes and deliver real value to the organisation.

Automating as much of the non-value-adding work as possible will decrease the daily costs of taking on new business and speed the time it takes for a policy to come into effect and to start seeing regular premiums. This value can then be taken through to servicing the client and maximising the investment the company must make in every customer.

The ability to cut extraneous costs and streamline business processes is exactly what technology vendors plan to deliver. Simply overlaying defunct business processes with the latest technology will not be of any help. Process and technology have to work together to deliver business and cost-efficiencies and this is the only way the insurance industry will be able to improve its long-term outlook and its public image. * Freda du Toit is a director and founder of SDT with 13 years' industry experience.