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How Insurers Can Modernize Their Asset Management Technology

Deploying new fintech solutions can be daunting, but the right partner offers insurers decreased risk and a streamlined process.


When it comes to the effects of emerging technology on their sector, most insurance leaders have their eyes wide open. According to Accenture, 58% of insurance executives believe that rapid advancements in new technologies and scientific innovations are poised to disrupt their industry.

As many insurers pursue digital transformation journeys in anticipation of industry disruption, they tend to focus their efforts on modernizing customer-facing processes – in fact, 83% of insurance leaders believe they need to elevate their customer relationships to succeed in a post-digital world.However, they shouldn’t overlook the value to be gained by modernizing their asset management systems, especially as we dive deeper into lower interest rates brought on by pandemic-fueled economic recession.

With interest rates remaining low, insurers will have to double down on their commitment to complex alternative investments and their in-depth asset servicing requirements in order to generate alpha. Fortunately for insurers, a booming market of fintech solutions presents the possibility of more efficient asset management operations and, ultimately, better returns.

However, adopting such tools is easier said than done, especially for insurers with legacy technology platforms. The modernization of asset management processes and the deployment of targeted technology strategies can be a daunting challenge, but with the right technology partners, insurers can navigate the complex IT process with decreased risk and satisfying results.

Emerging tech’s potential in insurance asset management

Many emerging technologies have exciting applications in the world of insurance asset management. For example, blockchain brings significant promise of transparency and communication between private capital managers and their investors, even potentially providing enhanced, real-time updates on asset valuations for a notoriously manual class of investment.  

Robotic process automation offers the opportunity to decrease data entry needs and other administrative burdens that come with managing a portfolio and completing back-office reporting, freeing up team members to work on more strategic tasks and decreasing the risk of human error. Cognitive computing and self-learning are also emerging, allowing complex asset owners like insurers to lean on technology solutions to understand market trends and choose what steps to take next with their investment strategies.

Modern technology solutions often exist within the cloud, and as insurers look to take advantage of emerging and established fintech solutions, adopting cloud-based tools offers faster and simpler ramp-up periods, unlike typical IT development and deployment projects of the past. But before insurers adapt such capabilities to their asset management operations, they should consider how to integrate these new processes with their legacy platforms and strategies.

A modernized development approach

Moving to agile development and away from waterfall development can help insurers navigate the deployment of new technology. As the traditional project methodology of IT, a waterfall schedule involves plenty of upfront work and preparation, including meeting with stakeholders, planning the project scope, securing funding, establishing product teams, and scheduling the releases of products that are intended to be fully formed and functional upon their debut.

The modern IT approach of agile development involves cross-functional teams focusing on a shorter delivery cycle made up of “sprints”. Unlike the waterfall method, agile development prioritizes quick release of functionality to be perfected after it’s available. The approach allows for more segmented software and standalone functions, making maintenance and updates much simpler when IT team members can avoid working through millions of lines of code to fix one capability within a platform.

Northern Trust’s own internal team embraced an agile approach in the development of the cloud-based Investment Accounting and Analytics platform targeted specifically to insurers. Our IT team embraced a “build to learn” culture and focused on learning from feedback over time to deliver a final product that incorporated early user testing. Leaning on shorter product development feedback loops and smaller software delivery teams made the process nimbler and empowered the team to design a more client-centric platform than it would have if relying on traditional IT workflows.

Modernizing asset management processes and technology is best done in an agile, modular way. Not only does it lend itself to a quicker, more informed development process, but it forces capabilities to be detangled from other platforms so they can stand on their own and be updated independently in the future. Its quicker development timeline also decreases the possibility that by the time implementation is completed, the insurer is left with an outdated process with diminished ROI.

Partnering through the uncertainty of digital transformation

As insurers navigate the digital transformation of their asset management systems, the right outsourcing partner can offer a powerful technology solution and be responsible for system up time, implementation of enhancements, and overall data integrity of output.

But even beyond these services, insurers should seek a partner who takes care of not only the technology responsibilities but also provides a service and strategy perspective. While some tech providers are prepared to hand over technology and onboarding, the right partner provides ongoing consultation on an insurer’s digital transformation efforts and use of their technology.

Asset management systems are core to helping insurance companies thrive in an increasingly complex investment landscape, and the necessary technology solutions and partners exist to modernize complex asset owners’ platforms and processes. When insurers make the investment in their asset management programs, they can count on seeing the payoff – in both efficiency and returns.

 


1 Accenture, “Technology Vision for Insurance 2020”
2 ibid

Christopher Dvorak

Head of Insurance Solutions
As the Head of Insurance Solutions, Chris leads all aspects of Northern Trust’s relationships with insurance companies, including their insurance asset bases, as well as their defined benefit and defined contribution plans.

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