By Cyril Tuohy
Information technology budgets of North American life and annuity insurers are expected to increase by an average of 2 percent in 2013 over last year, according to a recent survey.
That may seem anemic in the midst of a roaring stock market, a generally improving economy and clearer economic signals from leaders in Washington in particular. But it is possible to see a boost in spending, especially in the second half of this year, said one technology expert.
“If some of the economic uncertainty is lifted, spending could increase by the second half,” said Mark Breading, a partner with Boston-based research and consulting firm Strategy Meets Action (SMA). “I could see new projects being kicked off.”
Specific projects attracting information technology dollars in 2013 include the urgent need to create more demand for life and annuity products, and the ability of carriers to provide more capabilities for producers and financial advisers who distribute life insurance and annuities.
“Life and annuity companies continue to invest in technology to enhance the customer acquisition process,” Breading also said. “Distribution is the number one area where technology budgets are increasing, with marketing and new business/underwriting not far behind.”
As many as 46 percent of life and annuity carriers plan to increase spending on distribution and new client acquisition, the survey found.
Breading said one of the biggest technological issues facing life insurers and their distribution channel is how to shorten a sales cycle, one that is traditionally measured in weeks or months. If adopting new technology can help trim the cycle to days and weeks, then the extra spending will have been worth it.
“Our members clearly understand the strategic value of IT,” said Jeff Hasty, senior vice president of LOMA, a professional services organization dedicated to improving the management and furthering the interests of the life insurance industry. “Priorities and investment direction shift as challenges and opportunities unfold.”
LOMA conducted the survey of 67 life and annuity carriers in conjunction with SMA.
Meeting new information technology challenges requires the “flexibility to stay competitive,” Hasty also said, so that the industry can adapt to the changes in the marketplace. Those changes are being driven now by mobile platforms, encapsulated by the tablet-based computing hardware cropping up on every booth at trade shows.
The past two years have seen the industry develop more technology-based tools and products aimed at financial advisers, Breading also said. The ability to present digital illustrations of complex life products, and reviewing clients’ investment options using iPads or Android-powered hardware allows advisers to be more dynamic in their sales presentations.
“They want technology tools that are tablet based,” Breading said.
Another trend uncovered by the survey is that the agency owners, often men and women in their 50s and 60s , are more than happy to turn over the technological facets of the business to their successors, very often their sons or daughters, many of whom grew up in the Internet era.
The cliché of the aging advisor resistant to technology is a “misnomer,” Breading said. Older agents are, in fact, more and more receptive to technology, particularly as they leave their agencies to younger successors.
With Generation X and Generation Y stepping into leadership roles, the push for more technological change is going to grow, whether that means issuing iPads to producers connected to agency servers, or pushing carriers to make their agency portals and databases more accessible to brokers.
For the life carriers, that means they, too, will have to adopt new technologies, whether it be in distribution, policy servicing or new business underwriting.
Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at firstname.lastname@example.org.
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