Life insurers have an interoperability problem. In the Australian market, life insurers need to be able to interoperate with a range of parties: superannuation funds, administrators, and financial advisers, not to mention regulators and other government bodies. And yet the ways that life insurers currently interface with these organisations are often manual and ad hoc.
The case for better interoperability is pretty easy to make. If data flows more easily between insurers and their partners, potential benefits include:
- Quality of service — delays in claims and benefit processing have made headlines in recent months. Greater interoperability between insurers, superannuation funds, and administrators could reduce processing times, ease coordination, and reduce the risk of errors.
- Efficiency — manual data handling involved in internal and regulatory reporting is a significant source of effort for reporting and data analysts. Automating and standardising data feeds here would allow these resources to be deployed elsewhere, or potentially lower overall cost to serve.
- Customer engagement — research indicates that customers who interact with their insurance are more likely to take out additional cover. Tighter integration with the super fund and adviser distribution channels could get life insurance in front of more customers.
We think the solution has three components, ranked here from easiest to hardest to implement:
- Embedding of insurance in superannuation member experience.
- Standardising data exchange between insurers, superannuation funds, and administrators.
- Integration with regulators and other government bodies.
Embedding insurance in superannuation member experience
Australian life insurer, TAL, launched TAL Connect late last year. The digital solution aims to embed life insurance customer journeys into superannuation member portals, allowing superannuation members to manage their cover and make claims.
Solutions of this kind have the potential to improve customer experience. TAL claim that their rollout of TAL Connect to Aware Super members demonstrated that 50% of members wanted to lodge claims digitally using the solution, rather than by using traditional manual channels. They also note that claims lodged through TAL Connect reach claims consultants significantly faster than they otherwise would.
As logical as these solutions are, insurers will face challenges in implementing them. Building digital solutions according to modern user experience and architectural standards requires expertise and capital that many insurers may struggle to muster. And building them is just half the challenge.
Insurers will inevitably experience difficulties getting super funds to adopt their solutions. This is not to say that super funds do not see the value in them — insurance journeys are commonly recognised to be important member experience touchpoints. Rather, insurers will face the same issue that many prospective technology partners face when working with funds. Despite the goodwill and enthusiasm of the business, funds’ technology departments are stretched, with under-resourced backlogs of initiatives spanning years. These implementations may also require engagement with the fund’s administrator, whose technology teams most likely have the same issue. To overcome this, insurers will have to make implementation as low-effort as possible for funds by doing as much of it as possible on their behalf. This will require insurers to develop an understanding of super fund and administrator tech ecosystems and their integration architectures, or to work with implementation partners that already possess it.
Standardising Data Exchange
We do bang on about this one a bit. Group insurance arrangements between superannuation funds and insurers hinge on data exchanged between superannuation registry systems and insurance policy administration systems. For many insurers, much of this data is over a month old by the time it gets to the receiving party, and each fund sends and receives data in a different format.
Superstream is arguably the best example of how an interoperability standard could be used to solve a problem like this. A similar B2B standard could allow insurers, funds, and administrators to exchange data in a far more timely and consistent way than is currently the norm. There is, however, a reason the development and adoption of this kind of market utility is second on our list. Historically, projects like this that require participation from the majority of the industry to be effective have had to be driven by industry regulators, as Superstream was. That said, consolidation in the market gives us some reason to be optimistic a solution here is possible. There are now fewer life insurers and fewer superannuation funds operating in Australia, with further consolidation all but guaranteed. In parallel, there has been an increase in the scale and capability of the technology vendors that service the sector. All of this makes it more likely that a third party could coordinate and support the development of a market utility with a smaller number of insurers and super funds that nonetheless represent a majority of total market share.
Integration with regulators and other government bodies
There is a significant amount of data that insurers need to provide to regulators on a regular basis. Being able to provide this data to the regulator in a seamless and integrated manner would be the last piece in any project to automate regulatory reporting.
Perhaps more interesting for insurers is the data that government bodies hold. Integration with registries of births, deaths, and marriages could enable automatic lodgement of death claims, shifting the burden away from grieving families. A range of government data on health — both mental and physical — could be useful in the underwriting process. We characterised this integration as the most difficult to implement in practice because it must be government-led, and in many cases requires buy-in from state governments with systems and procedures that vary widely across the country.
Achieving interoperability in the life insurance sector will require a multi-faceted approach that includes embedding insurance in superannuation experiences, standardising data exchange, and integrating with regulatory bodies. These improvements promise to streamline processes, improve customer engagement, and foster efficiency, paving the way for a more cohesive and responsive offering to customers.
This article was produced as part of The Quarterly – Data and Technology in Superannuation, Q3 FY24
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Key Contributors:
Kevin Fernandez is General Manager, Market Strategy and Propositions at Novigi, and is based in the Melbourne office.
Sophie Bowen-James is an analyst in the Market Strategy and Propositions team at Novigi, and is based in the Sydney office.