We find this analogy useful. We think you will too…
In-force management is like mining for valuable minerals. There is significant value in the in-force business to be uncovered that can benefit both shareholders and customers. But it is hidden today, and requires specialist skills and some determination to get at it.
But unlike mining in static rock, in-force management works on a living business that is developing or running off over time. In this way in-force management is more akin to mining an iceberg that is melting away over time. The earlier you mine, the more value you can get at.
Layers in the iceberg
Above water, minerals in the iceberg are relatively easy to detect and extract. In in-force management of an in-force business, there are also initiatives which are quick to deliver and easy to identify. We almost always start with some of these quick wins.
But nearly 90% of an iceberg underwater, and nearly 90% of the value lies there hidden too. The vast majority of value from an in-force management programme also cannot be seen or gotten at easily at the start. There is usually a lot more value in the in-force business than you can see on day 1.
We mine deeper layers by sequentially digging deeper into a book. As we find a seam of value we follow it until it runs out and this uncovers the next layer. Mining can uncover significant new sources of value every year that pay for themselves many times over. This can make sense for many years. An in-force management programme will last 2-5 years depending upon the in-force business.
The melt profile matters
The fact that the in-force business melts away over time like an iceberg influences the approach. You will find that the economics of in-force management do not allow you to mine as deep on an in-force book that is small in size or has a fast run-off profile. By contrast, the large and long-duration books have many more in-force management opportunities and justify more investment of time and resource.
Each book is also unique. Not just in melt profile, but also in what pockets of value exist in the book. The same techniques can help detect value in different in-force businesses, but initiatives need to be tailored for each book, country or company.
Tools for the job
The mining industries’ capabilities in finding and extracting valuable minerals has developed dramatically over decades and centuries. The use of tools, technology and automation has driven enormous productivity improvements in that industry.
At inforcehub we want to lead productivity improvements in in-force management to help insurers mine more of their icebergs. The discipline of in-force management is still at an early stage of development and we believe that there is significant value for insurers and the industry overall if we can connect the professionals involved in in-force management and deploy scaleable technology and analytics as tools to make mining the in-force easier, quicker and more effective. They can then deliver more value for the shareholder and the customer.