Life and annuity policy administration is the core software that a life insurer uses to run its policies over their whole life, which can be thirty years or more. It handles two kinds of products. A life insurance policy pays money to the family when the insured person dies. An annuity is a product that pays a person a regular income, usually after they retire.
Life policies are different from car or home policies, which usually run for one year and then renew. A life policy may run for decades. Over that time, the system must collect premiums every month or year, and add bonuses or interest to some kinds of policies. It must update the nominee, the person who receives the money, whenever the customer changes it. And finally it must pay out. So life insurers often use a separate core, instead of the policy administration system built for car and home insurance.
An annuity works the other way round. The customer pays a large amount once, and the insurer pays an income back every month.
Imagine a retired bank employee in Nagpur. At 60, she uses ₹20 lakh of her retirement savings to buy an annuity for life. The system calculates her income from the annuity rate on that date: about ₹11,000 a month. On the 1st of every month, it credits that amount to her bank account. Every year, it records her life certificate, the proof that she is alive. When she dies, the system stops the payments. Her plan returns the purchase price, so the system pays ₹20 lakh to her nominee.
In America, annuities are often sold through financial advisers, who place orders through a wealth management platform. The online application and the servicing of each policy are handled by digital life insurance distribution software, which then writes to this core. Some life policies are issued without a medical examination, through accelerated life underwriting.
Life and annuity administration is one part of the insurance core system. Many life insurers still run cores that are thirty or forty years old, because moving decades of policies to a new system is risky.