Today’s independent software vendor (ISV) market is growing at a frenetic pace. With so many SaaS companies entering the space, and with an abundance of creative integrations underway and multiple disruptive technologies emerging, it’s difficult for companies to navigate the complexities of choosing the most appropriate solutions for their insurance customers.
INTEGRATE PAYMENTS TO ROUND OUT YOUR SOLUTION OFFERING
article
©2021 FIS FIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries. Other parties’ marks are the property of their respective owners. 1659322
linkedin.com/company/fis
twitter.com/fisglobal
www.fisglobal.com
Regardless of business size, insurance companies, agents and brokers want to easily view their payments data and integrate it with other parts of their business software.
And the online payments market is growing rapidly.
The payments imperative
Will the next pandemic happen in another 100 years or just five?
Independent software vendors (ISVs) serving the insurance industry can capitalize on this significant growth opportunity
Offering online payment capabilities to your insurance customers increases retention, recurring revenue and customer satisfaction. Integrating payments technology within insurance industry software platforms provides your customers with:
Since then, pandemics have remained top of mind for actuaries, who have written extensively and regularly on the subject. Pandemics are even modelled under some solvency regimes, including Solvency II.
As we enter 2021, there’s a lot more
Accessible payment options that increase customer retention
for actuaries to navigate – and luckily,
a lot more computing power to manage it all.
& complexity
Optimal business performance can be achieved by linking payment data to the software you offer your customers. Examples include speeding the claims process while making it more customer-responsive and offering recurring payment options. Insurance organizations can also improve how they measure responses to marketing efforts. Integrating key payment information into prospecting efforts improves insight regarding purchasing and eCommerce preferences.
Will COVID-19 be with us for decades but be managed effectively alongside the common flu or evolve in unexpected ways?
The holistic view
The payments imperative
Select the right payment partner
NEXT
As for solvency, it’s critical that insurers look at both external regulatory models and the internal models they use to manage their business. Solvency II makes a solid connection between the two, but not all solvency regimes do the same.
Are your solvency models strong enough?
In light of the pandemic, insurers need to first carry out a top-to-bottom review of the resilience of their risk modeling practices. That means not only examining their models but also their risk modeling platform and how it has performed in 2020.
In many cases, the early days of the pandemic saw employees remotely accessing systems en masse for the first time. Additionally, senior managers were asking questions about the future of their business, which suddenly relied on more unknowns and uncertainties than ever.
For their part, actuaries were running models and analysis based on different paths of the pandemic and how it could affect mortality, the economy, persistency of business and claims for business interruption, disrupted travel, health and so on.
What COVID-19 means for risk management
all of which are heightened with a remote workforce.
governance
Not only were largely office-based infrastructures under extreme pressure, but the pandemic also raised concerns about:
security
scalability
Regulatory bodies must also review and fine-tune their models. Both insurers and regulators should take care not to overfit their models to COVID-19. There is plenty of data on the current pandemic and also previous pandemics – from the 1918 Spanish Flu to the 1957-1958 H2N2 pandemic and the 1968-1969 H3N2 influenza pandemic – to better protect solvency across multiple stress scenarios and combinations of stresses.
Future pandemics will happen, but they may not be influenza-based, and they could look very different in terms of frequency and severity, as well as who is affected and for how long. Take care to capture second-order effects, too, such as global recession and psychological impacts.
NEXT
The main question is, how well have solvency models held up under COVID-19? If they didn’t cope well with falling asset values and higher numbers of claims, then it is time to revisit them. This shouldn’t be a one-off exercise; there needs to be ongoing scrutiny of both solvency and pricing models.
Even models that make explicit allowances for pandemics have seemed rudimentary in hindsight. Under Solvency II, for example, the focus of such models is on a fixed increase in mortality and how that correlates with market risk and other risks.
Should there be flat additions for mortality, or should older age groups and impaired lives be affected differently?
Could excess deaths be spread out over a number of years?
And ultimately, should there be a stronger correlation between mortality and the economic fallout of a pandemic?
This simple model needs to be revisited
for internal risk management purposes.
NEXT
At the time of writing, early results of several vaccine trials have shown high effective rates, in some cases over 90 percent, and some countries have already approved these for use with rollouts planned before the year end or in early 2021. Trials are also ongoing to see whether the BCG vaccination, developed in 1921 to protect against tuberculosis, offers any protection against COVID-19.
Whatever the direct outcome, research into vaccines and treatments will teach us more about how the immune system works and, like all medical advancements, should make a generally positive contribution to lowering mortality rates. Other aspects of the pandemic may also have a favorable impact on overall health – from an increased focus on personal hygiene to less traffic-related air pollution and lower stress from flexible working as more people work from home.
Payments provides an anchor that flows into business systems that track sales. It also flows into the general ledger to compute margin. Integrating marketing systems into the holistic view allows for rapid feedback on profitability of promotions. Payment data can expand insight into many aspects or your insurance customers’ business processes.
What does a holistic payments view look like?
The holistic view
Even now, the pandemic’s impact on mortality rates isn’t well understood. In the first half of 2020, many experts believed that the majority of COVID-19 deaths were linked to underlying health conditions and seen essentially as bringing forward deaths from future years. As a result, it was assumed that future populations would then be slightly healthier, causing the average mortality rate to fall in subsequent years.
That school of thought is already becoming dated. Now, discussions center more on the effects of social isolation on mortality, delays in routine screening for cancer and early cancer diagnosis, so-called “long COVID” and the socio-economic consequences of a lockdown-induced recession. These impacts are not well understood yet but have the potential to increase mortality rates.
What’s the outlook on excess mortality?
Review the resilience of your solvency platform and framework
With infinitely more compute power, data and resources at their disposal, underpinned by public cloud infrastructure, today’s actuaries are better equipped than their predecessors to model both white and black swan events.
Considering all of the current pressures on insurance risk management, I would recommend taking following steps to modernize your approach to modeling.
By definition, however, the COVID-19 outbreak is actually a white-swan event: not the first of its kind and therefore predictable and actually likely to occur at some point.
Five steps to building stronger risk models for the modern age
By offering payments capabilities, you can also deepen the partnership with your insurance customers. As they look to their ISV partners for broader solutions driven from your core platforms, payments becomes a logical capability to cement your relationship.
For example, players such as Micros (Oracle) and Aloha (NCR) initially focused on organizing ordering and inventory systems but are now adding payment capabilities to maintain their market share against emerging contenders. Others will have to follow suit.
Deepen relationships with payment capabilities
Regulation has traditionally led insurers’ robust approach to solvency, with Solvency II driving stronger governance and control of modeling results. Now, critically, insurers must look deeper and consider all of the aspects of their solvency models that haven’t worked as well.
You must also ask yourself serious questions about the changing nature of the workplace in the pandemic. Will what started off as emergency lockdown measures become a more permanent shift and keep many staff working from home or remotely more often? Should cloud computing and SaaS-based platforms form part of your protection against future challenges to business continuity?
Select the right payments partner
Visit Developer Engine
It’s critical that you have a payments partner who offers you multiple business model options to cover your needs now and into the future.
When it comes to capital management, you need to know that your reserves can withstand the very worst-case scenarios: extreme, black-swan events that would otherwise cause insolvency.
On the upside, global research continues into vaccines and treatments for COVID-19.
general ledger
previous
NEXT
previous
previous
Martin Sarjeant, senior vice president, Product Management, Insurance, FIS
But many of the assumptions that make up risk models
are best estimates.
Many insurance ISVs need to begin offering payments or already have a payments partner. The question is whether you have one that can support the growth of your company for years to come. While smaller or niche payments players may have offered a quick, easily integrated solution when you initially explored integrating payments into your software, you need to ensure you have a payments partner who can grow as your business expands in size.
Look at the stresses and combinations of stresses that you are running on your models. How did any pandemic modeling you carried out compare to actual COVID-19 results and would it have protected you in previous pandemics? Or should the stresses be higher and more explicitly targeted?
In terms of solvency, it’s important to gauge how well your stochastic and stress tests on models actually protected your company. What’s more, could you have survived any additional shocks after the initial market falls in March? By focusing on reverse stress testing, you can uncover any hidden risks and vulnerabilities that may also cause insolvency.
Assess stress testing
Consider layering on several mortality scenarios, but be prudent and make sure you underestimate for annuitant mortality and overestimate for life assurance mortality.
Some basic assumptions should also be made in the stresses about the pattern of mortality either worsening due to increased deaths from COVID-19 or the impact of long-COVID improving because of improved public health, hygiene and resistance to future viruses or flus.
However, remember that at this stage there is still a danger of over-modeling, overthinking and spurious accuracy, with not enough data or knowledge to support more complex models.
Rethink mortality assumptions
Tying back to your solvency platform and framework, actuaries need to be able to answer senior managers’ most fundamental questions, fast. At the start of the pandemic, C-suite executives were desperate to know what could happen next, the impact on their solvency ratio and whether risk teams could model all this remotely.
To consistently provide a rapid response in these circumstances, you need a risk platform that is well governed, scalable and accessible in the cloud, with the flexibility to model changes quickly.
Deliver timely information
Solvency modernization is now a reality for insurers around the world, with many countries echoing the spirit and format of Solvency II and the upcoming Insurance Capital Standard.
Beyond compliance, these supervisory guidelines are helping create a stronger insurance sector and improving protection for policyholders and the overall management of insurance companies. What better reasons to modernize solvency through both your technology and your risk modeling framework?
Push ahead to meet new solvency requirements
To adapt to a new world of post-pandemic risk, firms must cast a critical eye over their current modeling practices and accelerate solvency modernization.
In the century between the Spanish Flu and COVID-19, actuarial science, modeling and technology have come a long way. By renewing their approaches and taking advantage of modern innovation, today’s insurers can face the challenges, crises and extreme events of the next 100 years with greater confidence.
However, there are still clear lessons
to learn and much room for risk management to improve going forward.
previous
Deepen relationships with payment capabilities
Solvency modernization is now a reality for insurers around the world, with many countries echoing the spirit and format of Solvency II and the upcoming Insurance Capital Standard.
Beyond compliance, these supervisory guidelines are helping create a stronger insurance sector and improving protection for policyholders and the overall management of insurance companies. What better reasons to modernize solvency through both your technology and your risk modeling framework?
Push ahead to meet new solvency requirements
Tying back to your solvency platform and framework, actuaries need to be able to answer senior managers’ most fundamental questions, fast. At the start of the pandemic, C-suite executives were desperate to know what could happen next, the impact on their solvency ratio and whether risk teams could model all this remotely.
To consistently provide a rapid response in these circumstances, you need a risk platform that is well governed, scalable and accessible in the cloud, with the flexibility to model changes quickly.
Deliver timely information
Consider layering on several mortality scenarios, but be prudent and make sure you underestimate for annuitant mortality and overestimate for life assurance mortality.
Some basic assumptions should also be made in the stresses about the pattern of mortality either worsening due to increased deaths from COVID-19 or the impact of long-COVID improving because of improved public health, hygiene and resistance to future viruses or flus.
However, remember that at this stage there is still a danger of over-modeling, overthinking and spurious accuracy, with not enough data or knowledge to support more complex models.
Rethink mortality assumptions
Look at the stresses and combinations of stresses that you are running on your models. How did any pandemic modeling you carried out compare to actual COVID-19 results and would it have protected you in previous pandemics? Or should the stresses be higher and more explicitly targeted?
In terms of solvency, it’s important to gauge how well your stochastic and stress tests on models actually protected your company. What’s more, could you have survived any additional shocks after the initial market falls in March? By focusing on reverse stress testing, you can uncover any hidden risks and vulnerabilities that may also cause insolvency.
Assess stress testing
Regulation has traditionally led insurers’ robust approach to solvency, with Solvency II driving stronger governance and control of modeling results. Now, critically, insurers must look deeper and consider all of the aspects of their solvency models that haven’t worked as well.
You must also ask yourself serious questions about the changing nature of the workplace in the pandemic. Will what started off as emergency lockdown measures become a more permanent shift and keep many staff working from home or remotely more often? Should cloud computing and SaaS-based platforms form part of your protection against future challenges to business continuity?
Review the resilience of your solvency platform and framework
Like many types of businesses, insurance companies, agencies and brokerages must continually seek opportunities to improve their business processes and increase efficiencies. Moreover, they must
find ways to continually improve their customers’ experiences. Offering integrated payments can accomplish both goals in areas such as
claims processing.
The largest insurance organizations may have sufficient scale to design
their own unique payment systems or acquire a software firm. Many organizations will rely on the close collaboration with their ISV partners to help launch new payment products. Key to those successful efforts are the abilities of the ISV to collaborate with insurance customers to offer professional services and implementation methodologies to increase speed-to-market of this new offering.
According to Grand View Research, the global digital payment market is expected to reach $236.10 billion by 2028 and is projected to register a compound annual growth rate of 19.4% from 2021 to 2028.
Streamlined billing and collections
Reduced cost of policy servicing
Revenue generation through value-added services
collections
payments
marketing
accounting
In response to challenges by disruptive ISVs equipped with solutions that integrate payments, some ISVs are introducing software to provide clients with a more holistic view of overall performance.
For instance, you may want to take on more of the sales process, customer servicing and statement management to put your brand more forward and gain more of the margin from payments. Therefore, it’s critical that you have a payments partner who offers you multiple business model options to cover your needs now and into the future.
DEVELOPER ENGINE FOR UNIQUE PAYMENTS EXPERIENCES
Explore Developer Engine
Schedule a Call
Fifth Title Goes Here Lorem Ipsum Et
Are You Ready for the Next 100 Years?
How Risk Models Can Adapt to Extreme Events
What COVID-19 Means for Risk Management
In a Post-pandemic World, Solvency Modeling Must Change
Are You Ready for the Next 100 Years?
How Risk Models Can Adapt to Extreme Events
What COVID-19 Means for Risk Management
In a Post-pandemic World, Solvency Modeling Must Change
Test line goes here test line goes here
Test line goes here test line goes here
Test line goes here test line goes here
Test line goes here test line goes here
Test line goes here test line goes here
Test line goes here test line goes here
Test line goes here test line goes here
Test line goes here test line goes here
Title 1 Goes Here Goes Here
Title 2 Goes Here Goes Here
Title 3 Goes Here Goes Here
Title 4 Goes Here Goes Here
Title 8 Goes Here Goes Here
Title 7 Goes Here Goes Here
Title 6 Goes Here Goes Here
Title 5 Goes Here Goes Here