By now we are all painfully aware of the problems with the launch of the Federal health insurance website HealthCare.gov. NBC News recently quoted a government spokeswoman saying that the website successfully completes transactions only nine times out of ten.
The Federal website is not the only exchange with serious problems. The Washington Post is reporting that over the weekend (on February 23), the state of Maryland fired the vendor building their online health insurance marketplace. Reportedly, Maryland chose the vendor in early 2012 in part due their track record with developing software that processes Medicare and Medicaid claims, reasoning that since the vendor planned to use off-the-shelf components, the project would be more likely to meet the tight deadlines – it had to be operational on October 1 2013 for the initial enrollment period ending March 31, 2014.
However, problems started almost immediately. A Washington Post investigation uncovered that state officials failed to take action when an outside auditor warned that early deadlines were being missed, and that Maryland had not left enough time to adequately “complete, verify and test” the system. On top of that, the contracted vendor, based in North Dakota, hired another vendor, based in Maryland, for all the technical services related to operating the website, for nearly the same amount as originally contracted to develop the site. The second vendor proved to not have enough resources and hired multiple subcontractors. The two vendors are now suing each other.
Some of the issues revealed by this unfortunate situation are ones commonly seen in insurance core system projects. Among them:
- Unrealistic expectations – state officials set an aggressive timeline and did not allow enough time for testing once early deadlines were missed, according to auditors.
- Poor communication – Maryland claims that the vendor misled them about the maturity of the available software, and the vendor hired a subcontractor that did not clearly understand the resource requirements, leading the subcontractor to hire multiple sub-subcontractors.
- Poor governance – the project lacked overall accountability and did not have a process in place to reassess the project to correct issues raised during the outside audit.
- Lack of attention on testing – though not specifically mentioned in the article, the auditors questioned the time allowed for testing. As with most major projects, testing was likely trimmed back and not adequate for validating the major functions of the system.
The result of the poor execution of the project is that Maryland is now forced to find a vendor to rescue the system, while at the same time processing applications through more manual work and increasing the amount of call center support. State officials recently revealed that Medicaid participants cannot be properly identified by the system, costing the state over $30M. As any CIO who has lived through a failed implementation would tell you, you will always spend more money fixing issues than if you had taken the time and resources to get them right in the first place.
If you subscribe to Best’s Review, check out this month’s Technology article on pages 70-72, which features interviews with CIOs Kate Miller of Unum, Greg Tranter of Hanover, Michael Fergang of Grange, Rick Roy of CUNA Mutual, and myself, as well as stats from our US Insurer IT Budgets and Projects 2014 report.
The article notes, “Data, analytics, mobile, and self-servicing capabilities are among the items on insurance chief information officers wish lists.”
Here’s a couple of my quotes from the article:
Underinvested business resources needed to develop and implement new systems continue to plague carriers, [Josefowicz] said. “Even if you have all the IT dollars you want, you can’t deliver an effective system unless you have a time investment from users and those who will benefit from it.
The question shouldn’t be how much are carriers spending on IT, “but rather what effect is it having and how is it driving down the overall expenses and the expansion of the business,” [Josefowicz] added. “It’s a challenge for many business leaders to think that way because they’re used to viewing IT as purely an expenses. But it’s really an enabler, just as expert staff is an enabler.”
Check out the full article in the December issue of Best’s Review.
In my most recent weekly post on thefinancialbrand.com, I discuss what checking account features are most important by those who request “senior” accounts on findabetterbank.com. Low fees and convenient branch access are the primary drivers for which accounts seniors select, but their interest in online billpay is evident. While most expect that seniors don’t use digital channels for banking, our research shows that they do use online banking features, but are less likely to use their mobile phones to perform banking activities.
See full article here: http://thefinancialbrand.com/32992/grandma-wants-online-billpay/
A common complaint I heard as a CIO from my staff was that we had “too many meetings.” In addition to a weekly staff meeting, we had project reviews, meetings with vendors, lunch meetings to review issues, performance review meetings, HR benefits meetings, and, yes, even meetings to discuss agendas for upcoming important meetings. It felt at times like we were in the business of producing meetings instead of solutions for our business and services for our customers.
Our weekly staff meeting had become a time of going around the circle with my direct reports and some others from their teams reviewing every project and issue, but we rarely would start on time or complete the meeting within an hour. It was the least favorite part of everyone’s week. After reading some articles on effective meetings, I began having “stand up” meetings (no chairs), shortened the time to a half hour, started on time with no exceptions allowed and limited topics to only those that required collaboration within IT. In short, we got focused on meeting an objective in each staff meeting: making sure that everyone was getting whatever help they needed on their projects and other issues.
Some of the most effective CEOs hold meetings differently in order to get results. Jeff Bezos keeps an empty chair in the room to remind attendees that the customer should always be the focus. Richard Branson bans Powerpoint presentations, and sometimes has his meetings poolside or at some other non-boardroom location. Steve Jobs was famous for sending away the person least able to contribute to the meeting. (These and other great top leadership meeting tips are available at http://qz.com/94701/top-business-leaders-meeting-tips/)
An article from boston.com lists 12 helpful tips for making your meetings more effective. The tips include not only the standard “have an agenda” and “start on time” suggestions, but also the ideas of “stand up” meetings, starting at an odd time, and bringing a token of some kind to pass around to the next speaker and others. Try something new with your meetings, but keep a focus on getting results from them. Your staff will thank you.
Late last week the news broke that NSA has been working with US Information giants like Google, Verizon and others to monitor and analyze communications under the Protect America Act. The news set off a wave of responses, from privacy concerns to humorous posts on twitter. The PRISM program can be viewed on the positive side as a big data solution for finding and tracking threats to US security; on the negative side, it could be seen as an invasion of privacy. Whatever one’s view on the issues involved, the news may have people in your organization asking questions about IT security.
CIOs should be prepared to respond to questions from the CEO, Board, and business peers about how data security is handled in their companies. Now is a good time to have a discussion with whoever owns data security – whether that’s a Chief Information Security Officer on your team or someone else in the organization. If you don’t have a single owner for data security, then it’s you. When were your data security policies last reviewed? Does your website give customers information on how their data will be protected? Have you had third party security experts review your data security in the last year? Know the answers, because this could be a time where someone asks them and expects you to know.
With help from my teammate and fellow former CIO Rob McIsaac, I have published a CIO Checklist for IT Security planning. This executive brief provides an overview of IT security areas that CIOs need to consider as part of an overall IT risk management framework in their organization. While not intended to be a comprehensive planning guide or to give specific IT security advice, this guide will help CIOs gain traction on developing and reviewing their organization’s IT security plan.
Data security, privacy and how we communicate them is important in establishing trust. For the insurance CIO, maybe PRISM should stand for “Priority: Review Information Security Measures”, so that you are better prepared to answer questions and build the trust of those who use our data systems.
My new INNsights column, Underwriting Evolution and Revolution, is now available in the INN digital issue.
In the article, I discuss some of the evolutionary changes that have occurred in insurance underwriting over the last few years, while of course keeping in mind William Gibson’s dictum that “The future is already here, it’s just not evenly distributed.”
But I also look forward to the potential impact of a completely re-invented underwriting process based on ubiquitous third-party data and powerful analytics:
The industry today is poised on one side of the Innovator’s Dilemma. No established company wants to
risk the transition costs. But it is quite possible that a highly-funded new entrant could disrupt major
portions of the market by introducing a process that is significantly faster and cheaper than even the
most technologically-streamlined current underwriting process, through extensive use of third-party
data and sophisticated analytics.
No one knows exactly when this revolution is coming, but the early indicators are visible today. While
the regulatory and cultural inertia of the industry will protect it from change for a while, this will not last
forever. Insurers must carefully consider their short-term strategies and the pace of change that’s
appropriate for their organizations, but must also recognize that a massive shift is approaching over the
For the full column, see the INN digital issue.
PS: Kathy Burger from I&T has a great article on my expanded comments on this topic from a recent event in NYC.
Chad, Rob, Steve and I recently completed our overview of individual life carriers’ business and technology issues. The report, Business and Technology Trends: Individual Life Insurers, presents initiatives from 36 individual life carriers. Top initiatives include core system version upgrades and agent portal capabilities.
This report is part of a series on key business and technology trends in specific line of business segments in the US insurance industry. These reports are based on the expertise of Novarica’s staff, conversations with members of the Novarica Insurance Technology Research Council, and a review of secondary published sources. Both a free preview for non-clients and the full report for clients is available here.
If you would like to get more information on these topics, please contact Rob at firstname.lastname@example.org or me at email@example.com.
Insurance Networking News has a nice write up of the Analyst Panel from the ACORDLOMA Forum this week.
I was glad that Chris McMahon captured this quote from me on evolution and revolution in the insurance industry, driven by IT changes:
“There is an evolutionary imperative and — closer than some companies think — a revolutionary imperative,” he said. “The evolutionary imperative is about efficiencies and streamlining processes, using third-party data wherever possible to accelerate the underwriting and claims process and companies are looking at their core systems to make sure that they can support those incremental changes that are coming shortly,” he said, including fully-automated underwriting, which is expanding across lines of business.
But he also spoke of structural changes that could occur. “There is a huge potential transformation in terms of the capital markets ability to access risk. The current configuration of reinsurer, broker, primary broker, corporate — all of that structure was designed to solve an information management problem that at its core is not an information management problem any more. Now, that [organizational structure] is held in place by cultural inertia, the regulatory environment, accepted behavior and experience. But it was developed to meet an absolute necessity, and the absolute necessity that it was developed to meet is no longer there.”
The full article is online here, and a my recent INN column has an expansion on some of these ideas.
On the list of important IT projects for insurance CIOs and their IT organizations, you would expect to find Policy Administration Systems, Billing, Claims, Illustrations… but maybe not e-mail. As Rob and I found out recently, however, e-mail issues are a significant pain point for many life/annuity carriers.
While email has become a necessary mission-critical IT service that may be taken for granted by business stakeholders, few systems are more visible if there is an outage or a need for support during a regulatory or legal inquiry. With changing regulations and interpretations, as well as new communication channels and technologies such as mobile and social media, CIOs and their organizations must ensure that email is not only reliable and efficient, but also properly archived and effectively managed to meet wide-ranging retention and compliance requirements.
In our new report, Email Archiving and Compliance: A Checklist for Insurer CIOs, Rob and I present information about issues, best practices and a checklist to consider when evaluating current systems and potential solutions. The report also includes insights from a survey of seven leading Life/Annuity insurers at various phases of researching and implementing systems. Among the survey results, over half of the respondents reported moving to or being willing to move to cloud-based components for their next generation solutions.
The report will help IT leaders start the conversation about their email systems situation and begin planning for any necessary changes. Contact us if you would like to discuss how these issues are affecting your organization.
Accenture published a new survey this week about consumer preference on buying home and auto insurance. The headline of the press release was “U.S. Auto and Home Insurance Customers Turn to Digital Sources to Obtain Information and Quotes, but Prefer Using Agents to Buy Products.”
The first two bullets in the summary of findings were:
- Nearly three-quarters (76 percent) of consumers express a preference for setting up and paying for their auto and home insurance policies in person with an agent, and more than half (58 percent) indicate a preference for doing so via the Web.
- When asked where they prefer to obtain quotes, 43 percent of respondents choose websites, while 26 percent choose over the phone and 26 percent in person. A much smaller percentage (four percent) chooses mobile applications.
The first question seems to have allowed for multiple preferences. Despite the headline, this doesn’t look to me like a preference for agents. This looks like an openness to using agents, but a growing preference for online channels even to buy — more than 50% of consumers.