Peer Review: What areas are insurance CIOs focusing on?

Staying on top of the latest Property/Casualty and Life/Health/Annuity insurance technologies and trends can be a pretty daunting task. In order to provide our clients with more insight into what their peers are focusing on in 2015, Novarica has compiled a list of its top ten most downloaded reports for the year to date.

There are two main benefits of this top ten list: it will save you time by highlighting only the hottest topics, and it allows you to see if your organization is on track with its IT strategy or if something is being overlooked. The top ten list below covers a variety of topics in critical areas, including: digital, reinsurance, policy administration systems, social, mobile, big data, analytics and much more.

Top Ten Most Downloaded Reports

1.) Life/Health/Annuity Policy Administration Systems
2.) Property/Casualty Policy Administration Systems
3.) Preparing for Digital Transformation
4.) Benchmarking the “New Normal”: 50 Advanced Capabilities for P&C Insurers
5.) “Hot Topics” for Insurers: Social, Mobile, Analytics, Big Data, Cloud, and Digital
6.) Report Rationalization: A CIO Checklist Report
7.) Internet of Things Update: An Executive Brief
8.) US Insurer IT Budgets and Projects 2015
9.) Architectural Governance: A CIO Checklist
10.) Business and Technology Trends: Reinsurance

In 2014 alone Novarica released over 30 reports. If you’re a Novarica client, downloading reports from list above is a great way to get up to speed on the latest trends and guidelines. For more information about Novarica’s published research, visit our online library or contact email.

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Trends in P/C and L/H/A Policy Administration Systems

Martina Conlon

In Novarica’s US Insurer IT Budgets and Projects 2015 report, survey data showed that nearly 40% of Property & Casualty and Life/Health/Annuity carriers are currently replacing or planning to replace a policy administration system.

Core-Policy-Administration-Replacement-Chart

There are various reasons why P/C and L/H/A insurers are focusing their efforts on replacing policy administration systems, including:

  • The need to improve product development speed — and enhance product capability—to pursue new opportunities, or to accommodate market demands
  • The need to improve product development flexibility to enter profitable new niches whether in Life or P&C.
  • The need to attract and retain not just top producers, but also the new generation of producers who won’t stand for the challenges presented by legacy solutions.
  • A desire to find more cost-effective ways to support the ongoing operation and management of core-systems capabilities and reduce the sizeable costs associated with simply keeping legacy systems on aging brittle, platforms.
  • A desire to real-time processing, increase automation and gain internal efficiencies
  • Increased data accessibility demands as business intelligence and data analytics become a significant part of insurers’ strategic objectives. In order to better set rates/pricing, reduce fraudulent claims, and generate other predictive models, core system data must be available for analysis, whether within the system or via export and transformation.

Novarica’s recent research indicates that carriers continue to aggressively seek to replace their existing policy administration systems, or in some cases add a new system to the mix. The P/C policy administration market continues to flourish for those vendors with in-demand systems and reflects a number of trends most of which remain unchanged from last year.

While sales of L/H/A core systems have continued to lag the pace of their P/C counterparts, the level of interest has steadily grown, and growth in sales of core systems is likely to follow. In fact, the pattern of investment profiles for L/H/A carriers is following a very similar path to what has already happened for P/C carriers, albeit at a somewhat delayed pace, undoubtedly a consequence of the relative risks associated with implementation and the challenges related to in-force block conversions.

With a variety of vendor solutions available, choosing the right solution that best fits your needs can be a complex process. A great way to start is by checking out our latest Market Navigator Reports on Property/Casualty and Life/Health/Annuity, blog posts (links below), trends in policy administration webinar recording, as well as our vendor selection services.

To learn more the latest policy administration trends or to see how Novarica can help you with your vendor selection project, contact me via email for a complimentary 30 minute consultation.

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2015 Tech Trends: Thoughts for Insurance CIOs

Tom Benton

As I was preparing a blog post on technology trends for 2015, I came across Chris McMahon’s article in INN, “Top 5 Tech Trends for 2015”. The five he chose were: core systems modernization, analytics, mobile computing, the Internet of Things and the digital customer experience. These are certainly great choices, so here are some further thoughts on these trends and their impact on the insurance CIO.

Core Systems
As mentioned in the article, interest in core system modernization remains strong for 2015. A survey of Novarica’s Research Council members last year (with results presented for both P&C and LHA insurers) found that the trend is toward faster deployments via SaaS or hosted solutions using an iterative deployment approach. Vendors are developing track records of implementation completion and are finding ways to reduce the risks of these large implementations. CIOs who are considering core system replacements should get an update on potential vendors and their current offerings, and Novarica’s latest Market Navigator reports will be available in February for LHA and P&C policy admin system vendors. 2015 may be the year to consider a replacement and prepare using lessons learned from previous successful implementations at other insurers.

Analytics
Analytics continues to be a hot area of discussion at insurers. Novarica’s report “Big Data Technologies for Insurers” notes that insurers should focus on the need first, based on business demands and strategy, before investing in specific technologies. While there have been some initial uses of big data for analytics at insurance carriers, few have integrated analytics into core insurance processes like underwriting and claims. Insurance CIOs should work with business leaders to define a strategy and the “big questions” that need to be answered by improved analytics capabilities.

Mobile Computing
Novarica’s report on “US Insurer IT Budgets and Projects 2015” noted that mobile technology is still considered an “emerging technology” area at many carriers. Insurers are struggling to leverage the “3 C’s” of mobile technology (convenience, camera and coordinates) to provide better engagement with producers and customers. CIOs need to look beyond specific mobile strategy to consider flexibility of their systems for the next wave of mobile technologies, including wearable and Internet of Things, along with the analytic capabilities needed to leverage the data these systems will generate.

Internet of Things
Just as 2014 was the year of wearables as a consumer focus, 2015 promises to be the year of Internet of Things, including connected home products, drones and smart devices. The key for CIOs is considering what data from these devices can be leveraged for improved insurance products and operations. Information governance will be a key capability for 2015 and into the future.

Digital Customer Experience
Interest in engaging customers through digital technologies is driving insurers to reconsider their customer engagement and digital strategies. Novarica’s report “Preparing for Digital Transformation” provides a checklist that includes reviewing current capabilities, strengthening project prioritization and other best practices, and adopting an appropriate culture for transformation. Many customer-focused organizations outside of the insurance industry are creating Chief Digital Officer (CDO) roles to lead these efforts. In essence this move is to provide a focus for meeting the demand for improved customer engagement using technology tools. CIOs should consider taking the lead in efforts that a CDO role would address – CIOs with a good track record of meeting business needs through effective technology deployment should be in good position to do so.

These five technology trends provide a good starting point for discussing your IT strategy for 2015. As always I welcome your feedback. To send me a note or set up a complimentary 1 hour consultation, contact me via email.

London Market Business and Technology Trends

Catherine Stagg-Macey

This week, Novarica released the most recent of our Business and Technology Trends reports, focused on the London Market. The report is available for immediate download from Novarica’s research library.

Lloyds is the oldest insurance market in the world and often criticized for it’s slow adoption of technology or changes to business practice. Any time spent in EC1 and the iconic Lloyds building will assure you that paper and handshakes still form an incredibly important foundation for this sector of insurance. It is Lloyds Market that has insurer the vocal cords of Celine Dion and Whitney Houston, the hands of the 1932 World Yo-yo champion and that will underwrite Virgin Galactic spaceflights. Underwriting of such risk relies very much on experienced underwriters and actuaries.

Whilst the large wads of paper stuffed into leather files will persist, the London Market has undergone a remarkable degree of modernization in the last decade. The areas of post data risk capture, claims, and account settlement have been transformed. ACORD messaging – specific to London market – is commonplace as are a variety of message gateways aimed at reducing friction costs between counterparties.

London Market CIOs have a unique challenge to keep on top of these initiatives and evaluate the benefit to their organization.

The top technology initiatives for London Market insurers include broker management/e-placement, business intelligence, pricing engines, and risk and catastrophe modeling. The appetite to continue to expand into new regions drives much of this investment, as does the increasing intervention by regulators. Lower priority technology initiatives include messaging (both bureau and non-bureau), core policy admin, and general ledger.

The report covers these initiatives in detail, provides examples of 29 technology investments in the London Market, and provides view of market segmentation. The report also proposes there are four areas of priority for a London Market CIO which include business intelligence, risk and catastrophe modeling, developing a modernization capability, and exploring core systems refresh options.

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:

 

New Report: Insurer IT Services Providers

Thuy Osman

Rob McIsaac and I recently published a Novarica Market Navigator report on Insurer IT Services Providers. The report gives an overview of some of the major IT services providers to North American insurers and contains a brief profile of each provider, including information about the company’s experience with different types of clients in different functional areas. Providers profiled in the report are: Accenture, Agile Technologies, Capgemini, CastleBay Consulting, CGI, Cognizant, CSC, Dell Services, Deloitte, Edgewater, EY, HCL, HP, HTC, IBM, iGATE Patni, Infosys, L&T Infotech, MajescoMastek, MphasiS, msg global solutions, NIIT Technologies, NTT Data, PwC, Return on Intelligence, Slalom Consulting, Syntel, TCS, ValueMomentum, Vertex, Virtusa, Wipro and Zensar.

With the market becoming more competitive, having a technology partner that can provide the right level of resources to support business initiatives is a crucial tool for CIOs. Novarica’s recent report Insurance IT Outsourcing Update (January 2014), based on a survey of 95 insurer CIOs, found that outsourcing is a part of nearly every insurer CIO’s toolset. 85% of respondents report at least some IT outsourcing. Instead of simply outsourcing for cost reduction, which was the trend in the past, insurers are now outsourcing to meet peaks in demand, get specialized skills and enable new capabilities.

This makes it even more important for CIOs to evaluate service providers not only on the number of resources available, but the type of skills and level of experience the provider has in a particular functional area. Careful evaluation will ensure that CIOs find the right partner to support the organization’s strategy for growth going forward.

Please note that this report is focused on North America, and presents only North American (US/Canada) resources and client experience numbers from these vendors, most of which are global. Each profile gives a summary of the provider’s capabilities and experience to help insurers sort through their many potential partner options, and Novarica’s team can help insurers assess potential partners in more detail through our retained advisory service.

New Report: IT Security Update

Tom Benton

IT security has been a hot media topic during the past year;  NSA program revelations, retailer credit card breaches and password hacking at popular websites, just to name a few. These high-profile news stories are just the tip of the iceberg - the Identity Theft Research Center recorded over 600 data breaches, including mandated reporting from healthcare entities.

Novarica recenty completed a survey of 95 Novarica Insurance Technology Research Council member CIOs with questions about top security concerns, mobile device security, frequency of external audits and budget/spending levels.  The results are available in a new report, IT Security Update.  Among the key findings:
  • Most insurers plan to increase spending on IT security in 2014
  • External threats are the primary concern
  • Some insurers still don’t do annual external security audits
For more information on the survey results and the report, please contact me at tbenton@novarica.com.

More than 25% of insurers increasing IT outsourcing in 2014, but some heavy users scaling back

Matthew Josefowicz

Our latest CIO survey report on IT Outsourcing shows that while more than a quarter of insurers are increasing their use of outsourcing in either application development and maintenance, specialized IT skills, and IT Infrastructure, some heavy users of ADM outsourcing are planning to scale back in 2014.

Over the past decade, there has been an important shift in the business drivers for outsourcing. There are few pure cost reduction initiatives undertaken today. More and more of the demand centers on enabling new capabilities rather than just reducing the costs of current capabilities. Few organizations have the ability to meet peaks in demand or to attract and support staff to meet specialized needs. In addition, many insurers find that infrastructure and commodity tasks can be done more effectively by partners.

Outsourcing is an important part of CIOs’ toolkits. Like any good tool, it can deliver great value when used effectively, and cause great pain when used recklessly. Outsourcing decisions should involve careful consideration of business goals, current capabilities and skills, how external partners will be managed, and how external staff will integrated into the culture of the company as part of any cost/benefit analysis.

The full report is online here: http://www.novarica.com/it_outsourcing_update_2014/ (a free preview is available to non-clients as well).

CIO Wish List

Matthew Josefowicz

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.

Project End Zone: Business and Tech Trends in Workers’ Compensation

Karlyn Carnahan

Years ago, a carrier I worked for launched a project called Project End Zone whose goal was to move Workers’ Compensation into the profit zone. That project could easily be initiated at many carriers today as the Workers’ Compensation combined ratio has been above 110 for several years now according to AM Best.

Today, with premiums starting to recover and rates increasing 9 quarters in a row, carriers are continuing their efforts to grow their books of business while driving down the loss ratio and doing that in a way that delivers operational efficiency. Most carriers are moving down multiple paths. Investing in agent portals continues to be a high priority to drive ease of doing business and enable multiple channels. Policy administration system replacement is becoming more important to WC carriers in order to enable straight through processing of small policies. Claims administration system replacement continues to be a high priority to assure consistency in claims handling. And analytics, especially predictive modeling, is becoming a critical enabler for WC carriers.

While these are the highest priority initiatives, WC carriers are investing in a wide variety of other initiatives. Whether CRM solutions, Pay-As-You-Go, or enabling mobile a wide variety of creative initiatives are in progress and more are planned for 2014.

You can read more about the latest business and technology trends in my most recent report Business and Technology Trends: Workers’ Compensation.