The industry initiative looking to find a common electronic platform for life insurance has come to a halt. After two years of witnessing various changes in leadership, direction and insurance company support, the remaining members in the Life Company Central (LCC) project have decided to stop the project. The main reason is cost: over $10 million to develop.
Standard Life, Manulife, RBC Life and Sun Life – the remaining four members of the original seven – came to a unanimous decision regarding the project’s end. The decision came after phase two of the project was rejected.
The purpose of phase two was to understand the distributor and carrier readiness and to obtain a more detailed understanding of the costs associated with LCC. Most importantly, the phase two goal was to make a decision to proceed or to discontinue the initiative. As a result, each member company agreed to bury the project since a considerable capital investment would be needed to fund LCC.
Darren Denomme, Director of Business Management, Retail Life insurance at Sun Life and a member of the LCC Executive Steering Committee, says that to date the insurers invested roughly $1.3 million, which he says covered the cost to build the business plan and to analyze it. He points out that there was an equal amount spent internally in terms of time used to analyze the project, “there were significant internal resources allocated.”
He explains that the cost to build LCC was quite significant and says that a rough estimate stood at between $6 and $10 million.
“There were two other major costs. One was establishing our connectivity to LCC. So you build LCC and then you have to build links between the carriers and LCC and links from the distributors to LCC…so you have to build something and then you have to build something for the data flow.” Mr. Denomme estimates that the cost to establish connectivity would be another several million dollars.
He adds that “The LCC business plan showed that there would be significant transaction fees from carriers and distributors to use LCC, so it was not free to use…once you even build it there would be transaction fees that became prohibitive.” He highlights that the transaction fees would have varied between $0.20 and $5 dollars per transaction.
Overall, Mr. Denomme says that the $1.3 million were well spent. “All the carriers went in with the best of intentions…. We needed to do the work to thoroughly understand what the issues were. We come away with some real significant learning that each of the carriers can now carry forward to deal directly with strategic partners. We really have brought closure to this, it is not like we took a quick look and walked away, we looked at many alternatives and did a thorough analysis. At this point in time, we decided not to go ahead, but it is not to say that in couple of years that would not change.”
The Insurance Journal also contacted Tracey De Leeuw, the Project Planner and the Consultant hired for the LCC initiative. Ms. De Leeuw confirmed the news, however due to a confidentiality agreement, was unable to provide further details.
The LCC website located at www.lccexchange.net will no longer be available.