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.

July Acquisitions in the London Market

Catherine Stagg-Macey

In a recent blog on the evolution of core software in London market, I suggested that changes were afoot. (http://blog.novarica.com/?p=2470/) And so they were.

At the beginning of July, Xchanging acquired two insurance software companies within a week of each other –
AgencyPort Europe *(http://www.xchanging.com/news/xchanging-acquires-agencyport-europe/) and Total Objects. (http://www.xchanging.com/news/xchanging-acquires-total-objects) A week later, HG Capital, a private equity firm, announced a co-investment in Sequel Business Systems. (http://www.hgcapital.com/news/hgcapital-announces-investment-sequel-business-solutions)

Whilst the deals are very different in nature, they speak to the buoyant view of both software companies and private equity firms alike. With the consolidation of vendors, it also offers a more distinct choice for insurers.

The Xchanging acquisitions fill out their portfolio of offerings with the addition of a cloud based bordereau management system (TotalObjects), MGA systems (TotalObjects and AgencyPort), a risk aggregation tool (AgencyPort) and a system for Health Insurers (AgencyPort). The deals bring with them some duplication – two broker systems, two reinsurance systems, two MGA systems and two underwriting systems for both syndicate and company’s.

Xchanging has made it clear to all users of all these products that they will continue to support all products for the foreseeable future. That said, we would expect to see some consolidation of the product portfolio in the coming years. At a minimum, this is needed to streamline the market messaging and at an operational level, it would not be surprising to see some reduction in duplication to reduce current operational costs and future product investment.

The co-investment in Sequel Business Systems, a competitor of AgencyPort and Xchanging, will bring with it an injection of cash. No details have been published on where this might lead the company, but in conversations with clients of all these software companies, initial responses were mixed. A spate of deals like this always introduces uncertainty and it takes time for customers and prospects to embrace and understand the impact of these deals on their own technology investments.

One of our critiques of this sector of insurance software over the years has been the underinvestment in the solutions. These deals suggest show this is changing and insurers can be optimistic in the future evolution of London market software.

NOTE: Agencyport Europe has been separated out from Agencyport NorthAmerica in the recent years. This acquisition does not impact AgencyPort NorthAmerica.

For more of our recent research on the London Market see our CIO Survey and our Business and Technology Trends report.

Accelerating Pace of Change Requires New IT Planning Paradigms

Rob McIsaac

One of the realities of IT in any industry is that “truth” related to technology is a fleeting thing. The best system or technology to deploy can evolve with surprising speed, making it important for CIO’s and their organizations to determine with some precision what a roadmap toward a future state should look like. Increasingly, CIO’s and their team should carefully consider just how long they think they will be in that future state too. This has implications for both the technologies to be deployed and the financial mechanics used to pay for them. Missing either of these key points can create the IT equivalent of “The Hangover”. Unfortunately, aspirin alone won’t cure this one!

There are parallels in other parts of our personal and professional lives. As a frugal minded sort, my typical approach to cars was to buy them and drive them long after the warranty and that new-car smell were gone. While the shapes and sizes until recently changed like fashion statements, the essential technology remained pretty stable.  Parts evolving slowly over time and had surprisingly long useful lives. As a result, parts and skills remained in a pretty consistent supply. A few years ago I finished restoring a 30 year old BMW (ok, so being frugal has its limits) and the only limiting factors were time and money. Parts and skills could be bought, because essentially the same vehicle had been in production for nearly 15 years.

Try that trick with a new car. They are better in every way. Faster, quicker, safer, better fuel economy, less maintenance. The list is long. But the challenge is that the technology used is fleeting. A two or three year old vehicle may have technology embedded that looks nothing like what is in production now. When the parts run out, there may be no clear path forward. As a friend of mine said, “I don’t think I could afford the risk of owning a new one when the warranty runs out!”.  Relatively small parts failures could lead to catastrophic financial events.  Leasing starts to sound like a pretty decent idea; about the time problems begin to set in, give the keys back and start over again.  It is an appliance, not an investment.

That’s hardly unique to cars. Is anyone paying real money to fix an iPhone 4?  Of course not. They were the height of cool a few years ago and helped to change the world we live in. Now they are disposable.

Large flat screen TV’s are the same way.  When a circa 2008 model expired recently, it was cheaper to get a new one (that was far better) than it was to fix the old one.  Turn them and burn them when they’re done.

There’s a good chance my next car will be disposable too. I will lease it, use it for a specific period of time, then replace it on or around a known date. I won’t depreciate it, won’t fix it, won’t treasure it like a friend. I will consume it and move on.

The same should be true of future core systems at insurance carriers. The systems and their vendors will evolve quickly using the “best” available technology at a moment in time. Then they will move on. Rinse and repeat will be their model.

And while carriers have built, bought, modified and embraced systems from the 1960′s to the 2000′s (a surprising number of 40-50 year old systems run major workloads every night), that’s a model that has a foreseeable end. Anyone pining for that “state of the art 2009 platform” now?  Of course not; we would have had a challenging time describing some of the things that would be key drivers for business success five years later.  That will be even more true as we think about 2019 or 2024.

Rather than acquiring and depreciation systems for a protracted lifespan, implementing with an eye toward “replacing the replacement” appears to be a more viable and effective model. This impacts skill sets, depreciation schedules and even the future state IT discussions. It may no longer be a “buy versus build” dialogue. For the future it may be “buy versus rent”.

A variety of factors have now come together to make this a viable option. If email for large / complex / highly regulated companies can live in the cloud, a host of other things like policy administration, claims, distribution management and financials can too. Pun intended.

I never thought I’d lease a car either, but we’ve crossed a risk / return tipping point that makes that a pretty attractive option. Of course I will keep my ’84 Bimmer for fun and pleasure. Sure wish the A/C worked better, however …

 

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.

New Reports: Policy Administration System Project Averages and Metrics

Tom Benton

This week, Novarica published reports on PAS project metrics and averages for L/H/A insurers and for P&C insurers, based on a recent survey of 33 P&C insurers and 11 L/H/A insurers who have completed projects in the last ten years or are currently implementing. The survey included questions on project scope, timelines, resources, costs and impacts – the key areas that carriers focus on when considering a PAS implementation.

Among the findings, the survey showed that a significant number of midsize P&C insurers and midsize L/H/A insurers are opting for SaaS or hosted PAS solutions. Also, compared with our 2012 study, large P&C insurer deployments are taking somewhat longer to complete and midsize deployments are taking less. For L/H/A carriers, most deployments were completed in less than three years.

Core systems replacement is high priority for insurers, and the majority of insurers have either just completed a replacement, are in the midst of one, or are evaluating one. These reports should help those in the latter two categories set expectations for levels of effort and cost for these key projects.

See the reports for more information:

 

Document Creation and Customer Communication Management (CCM)

Sarah Bogan

Our new report looks at document creation/CCM vendors. While the document capabilities of core systems like policy administration and claims haven’t advanced much recently, document creation solution vendors have been investing in their core solutions to make them more intuitive and easier to use by adding better approval workflows and supporting more customer communication functionality, including better multichannel support. In addition, vendors who have historically focused more on document creation solutions or print processing offerings are expanding their footprint to include a more holistic CCM approach, focusing more enterprise-oriented customer experience. Cloud-based options are also proliferating.

The vendors and their offerings are as unique as the carriers and their needs. Our new Novarica Market Navigator, US Document Creation/CCM Systems can help insurers navigate the document creation / CCM vendor landscape. It captures vendor demographics, technology, solutions components, vendor service offerings and typical implementation approaches as described by the vendor.

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.

New Report: Policy Administration System Lessons Learned

Tom Benton

I recently completed a report based on some interesting recent discussions with IT leaders about PAS implementations. Specifically, I talked with several CIOs from Novarica’s Research Council who consider their implementations to have been successful.

Five key lessons learned emerged, mainly related to communication and governance best practices. The report discusses these five topics and provides some insight from a few of the leaders who turned around troubled implementation projects.

Policy Administration System Lessons Learned is available today. Please contact me at tbenton@novarica.com if you would like to discuss the report, or if you need insight on preparing for a PAS implementation at your organization.

My Highlights from IASA 2013

Tom Benton

I just returned from the IASA Annual Meeting at National Harbor near Washington, DC.  The conference was well attended, and Novarica was well represented by Martina and Chad at sessions on Monday and Tuesday, as well as staff at our booth and analyst meetings with various software vendors.
Here are some of my highlights from IASA 2013:
  • Buzz on the Show Floor – from the opening reception to the closing of the show floor, there was a buzz as attendees from carriers and vendors had great discussions.  IASA found great ways to engage attendees in the show, including a twitter contest with an iPad mini giveaway – see entries from my account (@T_Benton) by searching for #IASA2013.
  • Solid Show Logistics – IASA knows how to run a trade show.  I attended their annual meeting (I spent 10 years as a CIO at a non-profit) and IASA shows every sign of a healthy non-profit organization:  solid focus on mission, strong leadership, growing financials and an engaged membership.  Any organization that can get volunteers to do a country-western line dance flash mob at their annual meeting has something going for it!
  • Great Vendor Meetings – Novarica folks met with many software vendors – mine were mainly with vendors providing solutions for Policy Administration and CCM (Customer Communication Management).  Many of these vendors have built systems on modern architectures and are now providing innovation and improved delivery processes as well as maturing SaaS offerings.  Insurance core systems are maturing to the point where the buy-build decision is becoming a buy-subscribe decision.
  • Interesting Sessions – due to all the vendor meetings, I was not able to attend many sessions.  However, I did attend the following:
    • Tuesday keynote, with Peter Diamandis of the XPrize foundation – he encouraged attendees to have a positive view of the future – that exponential knowledge growth means all world problems will be solved in the next few decades and that we are facing a future with a world of “abundance” (title of his new book).  He also predicted that self-driving cars and other technologies will have a huge impact on the insurance industry.
    • Tuesday’s Analyst “Around the Horn” – an annual event where analysts from four major Insurance IT consulting firms comment then get voted off one at a time through three rounds.  Novarica was well represented by Chad, who bowed out in the final round, but made some memorable quotes, like “I spend too much time reading about core systems – and my wife agrees”.
    • Wednesday IT Town Hall – panelists and audience members talked about reducing infrastructure costs, the challenges of staffing for big data/analytics and how to approach mobile strategy.
In all, I, along with my Novarica teammates, left IASA with many new ideas and better knowledge of what is happening with insurance IT solutions.  If you would like to talk about these ideas, please contact me… and look for me next year at IASA 2014 in Indianapolis!

Importance of Communication on Core System Replacement Projects

Tom Benton

In my recent discussions with various insurance IT leaders, communication issues are becoming a common thread in lessons learned during core system replacement projects.  This reminded me of a Harvard Business Review blog post I read recently.  The post suggests that communication is an issue that has been of concern for a long time.

The author (Scott Edinger, founder of Edinger Consulting Group) presents three critical elements of communication first proposed by Aristotle, the Greek philosopher who studied under Plato and was teacher to Alexander the Great, a leader who undoubtedly dealt with communication issues on his projects.  The three elements of ethos (credibility), pathos (emotional connection) and logos (reason, or logic) are all important to communicating your message effectively as a leader.  Your team needs to believe what you are saying, connect with it and understand how you came to your conclusions.  The post notes that while all three elements are needed to communicate  effectively, leaders can become better communicators by improving in any of the three.

From my discussions on core system replacement projects, IT leaders believe that improvement in communication will increase the likelihood of success on these projects.  As one Novarica IT Research Council member noted, project leaders need to communicate “early and often” for project teams to successfully meet the challenges of these large, high risk projects.