Paul Latarche looks at the issues surrounding global market mobility and assesses the options for facilitating worldwide business solutions.
The global insurance market currently lacks significant opportunities for organic growth. In this climate the most obvious way for the major players to increase profits is through acquisition and cost reduction. In this context global insurers must increasingly look to enterprise-wide software solutions that can increase efficiency and productivity.
Mergers and acquisitions (M&A) has been a feature of this market in recent times. High profile examples include the $9.5 billion takeover of Transamerica by Aegon, and the $5 billion deal between AXA and Liberty Mutual. The big hitters of the financial services industries are also targeting it; Berkshire Hathaway's takeover of General Re is a good example of this. The first six months of this year have seen M&A activity in the market increase by 30% over the same period last year.
All this has been causing insurers to rethink their IT strategy, and building a relationship with a specialist software house is now seen as an important part of this. Insurers are increasingly looking for a “one-stop shop” where they can obtain a suite of products and services, ranging from technical support through to underwriting systems and e-commerce solutions, from a company that really knows the insurance business.
Outsourcing IT development work is also now more attractive, partly because it is more cost effective, but also because it provides access to product solutions. New IT systems are being used as an “agent for change”, both internally and in managing the client relationship.
Insurers are therefore much keener to invest in a packaged solution focused at enterprise level, rather than subscribing to the old multi-system culture. This standardised approach is far more consistent with the new global perspective, where the old boundaries of time, cultural difference and geographical separation are steadily eroding.
Market mobility demands IT mobility - the company that will reap the rewards in the coming years is the one that can respond rapidly to change across the entire enterprise. That change can be externally driven, such as by a change in rates or through “emerging markets”, or driven from within - by a merger for example. The “one-stop shop” approach enables the enterprise to respond to these changes quickly and painlessly, without the laborious task of implementing change in a variety of different local environments with all the management pain that this involves.
What other advantages does an enterprise-wide product solution give over a multiplicity of stand-alone systems?
The obvious starting point has to be cost. The stand-alone approach implies overlap of functionality and the deployment of resources cannot be cost effective. Multiple software systems mean higher maintenance and development costs. Organisational standards and strategies are more difficult to implement and manage, and ongoing support implies entity specific staff and localised overheads.
There are obvious benefits in standardising the interpretation of data across the enterprise. Implementing global market requirements means organisations are slower to react to market changes than others with an enterprise wide solution.
An enterprise wide solution lends itself to a global market approach within the organisation. This means staff are more in tune with the company's strategy and goals. This solution also facilitates communication between different business units thereby minimising the danger of uninformed internal competition. With regulatory requirements becoming a larger part of the compliance schedule, a more standard approach can be introduced across all business units.
ROOM Underwriting Systems is a software house dedicated to the insurance sector and has an in-depth knowledge of the market. ROOM's state of the art product, Subscribe 2000, is designed with the global insurance market directly in mind. For example, its use of the Business Diary enables organisations to set in place workflow standards to aid communication at enterprise level. The system's architecture is such that the ability to house an organisation “under one roof” massively reduces costs both in development and ongoing maintenance, while configurability still allows individual business units to work under local constraints. Most importantly it can react to change quickly, allowing its users that competitive edge that they are looking for.
As banking giants such as Goldman Sachs and Lehman Brothers set their stalls out in Bermuda, every company's position in this increasingly competitive global market will be determined by its ability to react to and manage change. Many of these changes will themselves be IT related, for example in the case of internet based business. The companies that can harness IT effectively and who, together with their partners, really understand its potential will be set to move with these changing times and not get swallowed up by them!
Paul Latarche, ROOM Underwriting Systems Ltd.