The new pension freedoms introduced by Chancellor George Osborne in this April’s budget will radically change how pensioners can and will spend their retirement pots. They will receive greater freedom, more flexibility and control of what they spend and how; they may choose for example to spend their whole entitlement in one lump sum, on a yacht. However, what is now a freedom for pensioners threatens to turn into a technical melting pot of complexity for pension providers; many will not have technology systems and software in place able to cope with implementing new business rules that accompany offering a new and complex service. Many will have to do this manually.
Yet, the pension provider battleground will be fought on agility. Those who are slow to market with new services risk losing ground to nimbler competitors. The upshot? Pension providers need to automate their IT systems and specifically their decision and rule making systems to deliver new services, quickly.
The new laws: what do they really mean?
Under previous laws most pension savers had little other choice than to buy an annuity (an income for the rest of their life) when they retire. These would give them regular instalments of their money, at a defined time. But the new pension reforms mean pensioners will now have other options as to how they receive and spend their money. People with a ‘defined contribution’ scheme – the one that most have –will no longer have to buy an annuity. Instead they can access all of their pension savings from age 55 and do whatever they like with them.
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Businesses are drowning in code
As annuities become increasingly redundant, many pension providers will need to change the management of their business decisions and the rules that underpin them so that they can offer different schemes. These business decisions are the processes that help offer the right service to the right person based on a set of predefined rules.
There could be any number of customer factors and variants that define a rule including age, different pension schemes, offers, benefits, and even health data. Yet these hundreds of variants are often buried deep in hundreds of lines of code and when they need to be changed they often have to be updated manually by software developers. Not only is this a time intensive task, it often means a slow delivery to market for new services and an inability to act with agility. In fact, manybusinesses have an IT backlog of change requests that may take months or years to deliver.
Automation is the key to faster delivery
By automating the decision making process and separating the business rules from code, both IT and business people can quickly create or modify rules using an intuitive interface. Businesses can do this by implementing a business rules management system (BRMS), allowing IT and business analysts to collaborate, identify and deploy automated business rules, freeing IT to focus on innovation.
Alike the pensions market, other businesses that offer a number of differentiated and complexly combined services from insurers to benefit providers could benefit from BRMS. They too feel the pain of manual decision making. For example, Unum, a market leader in disability, group life, long-term care and voluntary benefits used a BRMS to ensure faster delivery to market for new services. When tasked with introducing new products and services, the business rules that defined the original services where hard to change, causing increasing complexity costs and delaying change for new services.
“Our business rules were locked up in code” said Julie Gross, Assistant VP of Business Systems Implementation, “and this led to lack of agility. Changes we needed urgently were taking 12-plus weeks to implement.”Most of the logic still had to be maintained by skilled developers.
By using Progress’s BRMS, Corticon, Unum found that they could use business systems architects and analysts to change business rules,to ease the software developer workload. In doing so, the speed at which they could change business rules rapidly increased. For instance, one rule change had been estimated at 40 hours of development effort using the old approach. With the BRMS in place, the whole change was complete and in production in one day.
Optimising BRMS for maximum benefits
Even when companies do have a business rules management system, they are not always aware of all of the benefits it provides or how to optimise its usage. Outlined below are a number of key BRMS advantages the IT department should know:
- Better manage policy and regulation: Policy and regulation behind the business rules remain transparent and is not buried in code, meaning that it provides an audit trail showing exactly which rules were fired and when.
- Offer better response services to customers: BRMS can be a useful guideline for customer agents with best practices on their task list, whether it is diagnostics, upsell or cross-sell.
- Reducing business risk: With ‘decision engines’ at their heart BRMSs are programmed to automatically identify logical errors to ensure safe changes and more efficient and reliable decisions. This reduces the risk from manual updates, tired eyes and human error.
The last advantage is particularly noteworthy. For pension providers and other businesses that work in the financial industry, such as the insurance sector, errors can be costly. The mis-selling of insurance or pension plans could lead to hefty fines and compensation pay-outs for customers as popular retail banks who mis-sold services in recent yearshave found out.
Usability is the cornerstone to any BRMS
For pension providers tasked with bringing new services to market, quickly, an automated, rules based, decision system helps. This system must clearly solve change request pain points – if business analysts and developers still have to work with an interface that looks like code, the effectiveness of the tool is automatically reduced. A one click rule integrity and easy-to-learn and easy-to-use mantra should sit at the heart of any product used for maximum adoption and business impact.