For Life Insurers, the First Step is Admitting there is a Problem (in this case, with Customer Experience)

Rob McIsaac

I had a chance to speak at the recent North Carolina CEO summit and one of the key takeaways was that one of the hardest things for companies in any industry to do is adjust their business processes to reflect appropriately on the challenges and opportunities made possible by new technology and changing consumer expectations. This is especially true in insurance. The majority of carriers have perfected looking at the world from the inside out, which may be fine in an era of limited change, but it is exactly the wrong response in a period of dynamic activity and shifting expectations, punctuated by the threat of new market entrants.

This inside out thinking leads companies to focus on service-level agreements and other metrics which completely miss the importance of getting the actual customer experience right. Companies may well understand the correlation between poor customer experiences and financial outcomes (e.g., poor persistency rates or a failure to loss of assets under management), but they seem to fail routinely in understanding what the root cause events are driving these results.

A personal customer experience with business as usual

As a case in point, I recently went through a series of unfortunate customer service events with a large, national, life insurance carrier. The start came through a phone call to one of their support centers. This particular facility was in Ireland and their function was limited to letting callers know that the company was closed in the evening and would be open during “normal business hours”. Of course, “normal business hours” turns out to be the same hours when most consumers are at work, making it remarkably inconvenient. On the next day, a call during normal business hours and was routed to a call center in Manila. After almost an hour on the phone I discovered that this operation was only able to deal with non-registered products; that issue wasn’t picked up by the VRU when I dialed in. Once we got past that confusion, the call was routed to another call center in the Midwestern United States. At that point, a knowledgeable representative walked through the issue but concluded that since the transaction spanned multiple internal business units there was nothing he could do. The best response was to have an agent call me. The SLA for a call was 24 to 72 hours.

The empowered customer finds an alternative

Two weeks later, when no call came, I gave up and went looking for an alternative company to manage the assets. The multiple contracts involved were 30 years old, so this was not a new customer issue. It was however a life event issue which a new financial institution was happy to address. In this case, the company in question was a brokerage firm who happens to sell life and annuity products on behalf of a range of manufacturers. They were happy to set up the new accounts and handle the 1035 exchanges and had the experience wired before the original life carrier understood what had happened.

So, from a customer standpoint, I was quite happy. I was able to move the funds into an experience where there was a knowledgeable entity on the other end of the wire; the account opening experience was very Amazon-like, inasmuch as routine updates on the status of the transactions came to me in my preferred channel of communication.

Too little, too late

That might’ve been the end of the story except that the life carrier now seemed spurred into action. However, the action invoked processes that are little exercised and had unintended consequences. For example, multiple conservation letters were received offering to discuss options for keeping assets at the original carrier. Unfortunately, the conservation letters arrived after the proceeds had already been distributed to the new financial services company. Another bit of detective work found that the time lapse between producing (and dating) the letters and their actual delivery was 10 days. Based on the postmark, it was six days between the production of the letters and having them sent. They came via a bulk mail rate resulting in further delay.

The operation was successful, but the patient died

Through this whole effort, it is possible that the service-level agreements for every component in the process were met. The whole of the experience was very different than the sum of those parts, however.

Fixing this kind of problem doesn’t need to be particularly difficult or expensive. It does require, however, the recognition that there is a problem. One approach that we see taking hold now is the introduction of the position of Chief Customer Experience Officer. Frequently coming from outside of the insurance industry, from banking or consumer products, the individuals taking these roles have a charge to look at the carriers “from the outside in”. This is a promising development that many more carriers should consider as they kick off 2016.

To discuss this topic further, please contact Rob McIsaac at

Why Aren’t Insurers Doing More With Their Data Strategy?

Jeff Goldberg

While the business intelligence space has matured greatly in the last decade, it has been and remains an area where insurers need to work with a variety of platforms and tools to build out their capabilities. This requires a mix of technical skillsets, business expertise, and vendor relationships. While few efforts at an insurer are more complex or time consuming as a core system replacement, a major BI initiative will eventually touch all aspects of an organization. I will be presenting more on this topic in a webinar on December 1, 2015.

Today there are more vendors that provide a full business intelligence suite which includes the data layer, the industry-specific data models, the presentation and visualization tools, and the pre-built insurance reports and dashboards. But these suites still need to be tailored to and integrated into the rest of the insurer’s environment. Some policy administration system vendors are either pre-integrating with or releasing their own business intelligence suites. This does simplify the deployment but adds another variable to the “suite vs best-of-breed” decision, and until these options have more production exposure most insurers are still opting for best-of-breed.

For now, most of these approaches don’t provide some of the ancillary but very important data and analytics areas such as predictive modeling tools and the models themselves, the use of aggregated third-party data sources, or the emerging area of big data. And no matter what approach an insurer takes, it is a near-universal condition that there will be siloes of historical data that need to be considered with or migrated into the new BI solution, and that will take time and effort.

So despite plethora of vendor options and the general acknowledgement across the industry that good business intelligence is key to ongoing success, why aren’t more insurers further along in their data strategy?

1. Most insurers struggle with multiple legacy systems and siloes of disparate data, and they are still at the first steps of bringing that data together.

2. The data that does exist in the organization is of variable quality or completeness. New systems don’t immediately solve that problem without a broader plan in place.

3. Insurers and core systems have traditionally looked at data from a policy view, complicating the effort to move to new models that tend to take a 365 degree customer view.

4. Many insurers still have no formal data governance in place and lack organizational agreement on data definitions.

A good vendor partner can help put the framework and some tools in place to solve the above four roadblocks, but it requires more than just technology. It requires process and cultural change, which can’t be driven solely by IT.

Many insurers are still looking for a data champion to help push a strategy across the organization and get buy-in from other business leaders. As organizations mature, this data champion role is often formalized as a Chief Data Officer (CDO), and that person typically has a strong data background. But for insurers who are still looking to get a data strategy off the ground, it’s most important to find a leader who is respected in the organization and who is passionate about the value that good business intelligence can bring, even if they have little data experience themselves.

Related Reports:

  • Business and Technology Trends: Business Intelligence
  • Novarica Market Navigators: Business Intelligence Solutions
  • Top Stories for Life/Annuity for October 2015

    Steven Kaye

    We’ve just published our Novarica Industry Intelligence Brief for Life and Annuity for October 2015. These reports highlight some of the most interesting industry stories from the past month, and present them along with Novarica commentary. Commentary is available to clients only, but we’ve posted direct links to the stories below:

    • Senator Elizabeth Warren’s office has released a report alleging carriers are offering non-cash incentives to producers for selling annuities, without revealing those incentives to their customers. Full Story.
    • Knip’s mobile app analyzes clients’ existing coverage to identify gaps and makes recommendations. Full Story.
    • NAIFA has threatened to support legislation cutting the Department of Labor’s funding, in retaliation for the Department’s proposed fiduciary guidelines. Full Story.
    • Employers interested in private benefits exchanges and expressing a preference preferred carrier-run exchanges, according to a survey. Full Story.
    • The EU-US safe harbor for data sharing is overturned, with a few months for a workable solution or solutions. Full Story.
    • InforcePRO, a provider of a policy monitoring solution for life insurance policies, raised $4 million in VC funding. Full Story.
    • The IAIS announced new capital requirements for insurers deemed to be systemically important, with increases averaging ten percent and ranging as high as almost twenty percent. Full Story.
    • For Novarica commentary, clients can download the Brief at

      Previous Novarica Industry Intelligence Briefs for Property and Casualty

    Top Stories for Property/Casualty for October 2015

    Steven Kaye

    We’ve just published our Novarica Industry Intelligence Brief for Life and Annuity for October 2015. These reports highlight some of the most interesting industry stories from the past month, and present them along with Novarica commentary. Commentary is available to clients only, but we’ve posted direct links to the stories below:


      • Knip’s mobile app analyzes clients’ existing coverage to identify gaps and makes recommendations. Full Story.
      • Buying and selling smart homes means taking precautions – like closing out your smart device accounts, or changing the passwords if you’re a buyer. Full Story.
      • KPMG suggests autonomous vehicles, ridesharing, and new safety technologies may drastically shrink the auto insurance market. Full Story.
      • The US government plans to establish a registry for drones. Full Story.
      • AIG’s new Commercial Lines Chief Underwriting Officer has a data science background, not an actuarial one. Full Story.
      • The School of Business at Butler University in Indianapolis is establishing a student-run captive insurer to provide insurance industry experience to students.Full Story.
      • A new homeowners insurance product protects home buyers’ down payments should they be forced to sell their homes at a loss.Full Story.
      • New automotive safety features may reduce claims frequency and lower premiums – but it would help if dealers demonstrated them to car buyers. Full Story
      • State Farm has patented the use of automotive and biometric data to generate impairment scores for drivers, as well as methods for using stimuli to calm drivers. Full Story.
      • Volvo announced it will accept liability for driverless vehicles, but also called for federal regulatory standards to protect R&D efforts from multiple state regulatory standards. Full Story.
      • The IAIS announced new capital requirements for insurers deemed to be systemically important, with increases averaging ten percent and ranging as high as almost twenty percent. Full Story.
      • Progressive provided details on its analytics strategy at the Insurance Analytics Symposium. Full Story (registration required).
      • The EU-US safe harbor for data sharing is overturned, with a few months for a workable solution or solutions. Full Story (registration required).


    For Novarica commentary, clients can download the Brief at

    Previous Novarica Industry Intelligence Briefs for Property and Casualty

    From The Road…Oracle OpenWorld

    Rob McIsaac

    Last week’s Oracle OpenWorld event in San Francisco was interesting (and valuable) on a number of levels. I’d never been to an event with 60,000 attendees before that didn’t somehow involve a professional sports team. The size and scope of the proceedings are impressive. Once you get past the impression that you’ve landed at someone’s house party on steroids, however, there was a wealth of good content to explore and consider.


    The overall theme of the event was, effectively, “all cloud, all the time”. From podium keynotes to smaller / more intimate discussion sessions, it is clear that this is the Big Bet that Big Red has placed for the future and they are happy to talk about it with customers, analysts and the financial community at length. Mark Hurd’s presentations elaborated on this as being a strategy that would allow customers to run workloads on the platform of choice and that their R&D spending would continue to support localized decision making. He also noted that, as a vendor, they didn’t want to box customers in on their decisions, and that they fully expected the move to cloud-based solutions with a fairly logical progression of functions, likely starting with QA / testing.

    To help make that point, the CIO from GE presented an overview of their game plan for the manufacturing oriented conglomerate. With a clear mandate from above, they are driving as much as they can toward the cloud in an aggressive (and well-funded) 5-year plan


    A major issue with cloud-based solutions continues to be security. Larry Ellison chose that as a focal point to address during his keynote. He noted that for best in class cloud solutions, the security offered could now meet or exceed what many companies are able to do on their own. That is certainly consistent with what we see and hear from the insurance carrier community; an increasing number of carriers have noted this to us and specifically identified a “point of view” on who those best in class providers are.

    Ellison went on to note that they’ve seen a trend of security related “issues” where customers have failed to properly implement capabilities inherent to their offerings. To address for the future they plan to default enable these capabilities on the theory that this will help reduce self-inflicted wounds. Be interesting to see how that plays out.

    New “Horsemen” of Enterprise IT?

    Larry went on to highlight who Oracle sees as the prominent players for key capabilities in the future. His current list includes the likes of Salesforce and Workday; the only traditional competitor he sees making a coordinated and effective drive from the past and into cloud based capabilities is Microsoft. Notably missing in his analysis were companies that have 3-letter names.

    Though I walk through The Valley…

    In an era of accelerating change and increased awareness of the importance of finding ways to generate competitive differentiation through technology, this was a fascinating event. Many of the leading edge showcase items from retail or consumer products don’t have a direct insurance tie … except that they are helping to reframe customer expectations. For carriers that’s a key point. Regardless of the tech stack used, moving to address new paradigms will be key to maintaining relevancy in the future. A stop at the Silicon Valley Innovation Center served to emphasize that point. 2016 will be an interesting year. Buckle up.

    Our own Jeff Goldberg will be presenting at the upcoming Insurance Disrupted conference in Palo Alto later this month. More information is online here.

    It’s About Time for a New Board Committee

    Frank Petersmark

    Most IT leaders have experience with the various committees that are part of a company’s Board of Directors structure. It’s common for IT leaders to have to report to a board audit committee on security or other issues, or to a board finance committee as a prelude to asking for a large IT investment. Besides those two committees, many boards have several other committees, including ones for compensation, legal, nominating, governance, and sometimes even one for enterprise risk management, which is usually more focused on financial risks than anything else. What most boards don’t have, though, is a committee that focuses on what many now believe to be the most impactful company function of all – technology.

    That seems short sighted and odd at best, and something else perhaps at worst. In nearly all of the current research and surveys of business executives, including Novarica’s, technology is nearly universally identified as the driving force in the company, for better or worse. Most business executives seem to believe that the very future of their company – its product portfolio, market position, and overall profitability – depends on the company’s ability to effectively master and leverage the right technologies for their business. That begs the question of why more companies do not have standing, board of director level technology committees to oversee nothing less than the future of the company.

    Part of that answer might lie in the fact that old habits die hard, and traditionally that kind of board committee has just never existed. It might also be the case that many companies have IT executive or steering committees already established. Those are generally comprised of the CIO and/or other IT leaders, business function executives, and maybe a sitting board member. However, neither of these are enough of a reason for companies and their boards to ignore establishing this critical function at the highest management and oversight level of the company. In fact, companies who don’t strongly consider the establishment of a board technology committee may soon find themselves at a serious competitive disadvantage.

    And why should be this be so?

    First, the technology investments that most companies consider and ultimately make, certainly rise to a level of materiality so that direct oversight is required. It also makes sense to have technology investments considered independently from the board’s finance committee, whose purview is the entire company, but whose membership often lacks the experience and perspective required for important technology investments.

    Second, the potential for resource impacts across the entire company as a result of technology initiatives certainly rises to the level of materiality where direct and knowledgeable oversight is warranted. Consider the recent trend of core systems modernization occurring at most insurers over the past several years. Often the most under-considered part of these initiatives is the widespread impact they have on resources in almost all of the functional areas of a company. This causes, among other things, resource conflicts and tensions that often lead to diminished productivity and customer facing impacts.

    Third, most technology efforts are not about the technology ultimately, but are about the process impacts on the organization. Sticking with the core systems modernization example, new systems often replace decades’ worth of functional processes – and the cultural biases that have evolved with them – and the degree to which employees and customers are willing and able to adapt to the new processes has a major impact on a company in the short and long term. That is the definition of materiality.
    Fourth, nearly all technology initiatives nowadays are somehow related to market competitiveness. Whether the technology enables mobility to improve customer acquisition and retention, or improves processes for efficiency, or allows for the rapid development and implementation of new products, or enabling the levers required to turn information into action, it has an impact on the company’s ability to compete in their marketplace. Once again, that’s materiality.

    For all of these reasons and more, it is actually past time for companies to implement a technology focused board committee. The fact that it exists at very few companies in the industry only means that the industry, survey responses to the contrary, has not really made the executive management connection to the materiality and impact of technology, as other industries clearly have. That sounds like an opportunity for some insurers to get a jump on the competition.

    Life Insurers Looking for Top Talent and Technological Change

    Rob McIsaac

    Earlier this week, Novarica hosted the latest in our Special Interest Group series of executive round table discussions, which in this case focused on individual life insurers. This line of business currently faces significant technological change, and due to the preponderance of legacy core systems, coupled with increasing customer baseline expectations, it will soon be “crunch time” for many carriers. Specific topics of discussion included potential industry disruptors; the difficulty of finding—and keeping—IT talent, especially for insurers outside of major metropolitan areas; challenges in selling life insurance to the Millennial generation; and the vendor solution marketplace.

    In elaborating on the ripeness of the insurance industry for a disruptor, the carrier and Novarica representatives shared a wide range of perspective on key issues which provided the foundation for an informed, yet informal discussion that continued throughout the entire day. Although all attendees are anticipating an Uber-like disruptor for insurance, clarity on what that will look like remains elusive. The participants described the challenges of balancing long-term investments in “business as usual” with preparations for disruption—particularly around making sure core systems will allow for the agility and decisiveness necessary to respond to a major industry shift.

    A lively discussion ensued regarding the problems insurers face in keeping top talent. A major regional carrier headquartered less than two hours from a major American city shared that he had more than a few open business intelligence positions, and filling them was a serious problem. Others chimed in with similar problems. Couple that with the fact that the average agent is now 59 years of age, and the industry is looking precarious in a range of key skilled positions. Some carriers have recognized the challenge associated with attracting key talent to smaller markets and have taken the offensive to open satellite facilities that are in locations closer to where “the action” is. This is very much in keeping with the ongoing “urbanization” of North America overall.

    There was much cause for hope, however. Many of the CIOs in attendance were happy to share their experience with building relationships with local colleges to speak about the industry and the interesting roles therein. One even mentioned starting to connect with local high schools to support STEM programs that could create a future pipeline for talent. This strategy is not only focused on developing excitement about the prospect of careers in the insurance industry, but also producing graduates with skill sets that are better aligned to the data science, analytical and analysis needs of the modern insurer.

    This led to a discussion regarding issues life insurers face with Millennials broadly, as employees, producers and consumers. For example, the methods of buying and selling insurance are very, very different for Baby Boomers compared to their children. However, not all participants were in agreement—some carriers argued that adoption of technologies like mobile devices wasn’t necessarily skewed by demographics, while others argued that insurers need to pursue a “bi-modal” strategy for their sales and customer service capabilities. Only time will tell, but one thing that Novarica has referenced achieved universal agreement: in the future, “one size fits all” approaches may well turn into “one size fits none”.

    This naturally led to a discussion of the solution marketplace and the associated challenges. Gamification, specifically to incentivize behaviors that life insurers find lead to profitable outcomes, will become increasingly important. The IoT, having gained major traction in P/C circles, is gaining in acceptance in the life sector as well. Carriers are looking to better understand, for example, how wearable technologies could fundamentally change risk analysis and the nature of communications between carriers and customers.

    A great example of this, tying together how both millennial customers and technological change will affect the industry, was a personal story shared by a participant on a recent effort to buy life insurance. A paramedic came to his home and withdrew three vials of blood, necessary for the tests at the three carriers he was considering doing business with. For his Baby Boomer generation, a test like this was likely considered relatively routine (if not painless). Two recognitions came from this experience: as a Baby Boomer, this may be the last time this individual ever purchases life insurance, and the process optimized to address the needs of this generation will be untenable for Millennials, now accustomed to instant gratification and painless processes. The potential for doing underwriting in a completely different way is now within the conceptual grasp of many carriers.

    As always, the format for these Special Interest Group sessions provided for a frank, open, thoughtful and (of course) private sharing of experiences and perspectives. The CIOs involved were happy to be able to share their hopes for and worries about the future, and especially to know that they’re not alone with many of the challenges they face!

    2015: Back to the Future- CIO Insurance Summit 10/6/15-10/7/15

    Mitch Wein

    I recently attended the CIO Insurance Summit in Chicago. Interestingly enough the Chicago Cubs had the DeLorean from “Back to the Future” just outside the hotel. This was because in the movie “Back to the Future Part 2”, the Cubs finally win the World Series in October, 2015. Of course, that evening they won a wild card game, putting them on track to be in the playoffs and possibly win the World Series, a feat not done since 1908. Well, we have arrived in the future, which was clear from the conference. There were a couple of overriding themes in the conference: digital, data and predictive analytics, customer driven services, business driven agility and maximizing IT investment and value. Let’s explore each of these in further detail:

    Digital. Every speaker in the conference talked about digital, digital, and more digital. What struck me were two pictures that SAP showed of the people in Vatican Square in 2005 and 2013 when the Popes were selected. In the 2005 picture, there is only one person holding up a phone and it is a flip phone. In the 2013 picture, everyone was holding a smartphone or a tablet to take a picture. What a change in just a few short years.

    As a result, expectations of how to interface with a financial services provider has changed. It started with banking but now it has reached insurance. For everyone speaking, the connection between the agent’s or customer’s digital device into back end business services and capabilities utilizing automated workflow was a minimum requirement. Agents themselves need to adapt to this new reality.

    While none of the speakers expected agents to disappear, all expected the agents to be augmented by technology in everything they do. Speakers talked about this customer experience being woven together through multiple clouds and different virtual organizations throughout multiple locations across the world. One speaker said we had moved from the “connected era” to the “interconnected era”. But there are challenges that were pointed out. Many insurers are still not well positioned for Omni-channel delivery. Additionally, may carriers can’t deliver solutions quickly using a bi-modal approach to test out these solutions and learn and evolve them in a highly nimble manner.  All the speakers talked about using “Fast IT” for mobile and analytics. But to create ideas to roll out quickly, one speaker said these ideas must come from empathy with the customer and the difficulty with the current customer experience.

    Shortages of people who have key skills in architecture and information security were cited as challenges limiting the ability to move forward. Many carriers were retraining people with legacy skills on new technology because of the value of their knowledge of the business processes. Insurers still have a long way to go. One speaker pointed out that 44% of clients had no contact with their carrier in the last 18 months and only 17% of clients are happy with the communications from their carrier. NTT Data has created a digital maturity model to help carriers understand where they are on their digital journey. One carrier CISO noted that, from his perspective, there was a “negative unemployment rate for the skills needed in their organization”. That’s a notable wakeup call to some of the challenges that have arrived with The Future.

    Data & Predictive Analytics. One of the speakers noted that 64% of all Americans have smartphones generating data.  Automobiles have shifted from mechanical based devices to software based devices, with as much as 40% of the cost of new cars attributed to software and related electronics. New cars are turning into computers and networks on wheels. The speaker from Equinix pointed out that a fully instrumented car in the near future is expected to generate 25 gigs of data per hour! And what about fully instrumented human beings. Exponentially more data!! What about sensors generating data about homes, equipment, etc. Where will all this data go? How will it be governed? How long will it be retained and how will it be secured? Of course the data will be both structured and unstructured.

    Virtually all of the speakers talked about the need to use all of this data within an integrated insurance workflow. It is not really about more data but additional insight and actionable information from the data. An example would be incorporating real-time data into underwriting; with the scoring of this data driving workflow.

    The single view of the customer is a challenge that many speakers discussed. Another challenge is data ownership. One example given here was real-time data about water flowing through the sewer system of a city in California and being geo-visualized on top of locations of highways, schools and factories. When the water main breaks, it will potentially close a school or damage the equipment in a nearby factory. Whose data is it? The city, the factory, the insurance company, the people who maintain the valves of the sewer system? Who owns the data and how it can be used and shared becomes a big issue.

    Customer Driven Services. Channel consistency was much discussed by the speakers. The importance of architecture in delivering this consistency was also noted. GMC Software talked about tools that allowed design teams and compliance to see what was being communicated across channels all at the same time and be able to make consistent changes all at once. New technology capabilities were seen by the speakers as enabling customer driven services. Service abstraction through REST APIs and PaaS were highlighted.  The importance of REST in particular led IBM to acquire Strongloop. IBM talked about how Strongloop enterprise Node generates REST interfaces automatically, dramatically speeding up development. “Fail fast and moving on” was a mantra that one speaker emphasized when discussing how to leverage these tools and bring new capabilities to market quickly.

    Underlying everything was the notion that customers do not need intermediaries to gather information about insurance products and can and contrast products themselves. One speaker pointed out that insurance offerings need to make the insured’s life better. Offering lifestyle, driving suggestions, or recommendations on maintenance for homes or equipment will generate discounts but also prevent losses and increase the quality of people’s lives. One speaker mentioned that a carrier was actually taking a piece of the premium paid and putting it into a retirement account for the insured if there was no claim in 3 or more years.

    Business Driven Agility. Many presenters talked about bi-modal IT. Here, “Fast IT” apps can be delivered quickly and changed easily to meet customer expectations. The “Fast IT” apps are logically separated from Core legacy systems that may still need to evolve using structured slower methods.  There were a number of examples identified in the conference. EasyJet in the UK was identified as having created a whole new experience for the customer. What was interesting was that the seat selection part of the process was running on a Microsoft Azure cloud infrastructure, yet the interface the customer sees is seamless.

    Another interesting example was the Snapsheet app ( for mobile devices which is carrier branded and can be downloaded in real time and used to estimate claims loss by capturing images of the damaged car. We heard from Accenture about AXA Equitable using Duck Creek Rating to deliver a new direct channel in three months. IBM talked about how firms like Primerica were able to reduce mobile application development from 18 months to 5 months.

    Maximizing IT Investment and Value. Investment is being redirected to core system replacements, data analytics, mobile, cloud and software as a service architectures in order to increase agility. It was noted that these were formerly emerging technologies that have now emerged. Another element of maximizing IT investment was that all of the presenters talked of breaking down large projects into small (and faster) deliverables.  The Allstate policy administration 3 year replacement program delivered intermediate value every few months. CNA discussed using Waterfall and Agile for large projects but also having a bi-modal delivery process for small projects delivered in 60 days where return could be measured quickly. Prudential talked about “Running IT like a Business” utilizing a plan, build, run model to look at IT’s operating model, process and controls, application portfolio management and technology roadmap.

    Running IT as a strategic partner which is part of the business as opposed to being a service provider to the business was deemed critical to ultimately having a seat at the executive table. Having a platform capability view that can be assessed in a transparent way and aligned with critical business strategies ultimately improves investment decisions.

    So what’s the big message? IT is poised to experience digital shock and disruption. Its business will change even while basic insurance fundamentals stay the same. Not everyone will win as we move forward. Only the “digital haves” that understand what their competitors, both traditional and non-traditional are doing, understand the emerging technology capabilities, and have a vision of what markets, products and business capabilities they will be providing moving forward will succeed. The bottom line is this — 2015 is the year the future arrived and insurance arrive in the future.

    Related Research

  • US Insurer IT Budgets and Projects 2016
  • Agile at Insurers 2015
  • Analytics and Big Data in Insurance
  • Benchmarking the “New Normal” 50 Advanced Capabilities for Life/Annuity/Benefits Insurers
  • CIO Checklist: Running IT Like a Business
  • “Hot Topics” for Insurers in 2015: Social, Mobile, Analytics, Big Data, Cloud, and Digital
  • Benchmarking the “New Normal”: 50 Advanced Capabilities for P&C Insurers
  • Preparing for Digital Transformation
  • Update from Orlando: Themes for 2016

    Rob McIsaac

    I had the opportunity to participate in the revamped CSC user conference recently, which was a terrific opportunity to visit with both the issues … and the challenges … facing carriers as they move into the final stages of 2015’s Budget Season. With technology developments moving quickly and the reality of raised expectations around what “good experiences” should really be like, carriers face some important prioritization decisions in the near future.


    For carriers we see continued efforts to push toward the concurrent addressing of legacy technology issues while trying to improve capabilities related to product deployments and improved end user experiences for consumers and producers. Time to market continues to be a recurring theme for carriers although in the session I had a chance to facilitate there was a clear distinction raised by some CIOs who, armed with process metrics, were able to confirm that the IT group was no longer the “long pole” in that tent. This was but one manifestation of how better analytics can help organizations be more effective and efficient … while potentially helping build greater trust between IT teams and their “other business unit” customers.


    That said, one of the laments of the CIOs in the session was the overwhelming percentage of their spending annually that goes to “keeping the lights on”. For the vast majority of carriers this continues to hover at or above 75% (equal to the “Run” plus “Grow” spending in our new Insurer IT Budgets and Projects 2016 report), leaving limited headroom for transformational efforts and innovation.

    To that end, there was considerable discussion across the conference events related to both BPO services (as a mechanism for addressing legacy products and platforms) and increased interest in the role cloud solutions can play in the future. This is certainly consistent with other research Novarica has done and positive cloud experiences with SFDC and Office365 seem to be confirming that key workloads can effectively be handled for carriers. Both of these capabilities can ultimately allow CIOs to respond to what we are seeing in the 2016 budget surveys for carriers: a continuation of a theme that requires “doing more … without much more money.”

    Data and Digital

    Analytics and expanded digital capabilities are also top of mind for many carriers. The need to think about distribution system issues, highlighted by the average agent age now riding to 59 in the U.S. should be impacting more investment decisions than it is at the moment. The realization that Millennials now (and forever more) outnumber Baby Boomers does not yet seem to have sunk in for many organizations.

    Innovation, in varying forms, was a topic that emerged in almost every conversation at this event. In addition to the M&A activity that a number of carriers (and solution providers) embarked on in 2015 to build their own set of capabilities, there was considerable interest in the investment funds that a number of carriers have very publicly deployed over the course of the past year. For some small carriers, this raised a concern about the best way forward to competing in a rapidly evolving space. To that end, discussions about the Global Insurance Incubator (Des Moines, IA) and other local shared sourcing events proved interesting. Further, approaches that carriers have made to create innovation centers from Silicon Valley to Silicon Alley were very much on the minds of carriers in the sessions we facilitated.

    Talent and IT Organizations

    Another area of considerable interest related to some of the challenges carriers face with both managing an aging IT workforce to address their current needs, exacerbated by some of the challenges carriers have experienced with attracting and retaining a younger generation of associates to support their technical needs. Recent research we’ve done at Novarica both highlights the “Silver Tsunami” issue and offers insights into actionable steps CIOs can take now to address the concerns.

    The Future

    We have repeatedly said that 2015 has been, in many ways, the year that the future arrived. Competition among solution and service providers heightens their “game” for delivering the functionality carriers will need in their own battles to stay competitive (and relevant) in that future. The transformational journeys for L&A and P&C carriers are evolving along somewhat unique pathways, no doubt tied to the length of the tails associated with their primary product offerings. Irrespective of the lines of business, however, the realization that legacy solutions can’t provide the horsepower needed to address the future state needs of the carriers they support is increasingly clear for CIOs and their senior teams. Armed with a range of solutions for both technical capabilities and hosting options, the future promises to be dynamic. And yes, the insurance industry has clearly entered a period of interesting times.

    Top Stories for Property/Casualty for September 2015

    Steven Kaye

    We’ve just published our Novarica Industry Intelligence Brief for Life and Annuity for September 2015. These reports highlight some of the most interesting industry stories from the past month, and present them along with Novarica commentary. Commentary is available to clients only, but we’ve posted direct links to the stories below:

    • Volkswagen had a built-in cheat mode for passing EPA emissions testing for diesel vehicles. Full Story.
    • CoverHound plans to offer comparison quotes for business insurance, following an investment round led by ACE.Full Story.
    • An Oregon office building can detect earthquakes, sound alarms, send text messages to tenants, send elevators to the ground floor and lock them, and shut off gas mains. Full Story.
    • New York City is receiving $20 million to pilot vehicle-to-vehicle communications technology that would warn drivers of congestion and potential hazards. Full Story.
    • Munich Re has established a Mobility Domain, working with strategic partners to develop risk management solutions for itself and its clients for
      autonomous driving, crash avoidance systems, telematics, and related areas. Full Story.
    • The Carlyle Group purchased Innovation Group for $765 million. Full Story.
    • Progressive is partnering with Censio to investigate the possibility of leveraging mobile devices for monitoring driving behavior without
      sacrificing accuracy or unduly draining device batteries. Full Story.
    • Many small business owners are unaware that various insurers even have small business offerings, according to a J.D. Power study.Full Story
    • Verisk Analytics announced the Verisk Telematics Data Exchange, enabling carriers without existing telematics programs to develop models using its
      data and also enabling portability of telematics data between carriers. Full Story.
    • Fitch and Standard & Poor’s rating agencies disagree on whether reinsurance pricing pressure is moderating.Full Story.
    • Autonomous ocean robots hold the potential for providing real-time hurricane intensity data for cat modeling. Full Story.
    • Carriers are facing an aging underwriter population and a shortage of new underwriters. Full Story (registration required).
    • For Novarica commentary, clients can download the Brief at

      Previous Novarica Industry Intelligence Briefs for Property and Casualty