Optimizing closed blocks: A strategic imperative

Written by: Ron Scheese

What should a Life and Annuity company do with a closed block portfolio of complicated, benefit-rich, high-maintenance policies and contracts? The simple answer: optimize.

Optimizing the value of closed blocks is a strategic imperative. Closed blocks are an ideal target for companies looking to liberate financial and human resources. Moreover, improving the margins on portfolios not actively sold has a positive impact on top and bottom line performance.

As elevated unit costs are a function of high expenses and low volumes, a particular subset of closed blocks stands apart, particularly ripe for address. These small, complicated closed blocks often share the following characteristics:

  • Modest volumes of policies/contracts
  • Products designed to meet the needs of a niche target market
  • Harbor unique benefits and esoteric product features
  • Demand expensive, highly skilled business people and custom technology solutions

How can carriers manage the most vexing closed block portfolios effectively and efficiently? In short, the optimal solution for closed blocks maximizes margin, unlocks latent value, and delivers capital to fuel strategic initiatives. The successful solution is rooted in preservation of the policyholder-carrier relationship, while leveraging technological efficiency offered by a modern solution.

Allowing the insurance company to maintain intimate customer contact and employ the power of a low-cost technical platform is the ideal mix of insurance company and outsourcing vendor capabilities. As such, the SaaS/ASP model is the most powerful solution for closed blocks – especially the portfolio of complicated, benefit-rich, high-maintenance policies and contracts.

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