Four Obstacles Annuity Providers are Facing in 2015

Mitch Wein

Recently Novarica hosted a Special Interest Group Meeting in Boston for Annuity providers. The meeting was well attended with four key themes emerging:

  • Product Time to Market
  • Straight-Through-Processing and Related Issues around NIGO
  • Electronic Signatures
  • Security

The executives in attendance were looking at how technology can solve problems and enable capabilities. What struck me was the paradox of technology providing better and better ways to reach the customer, while at the same time introducing new issues that didn’t exist earlier. One participant noted that “Annuities are sold, not brought”. This comment provided insight into this area of insurance and why it is unlike other area. Clearly the customer and agent experiences are very important. How analytics and mobile can help is still being explored by the carriers.

Another area of keen importance is the product itself and the ability to modify or introduce new products quickly. We talked about innovations that are on the horizon, especially around customized product offerings that can be assembled in real time out of product features that have already received regulatory approval. Yet, today’s existing legacy systems can’t support these types of time to market innovations. A third area of importance is the ease of doing business for the agent & broker. E-app, illustration and e-signature have been deployed to facilitate straight-through-processing but in the non-captive third party distribution channels, the effectiveness has been more limited. Security is the overlay on top of everything. Carriers feel they are in a good position but noted breaches in firms like Target and Home Depot indicated that what they perceive may not be accurate. We talked about ethical hacking and proactive penetration testing as mechanisms to validate assumptions. All-in-all a terrific an interesting session.

Our next special interest group will be taking place June 25th in Boston, MA. This meeting will be geared towards Regional P/C carriers. If you or a colleague would like to attend, please feel free contact me at email.

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Special Interest Group 2015: Annuities

Rob McIsaac

Earlier last week, we hosted our first special interest group meeting focused exclusively on annuities. Increasingly we have found carriers value opportunities like this to spend dedicated time on very specific lines of business. We were certainly not disappointed this time! One carrier noted that “This is the first event I’ve ever been to that is focused only on annuities, and I’m very excited about that!” Indeed.

For the event, we shared updated information from our Business and Technology Trends report series. The market continues to evolve as new products are brought to bear which improved competitive positioning for carriers but which may test existing technology infrastructures in ways that were not anticipated in the past. One of the key business drivers for the future is “time to market” for new and enhanced products and, in many cases, legacy systems are simply not up to the task of supporting new variations in product features or distribution channels. A variety of approaches for dealing with this were discussed by the group.

Another key issue area relates to electronic applications and the broader subject of Straight-Through-Processing. We used the meeting as an opportunity to unveil new research that we’ve done highlighting carrier deployment patterns and experiences with both electronic applications and electronic signatures. This research will be part of a future Novarica publication but the preview at this session provided for a highly engaged interaction. One of the things that we were particularly pleased with was our ability to share “lessons learned” with the various vendors which can provide key information to other carriers as they put together their own implementation plans.

Another area which prompted lively discussion was security. No doubt fueled by concerns associated with recent breaches at places like Target and Anthem, CIOs are acutely aware of the potential risks and challenges. In addition to talking through some of the characteristics of current environments, we explored a range of best practices which carriers can consider in their future investment plans. The use of ethical hacking as a means of exposing, in a controlled manner, important gap areas was particularly interesting.

This was the third in our series of special interest group meetings and we are particularly pleased with the level of interest and engagement that they are providing. If you would like to review the agenda or discuss the research material we shared at the session, please let me know. You can reach me directly at email.

Our next webinar for a specific line of business will be on Wednesday, March 18th at 2 p.m. (ET), and will focus on the business and technology trends we are seeing in the group insurance space. If you would like to participate, please make sure to pre-register today to secure your spot.

This is also a good time to remind Research Council members that our annual meeting is coming up at the end of April in Providence, RI. We already anticipate that there will be time dedicated to a follow-up discussion between the annuity carriers that participated in last week’s session. We look forward to seeing you there!

The Experience is the Product

Matthew Josefowicz

I had a chance to present on customer experience in insurance recently at the Insurance Performance Association. It was an interesting event featuring several engaging speakers from outside the industry as well as business leaders and consultants from within.

My presentation focused on the role of technology in supporting customer experience, especially in a technology-transformed world where customer expectations are set by other, more advanced industries like banking and online retail. This is an important are of research for us at Novarica: our report on Insurer Digital Capabilities focused heavily on customer and stakeholder experience, and one of our recent Research Partner Program reports focused on this topic, especially related to ECM.

But even more important than deploying technology-enabled capabilities effectively is the incorporation of experience into the insurance product itself. As the slide below from my presentation illustrates, the overall experience of feeling covered is what insureds are buying, not just risk transfer.
(R)Evolution in Customer Experience in Insurance

Rather than start from a coverage and price, insurers may want to start with the customer’s need.

This is also the topic of our latest “Novarica Quick Quote” slideshare.

Strategic Alignment for Insurers

Matthew Josefowicz

As part of my presentation this week to the annual PCI Technology Conference on Technology Trends in Insurance: Change, Legacy, and Disparity, I discussed the need to align product, segment, channel, and process/technology in insurance.

Although some insurers have been discussing this need for a long time, changes in the data environment and information technology capabilities, and attendant changes in customer expectations, make this more important than ever.

Novarica PCI Tech Presentation 2014b

  • Product. Insurers need to broaden their definition of product. There is a disconnect between the way insurers see their products, which focuses exclusively on coverages and pricing, and the way customers see the product, which includes the overall experience of buying and being a customer. Insurers need to start from this customer perspective in order to design a product that effectively meets a market need for more than fair coverage at a fair price.
  • Segment. All business is program business. Insurers already have experience in aligning product, segment, and channel – it’s called “program business.” The insurance industry needs to apply this approach to the rest of their product portfolio.
  • Channel. Different segments will buy different products through different channels. Insurers should make sure they’re leveraging the right channels to sell the right products to the right segments, and not assume that they can push any product to any segment through their preferred channel.
  • Process and Technology. All of the above is only possible with the right processes and technology that are aligned to support the creation and delivery of the right products to the right segments through the right channels. Insurers should re-examine their processes in the light of currently available information technology capabilities and the experiential needs of their target market segments.

Only by aligning these four areas will insurers be able to compete for modern customers. For more insights from my presentation, Novarica clients can download the full deck here.

Systems of Engagement, Core, and Analytics are Major Topics at IASA

Our team is just back from the annual IASA conference, which provided the opportunity to meet with dozens of CIOs and solution providers over a couple of days.

In general, insurers and vendors appear to have been investing heavily in technology over the last year or so, with carriers launching major initiatives in core systems and analytics and vendors improving their products both in core engineering and in UI.

In contrast to prior years where technology investments appeared to be focused primarily on cost reduction or mitigation of technology risk, there was one overwhelming theme in the private discussions and panels our team participated in: meeting rapidly changing customer demands.

While we continue to see very strong interest and activity levels in core systems among insurers of all sizes and sectors, there was a notable focus this year on systems of engagement as well. Agent portals, customer portals, responsive technology, and mobile were frequent topics of conversation among the carriers our team met with. Some insurers feel overwhelmed by the problem and lack the expertise to develop a strategic roadmap in an effective way, and there’s a high level of interest in vendor partners that can help them get there.

We found many of the same themes in discussions at the Research Council Meeting. Our report from that meeting is available online and is free to clients and council members.

Turning Insurance Outside-In

Matthew Josefowicz

Across the great formal presentations, panel discussions, and roundtables at our 7th Annual Council Meeting this week, one theme kept jumping out for me: the need for insurance to become more demand-led in market, operational, and technology strategies.

As an industry, we have a tendency to view the world from the inside out. We need to reverse that perspective and look at the our industry and our operations from the outside in. We need to start from market and operational needs as we plan product, service, and technology strategies, rather than starting from our own understanding of capacities.

Our keynote speaker, data and analytics expert Adam Braff, hit on this theme in his opening presentation on “Cooking with Big Data,” with the first of his 5 guidelines: “Figure out what people want to eat before you go shopping.” Too many analytics efforts start with gathering data rather than thinking about how insights might be operationalized to drive better business results. The supply of data and analytical capability is leading in too many cases, rather than the demand for insight.

My presentation on Trends in Information Technology and Insurance focused on how changes in the ability to access, communicate, and analyze information means that buyer and distributor expectations about speed, flexibility, and even value propositions, are diverging from insurers’ own understandings of the world. The supply of risk analysis and distribution is leading in too many cases, rather than the demand for coverage.

In our CIO panel, a common theme of the panelists from AFLAC, The Hartford, Great American, and New York Life Investment Management was re-orienting IT organizations to be more focused on the creation of business value. This involves educating IT staff about business needs and goals as well as educating business leaders about the implications of their requests. The supply (and cost) of technology is leading in too many cases, rather than the demand for capabilities.

This will be a massive shift for the insurance industry, but one that is necessary to undertake. Access to information, communications technology, and analytical capability is democratizing the ability to price and sell risk. Insurers (and insurer operational and IT executives) that focus on the demand for coverage and capabilities will be better positioned to meet that demand. Those that don’t may soon find themselves with much less demand for what they have to offer.

The 7th annual Novarica Insurance Technology Research Council Meeting was held in Providence RI on April 30-May 1, and was attended by more than 70 insurer CIOs and senior IT executives. A report based on the discussions at the meeting will be published shortly.

Other recent Novarica reports on this theme include:

 

Straight Through Chicago

Rob McIsaac

Last week’s LIMRA/ LOMA Retirement Conference in Chicago provided an interesting overview and update for what is happening in the industry today. Jim McCool from Charles Schwab noted the importance of having carriers move to establish trust with consumers, and the need to de-clutter and simplify products and business models. He highlighted the example of Apple as a company that has taken a potentially complex space and made it elegantly simple with a terrific user experience that inspires trust and confidence.

This was a great build on a presentation I had an opportunity to deliver at the conference on Straight Through Processing.

The reality in the United States is that 10,000 Baby Boomers are now reaching retirement every day, something that will persist for the foreseeable future. The opportunity for carriers to prepare for this is now. Further, with low interest rates and continued cost pressure, finding ways to reduce operational expenses while improving customer experience (for both agents and customers) is critical.

Another reality is that customer experiences are increasing being set by companies like Apple, Facebook, Google and Amazon. They have perfected ways to make complex things simple, easy to use, innovative and “delightful” to customers. With expectations set there, business practices that are dependent on paper and rooted in the 1950′s are increasing arcane and inaccessible to agents and customers alike. The need to drive toward electronic applications and electronic signatures is crucial for carriers across lines of business. It is both a crucial step toward better customer experience now … and a precursor to bring able to deliver on meaningful mobile capabilities.

This was an opportunity to highlight findings from a recent Electronic Signatures Executive Brief we published.

When asked if there was a potential crisis due to aging in the producer community, the executive panelists at the conference’s main session noted that there is. Allianz, Schwab and Wells Fargo all acknowledged the problem and highlighted approaches they are taking to prepare for a new generation of advisors.

In some places, the agent / advisor community is actually aging faster than the general population at large. This also highlights the importance of creating better and more compelling user experiences for both producers and end clients. Moving to simplify business process, allowing for the electronic execution of transactions and “going mobile” are all key to this. Carriers will continue to need to compete for advisor “mind share” which will require experiences that can be concurrently compelling to multiple generations of users. All of this, of course, ties back to the Hot Topics we see for insurers in the near future.

The Apple analogy continues to resonate, particularly if carriers want to truly remain relevant in a highly competitive environment.

While there are certainly complexities inherent to the life insurance, annuity and retirement plans segments of financial services, the future is clear: STP is moving from being innovative to becoming a “cost of doing business”. Hope is not a strategy and indecision is not a winning game plan.

Of Insurers and Color Separators: Thoughts from I&T’s Elite 8 Event

Matthew Josefowicz

I had the honor of participating on a panel at the I&T Elite 8 Summit last week at a new hotel in downtown NYC just around the corner from where my parents’ printing company used to be, and it reminded me of a story my dad told me recently about the effect of technological change on established industries.

The neighborhood where the event was held used to be home to dozens and dozens of color separators, technical specialists that supported the printing industry. The two years before they were all wiped out by desktop publishing were the most profitable two years they had ever had — because they adopted the new technology and changed their cost structures but not their value propositions or pricing. As soon as the customers got their hands on the technology themselves, the color separators were all gone within a couple of years.

The insurance industry may be at a similar inflection point. Communication and analytical capabilities, as well as the ability to access data, is changing more rapidly than ever before. Insurers are just now learning to embrace these technologies fully in order to radically change the efficiency of the risk protection service they provide. In the short term, these insurers will have a huge advantage over their laggard peers.

But in the long term, access to information, analytical capability, and capital is being democratized. While regulatory frameworks may provide some temporary protection, insurers must prepare to adjust their value propositions to account for a different world – one in which the barriers to entry in pricing risk and accessing capital are much, much lower.

While that world may well still be years or even decades off, what happens when the best retailers can compete with personal lines and individual life insurers? What happens when large businesses can package their own risks efficiently for the capital markets? Insurers need to start thinking about that world, and figuring out what their niche will be where their expertise and capabilities will continue to create customer value.

“Futurecasting” at the Insurance Data Analytics Summit 2013

Rob McIsaac

Tuesday’s Insurance Data Analytics (IDA) Summit in Chicago provided an opportunity for carriers and vendors to showcase some of their progress, and share some of the challenges, associated with deriving greater business value from the explosion of data now at our fingertips. The opportunity afforded by a proliferation of data acquisition points (e.g., Telematics, mobile devices), broad use of social media capabilities and expansion of communications channels creates a target rich environment. New tools supporting analytics and dash boarding clearly peg the “cool” meter. And some carriers are now putting organizational structures, such as a “shared services function”, responsible for managing and sourcing data, in place.

As we pointed out in the analyst’s “Futurecast” segment, carriers are moving in the right direction, albeit at a modest pace that is generally correlated to their size. While recognized as important, funding is frequently crowded out by other pressing issues including regulatory demands and “burning” platform concerns.

CIOs should, in our view, take every opportunity to get resources to focus on the emerging technologies which can facilitate managing the internal “small” data that is already available and in need of attention. This can provide a foundation for the technical, organizational, operational and cultural issues that will be brought into stark relief as carriers look to turn data into actionable information, insight … and ultimately competitive advantage. The future is essentially here now. Time to move.

For more on big data and analytics see:

Big Data Lessons For Insurers from Other Industries
Analytics and Big Data at Insurers 2013

CIO Insurance Summit Highlights Transformation Efforts and Challenges

Matthew Josefowicz

Lots of good discussions this week at the CIO Insurance Summit in Atlanta. More than 50 CIOs joined members of the Novarica team and others for an intense two days of workshop discussions, panels, and informal networking and learning.

Discussion topics ranged from industry and technology trends to management and leadership best practices. Each day concluded with lively moderated discussion panel of CIOs representing a broad range of perspectives.

Panel Discussion with Tom Wolf, SVP at MetLife, Praveen Reddy, CIO at Aon Affinity, and Guru Vasudeva, CTO at Nationwide

Panel Discussion with Tom Wolf, SVP at MetLife, Praveen Reddy, CIO at Aon Affinity, and Guru Vasudeva, CTO at Nationwide

While some of the discussions focused on managing tactical issues, many of the attendees mentioned the benefits of having some time away to think about the bigger picture of the role of information technology in this information industry, and the evolution of the role of the CIO as technology becomes ever more pervasive in every functional area of the company.

It was interesting to see how formerly “stand-alone” topics like mobile, social, cloud, and big data are starting to be assimilated into more holistic discussions about the multi-screen reality, customer and distributor communication strategies; optimizing IT infrastructure, and analytics-driven business practices across product, marketing, distribution, service, and claims.

This is parallel to the assimilation of e-business over the past decade into the standard operating model of every insurer. New information technology capabilities will continue to affect the operating model of the industry, and CIOs will continue to have a key dual role: managing the delivery of new capabilities and educating fellow CXO’s on the transformational potential.

Changes in technology capabilities are also affecting how CIOs run their own organizations. Many are knee deep in the challenge of turning waterfall-based, order-taking, support organizations into more nimble and agile capability-enabling partner organizations. This shift is challenging both inside IT, where it requires new skills and new thinking, and organizationally, where static budget and governance processes inhibit agility and innovation.

In the final panel discussion yesterday, many attendees talked about the benefits of internal cross-pollination between different parts of the business and/or IT organization. My Novarica colleagues and I are proud to be a part of providing this forum for inter-company cross-pollination for so many committed executives who are so focused on addressing major transformational challenges.