Buck Bond Group
On the horizon: New technologies for annuity administration

On the horizon: New technologies for annuity administration

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Today, more defined benefit plan sponsors are using group annuities for their pension de-risking strategy. This is good news for the insurers who provide those annuities, but it does come with a more involved, complex, and time-intensive administration process. Companies can either handle this function in-house through combinations of computer systems and good old-fashioned spreadsheets or hand the job over to professional third-party administrators.

While existing technology eases the burden of these tasks, there are still developments on the horizon that will seriously change the game, making the process more efficient, less costly, and far more effective than it is even today.

Here we look at four leading and promising new technologies that, when fully adapted to annuity administration functions, could spark a small revolution in the way this work gets done.

1. Natural Language Processing

The most familiar application of natural language processing (NLP) is the use of chatbots. Chatbots provide a more conversational user experience to annuitants looking for information. With NLP, chatbots can provide annuitants with immediate answers, whether they are online, calling the call center, or even putting questions to their smart devices such as Alexa and Samsung Galaxy Watch.

2. Artificial Intelligence (AI)

AI and machine learning are well adapted to anticipating spikes in annuity conversions based on market movement. This gives administrators the opportunity to do proactive outreach to plan sponsors and participants to help them prepare for those conversions. Finally, the iterative nature of machine learning systems can help suggest new products insurers could develop for the market to provide total wealth, retirement, and insurance protection.

3. Data Analytics

Analytics could show correlations between market movement, conversions, workplace demographics, and so on to predict how annuitants will behave. Beyond the usual business insights gleaned from analyzing data, so-called people analytics can help insurers intervene at strategic moments with educational materials, marketing collateral, and the like.

4. Blockchain

Blockchain’s ability to link records using cryptography, timestamps, and transaction data, and to resist tampering with data, could be the best secure transaction mechanism for recordkeeping involving personal information. This is probably not on the immediate horizon, as insurers looking to use blockchain this way will need to get up to speed on the technology, and clear regulatory hurdles.

All these technologies are currently being used for a variety of business and in personal applications. Their potential for greatly improving insurers’ administrative processes is still in the future—but it’s not a far-distant future.