Evolution or Revolution: Insurance in Flux

Mitch Wein

I am very excited to have joined Novarica, and to have a front-row seat to the 2015-2018 Insurance Revolution. What do I mean? There are some key themes flowing through the evolution of technology generally that will have a revolutionary impact on the insurance industry over the next few years. Some of these areas include the “Internet of Things,” Social Media, Big Data, Cloud, Mobile, Security and Digital. These changes are on top of the regulatory changes sweeping the insurance industry like the Affordable Care Act, HIPAA and privacy regulations.

But to focus on the technology changes:

  • The “Internet of things” implies all things being IP enabled, including things that P&C Insurers think about, Auto, Home, Facilities, and even human beings through wearables like the iWatch or Google Glass.
  • Social media opens new ways to communicate to the customer and to understand the customer’s needs.
  • Big Data implies the collection of large data both internally and externally and acting on it through workflow and customer interaction.
  • Cloud implies a virtualization of where the software and platforms resides, introducing security and regulatory considerations.
  • Mobile becomes the preferred interaction mechanism for the customers, brokers, agents, etc. The customers “moments of truth” take place in an omni-channel environment.
  • Security is within everything done by insurers, agents, packages, services, etc.

Ultimately, all of this turns the insurance industry into a digital industry. So, what does this mean for me within Novarica? Of course I will be participating in the creation and delivery of key Novarica advisory services including strategy development, vendor selection, benchmarking, and IT assessments. I’ll be adding my extensive international and enterprise architecture experience to Novarica’s collective expertise.

But my particular focus as I help drive and create these services will be to help overlay the trends listed above and evolve the offerings and delivery to our customers to take these into account. I will be working with the rest of the team to create new offerings that speak to the trends above like digital readiness, architecture governance, IT roadmap development, and large project implementation planning and risk mitigation.

Evolution of Revolution – for all a little of both. For me…lots of fun. I look forward to hearing your thoughts – contact me at mwein@novarica.com!

Novarica Quick Quote: Legacy Systems

Matthew Josefowicz

We’re continuing our series of Slideshare presentations we’re calling Novarica Quick Quote. Each one is designed to convey a single important idea related to how technology is changing the insurance industry. Each one is meant to be consumed in 15 seconds or less, and our hope is that our clients and council members will find them to be a useful tool to stimulate strategic discussions.

This week’s installment is on Legacy Systems.

You can check out all of the presentations in this series at http://www.slideshare.net/novarica/

Program Business Growth Outstrips Overall Commercial Market Growth

Matthew Josefowicz

Interesting article in PropertyCasualty360 today about how Program Business has now grown to $30B and is experiencing faster growth than the overall commercial lines market.

Hmmm…maybe there’s something to this idea of aligning products, market segments, and distribution strategies after all.

Novarica Quick Quote: Build for Change

Matthew Josefowicz

We’re continuing our series of Slideshare presentations we’re calling Novarica Quick Quote. Each one is designed to convey a single important idea related to how technology is changing the insurance industry. Each one is meant to be consumed in 15 seconds or less, and our hope is that our clients and council members will find them to be a useful tool to stimulate strategic discussions.

This week’s installment is called “Build for Change”

You can check out all of the presentations in this series at http://www.slideshare.net/novarica/

Baked Ham and How “Best Practices” Reflect the Best Available Technology…

Rob McIsaac

Both organizations and the people who comprise them are, to a significant degree, a function of their experiences. As time progresses we learn what works, and what doesn’t. We explore strategic alternatives and consider decisions which reflect an appropriate balance of risks and rewards in order to allow us to optimize results based on a specific set of criteria.

Both insurance companies and their employees also learn from their mistakes. The corporate form of “don’t touch that stove” may actually tie to business ventures gone sideways, technical investments gone bad or M&A events that spectacularly failed to hit their mark. No matter what it is, these experiences inform future decisions unless (or until) they fade from the conscious memory.

Of course these events have a corollary which focuses on what worked, and these “winning” strategies and tactics also form a foundation for future success. In fact, for many organizations, the past many times is deemed to be a predictor of the future, so long as it gets put into the right context. This also means being in a position to draw the correct lessons from past experience, and avoiding the temptation to confuse “correlation” with “causation”.

The correct lesson extraction may, in fact, be the tricky part.

I heard a story recently which brings home the point. In prep for a holiday dinner that involved a ham, a spouse noted that the ham had been cut in half before put in the oven. Why?

“Because that’s what my mother did” came the reply. Asking the mother-in law-why she did it produced a similar, inter-generational,: “because that’s the way my mother did it”.

Blessed with the opportunity to ask the grandmother-in-law why the ham was cut on half got to the root of the matter. And the response for the ages: “because my oven was too small for a full ham to fit!”

Which gets back to many insurance carriers as they consider options for future business process changes and the technology investments, including core systems, that will support them. As carriers look to replace platforms from an earlier era, rather than focusing on what is possible to do with modern tools , they continue to plan for a world that was heavily informed by what worked in the past, failing to appreciate the limitations created by the environment of a different day. Rethinking business processes and related structures can dramatically improve operational and financial results, but not if they are arbitrarily constrained by legacy limitations.

As carriers embark on technology stack replacements they need to understand their own half-a-ham stories and proactively work to explode them for the myths that they are. Getting outside of the company, perhaps outside of the industry, can be particularly helpful and instructive for CIO’s and their teams today. Last year, I had a chance to visit the BMW assembly plant in Greer, SC. This is an amazing facility that is essentially business process and industrial choreography on steroids. The last time I’d seen a plant like this was in the late 1960’s watching Chevys come down the line. This was like Star Wars (my new experience) meeting Charles Dickens (my recollection from a bygone era). It was hard to imagine that these were the same types of places.

Building a state of the art, 21st century car, in a plant rooted in the lessons of Henry Ford, would be impossible. Insurance carriers face a similar dilemma as they get ready for a new and every more competitive environment. Game on!

Novarica Quick Quote: Product, Market, and Channel Alignment

Matthew Josefowicz

We’re experimenting with a new series of Slideshare presentations we’re calling Novarica Quick Quote. Each one is designed to convey a single important idea related to how technology is changing the insurance industry. Each one is meant to be consumed in 15 seconds or less, and our hope is that our clients and council members will find them to be a useful tool to stimulate strategic discussions.

This week, we look at Product, Market, and Channel alignment, which we’ve also blogged about in more detail.

IT Security Update: Financial Services Now In The Spotlight

Tom Benton

News about a major bank security breach dominated the weekend, and new developments continue to emerge.

How should insurance CIOs and CISOs respond to this news? In Novarica’s IT Security Issues Update earlier this year, a significant percentage of insurers revealed that they had not conducted an external audit of IT security in the past year. The report concluded that insurers should consider audits more frequently than annually. This recent news may prompt them to consider how frequently access permissions are reviewed along with what processes they have in place for monitoring access to sensitive data and key customer systems.

As many insurance CIOs go into annual budget cycles, some consideration should be given to funding of audits, educating IT and business staff on IT security and investing in security monitoring and other security tools.

It may only be a matter of time before a major insurer is in the news for a data breach. Some consideration should be given to how your company would respond if this happened to you. What are your communication and response plans for an IT security incident? Use the recent news of breaches to be better prepared and protected.

Core Systems Selections… It Isn’t Like Riding a Bike!

Rob McIsaac

Or, in retrospect, maybe it is. The old adage that “we never forget” key life skills from an earlier time may have some instructive elements for CIO’s to be aware of. And to beware of.

I recently really did return to riding a bike and, while there haven’t been any medical emergencies, it hasn’t exactly been what I’d call “smooth”. While I understand the concepts and the physics, the act of putting all the pieces together into a smooth and fluid motion that is safe requires more than just fond memories of an earlier time. It requires practice and a surprisingly high level of dedicated time to get it right. A success metric built around the phrase “didn’t crash” seems to be dubious at best.

My wife recently took up the piano again with very similar results. Knowing where the keys are is helpful but not enough to make visions of Carnegie Hall dance in anyone’s head.

All of which, of course, then begs the question about how an insurance carrier can best go about selecting … and hopefully implementing … a new core system. The reality is that for many carriers this is something that they have very limited recent practical experience with, even if they have some vague recollection of the key steps. There’s no muscle memory that they can rely on or institutional capacity that has been recently exercised in order for them to have a leverage able asset. Once again, “didn’t crash” is a pretty low success bar to achieve. For many carriers, making these kinds of investment decisions are only pursued a few times in the course of a generation, so thinking that there’d be notable carryover from one experience to another would really stretch credibility.

Beyond that lack of recent experience, the changes in technology from one era to another can also add daunting new level of complexity to the issue. I also learned this the hard way when rekindling the interest in biking. It turned out that all of my experiences were rooted in the 1980’s and 1990’s; the technology has changed dramatically since then, creating a multi-dimensional learning event. Unless my goal was to optimize around solutions that are 30 years old, thinking differently and being open to outside influences proved to be pretty important elements for building to ultimate success.

For carrier CIO’s, finding a way to gain both organizational muscle and institutional knowledge fast is also a critical factor for success. As increasing numbers if carriers across a range of lines of business are finding, a system strategy the addresses replacement of core capabilities is a logical enabler for future success. It isn’t just for P&C anymore.

To that end, using a process like what Novarica offers our Advisory clients is a way to both speed up the selection process and to reduce the risks associated with these initiatives. The experiences built up over many efforts across multiple carriers helps to position these assets to be immediately leveraged for success. The idea of “didn’t forget” something is rather different from “didn’t stop doing”.

As exciting as “On the Job Training” can be, the IT equivalent of open heart surgery is likely not a practice with an appropriate risk / reward profile. Happy trails!

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.

Getting at the Root Cause Helps Avoid “Ready, Fire, Aim” Events

Rob McIsaac

The idea of finding a root cause to a problem, before going into “action” mode for fixing symptoms related to issues, is a tried and true methodology. In the calm, when there’s no particular problem to address and no sense of impending doom caused by the pressure to actually get something done, the rationality of the approach makes perfect sense. The logic of being clear on what problem is being solved, identifying the cause, then (and only then) moving to action is compelling.

This helps avoid the self inflicted wounds that inevitably come with “ready, fire, aim!” events.

I was reminded of this recently when suffering an intermittent Wi-Fi outage. Some machines seemed to be impacted while others were not. A phased rebooting of equipment and a lengthy experience with the Telco eventually restored service … which then immediately failed. The real root cause? A Wi-Fi on / off switch that was hung on the tipping point of turning itself “off”. Once discovered the problem was quickly and easily solved, although I will never get the lost time back.

A far more serious event occurred in one of my data centers a few years ago when a SAN controller suddenly went into a freeze state, bringing all core processing to an immediate and agonizing halt. An immediate thought: let’s reboot / IPL everything and see what happens! Cooler heads prevailed and we did the hardest thing possible … nothing! … until we really understood the issues.

Once the issue was understood, we learned that the controller had done exactly what it was supposed to do. As the result of a fault in the original configuration (years earlier) that had hit just the right set of conditions, it stopped processing. Armed with that insight, we engineered a proper recovery which lost no data along the way. If we had followed a more action oriented approach, perhaps rebooting the device, we would have lost all the data that was in flight at that moment. The only word to describe that would have been “ugly”. By taking the more planful and thoughtful path we were able to recover with no loss of data and in a better business state than would have been possible otherwise.

Taking the time to do this was the smart thing to do, but it certainly ran counter to a human emotion that said “just do something!”.

Of course we see that “do something” mantra happening at many insurance carriers on a range issues. Whether it is because they are so close (perhaps too close?) to their own issues, IT teams frequently misunderstanding the real underlying causes for systems and operational issues. As a result, they may go after treating symptoms, which can actually mask the underlying problems. This can actually create a bigger problem with more significant, and unfortunate, long term consequences. Taking the time to do the root cause analysis, which may include bringing fresh eyes in to look at old issues, can ultimately be a faster and cheaper approach to real resolution. As counter to an action orientation as this may be, getting a plan framed and communicated can avoid all the collateral damage that can go with poorly conceived plans or a lack of proper context.

Setting context and framing issues can be a powerful way to get resources and organizational commitment to go after big issues too. This allows for proper education on issues, options and ultimately gaining organizational commitment to go after the right issues in the right way. This isn’t, however, something that is universally appreciated. In recent times, I’ve even seen some carriers shop for technology solutions to problems they don’t have … clearly not an optimal investment of assets. This can happen to organizations are too quick to jump to conclusions or somehow fail to frame issues in the correct, holistic, context for their specific organization.

Taking the time to plan things through early can avoid turning a modest problem into a nightmare scenario.