Insurance Industry Remembers that Investment Dollars Buy Access to Innovation

Matthew Josefowicz

Everything old is new again. Like the E-Venture Investment Groups of the late 90′s and early 2000′s, a new crop of investment activity is springing up in the insurance industry, with the hope of giving the industry a preview of tomorrow’s capabilities and approaches.

This includes single company initiatives like AXA Strategic Ventures and American Family Ventures, as well as the Des Moines-based Global Insurance Accelerator incubator, and the recently announced ACORD Insurance Innovation Challenge showcase for start-ups.

It’s almost as if the industry woke up and realized it didn’t have to sit and wait to be disrupted from the outside. A multi-billion dollar industry can buy some of its own innovation!

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Seven Key Findings About the Group Life/Annuity/Voluntary Benefits Sector

Rob McIsaac

With plan sponsors becoming increasingly price-conscious, the group life, annuities and voluntary benefits sector is turning to technology to help them attract, retain and profitably serve clients. Across the industry, insurers continue to make investments spanning the Novarica Insurance Core Systems Map.

Group Life Annuity & Benefits Heat Map

Novarica has identified seven key findings in its Business and Technology Trends: Group Life/Annuity/Voluntary Benefits report. If you’re not familiar with this report, it provides and overview of group benefit providers’ business and technology issues, data about the marketplace and 57 recent examples of technology investments by group benefit providers.

Key Findings

1) Top technology initiatives for group and voluntary insurers include agent and customer portals (including enrollment) and core policy administration, including benefits administration. The need for effective sales and marketing tools across multiple channels is key to drive enrollment, and robust flexible group administration is also vital. Carriers are opting for incremental upgrades over “big bang” core system transformations. Vendors must grow their understanding of individual markets, as well as the linkages between billing and enrollment.

2) True sales growth is a challenge in group business, with much activity consisting of carriers trading business or increases in group term life face amounts rather than cases or lives covered. Group annuities reportedly also saw declining sales. At least one carrier is experimenting with offering cheaper long-term care insurance coverage for lower benefits in an attempt to drive uptake.

3) Private exchanges are emerging as a new distribution channel for voluntary products, though enrollment is modest to date. The need for brokers to make up for caps on commissions and high deductibles for traditional health coverage may lead to more activity in this arena.

4) Group annuity contracts are seeing increased interest as some carriers are offering US employers the chance to offload some or all of their defined benefit plan liabilities in exchange for purchasing group annuity contracts.

5) Lower priority technology initiatives include billing, BI, claims, CRM, distribution management, document creation and management, rating, underwriting workstations, and specialized components. While lower priority, many of these components can contribute both cost savings as well as more efficient handling of transactions and payments. The lower priority of investment in BI should not be read as an indictment of its potential, as plan sponsor reporting and analytics capabilities, the ability to analyze participation, and understanding channel and producer productivity and profitability remain important.

6) Mobile devices continue to make inroads. Both members and plan sponsors see benefits, such as the ability to submit claims or view policy information.

7) Critical success factors for carriers continue to be sound product design; better tools for enrollment, marketing and sales to individuals; powerful and adaptable administration systems; marketing and sales across multiple channels, and continuing improvement of administrative systems to drive cost savings and efficiency.

With customer expectations changing across the industry, driven by changes in the technology ecosystem within the industry and across the economy, insurers need to plan to incorporate these paradigm shifts into their business and technology strategies for 2015. Or else plan to be taken by surprise! If you have any questions or comments, please feel free to send me a note at email.

Ten Statistics About Social Media, Mobile, Analytics, Big Data, Cloud and Digital Technologies in Insurance

Matthew Josefowicz

It can be hard for Property & Casualty and Life/Annuity insurers to sort the hype from reality when it comes to areas like social media, mobile, analytics, big data, cloud, and digital capabilities.

Recently, Novarica released its “Hot Topics” report which is designed to show adoption rates and provide insurance carriers with insights on six “hot topic” areas: social media, mobile, analytics, big data, cloud and digital. This report is based on a snap poll conducted in November 2014 of 90 members of the Novarica Insurance Technology Research Council, a moderated knowledge-sharing community of insurer CIOs and senior IT executives.

Deployment-Hot-Topic-Areas-Insurers

As you can see from the chart above, deployment rates have grown in the year since Novarica’s last study on these topics. Big data deployment rates, while still under 20%, have more than doubled over the past year, and mobile has increased in every category, with the largest percentage increase in deployment for policyholders. Analytics usage in modeling has increased by nearly a third, but there’s still a persistent gap in analytics usage between large and small insurers. Some other relevant statistics of note include:

1.) 40% of respondents have deployed social media in some areas of marketing

2.) 27% of respondents have active or planned mobile pilot projects for distributers

3.) 44% of respondents have deployed analytics to provide real-time scoring in some areas

4.) 16% of respondents have active or planned pilot big data projects

5.) 18% of respondents have deployed in some areas SaaS for core applications

6.) 72% of respondents said Agent e-business was part of their digital strategy

7.) 67% of respondents have no formal ROI for analytics already deployed but its value is widely recognized

8.) 10% of respondents have well deployed and widely understood mobile plans

9.) 29% of respondents have deployed digital or digital strategy in some areas

10.)36% still trying to understand the value of social media data analysis

The six “hot topics” included in this report share two main characteristics. First, they enable potentially disruptive changes in one of more areas of the insurance value chain or traditional company operating models. Secondly, they are discussed more than they are embraced or understood.

As we noted last year, today’s “Hot Topics” are tomorrow’s basic capabilities. Increased, but still uneven, deployment rates in mobile, social, big data, and other areas indicate this evolution is continuing, and that some companies are evolving faster than others.

For more information about the latest “Hot Topics” download a free preview or contact me via email for a complimentary 30 minute consultation.

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Lessons from Peter Drucker

Paul Ptashnick

As I was reading our latest report: Benchmarking the “New Normal” 50 Advanced Capabilities for Property & Casualty insurers, it reminded me of a few famous quotes from management consultant, author and educator Peter Drucker. Below I have highlighted a few of his quotes and how they relate to the insurance industry.

“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”

As technology evolves it’s going to 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. With the rapid changes in technology-enabled capabilities, it’s imperative for organizations to have access to the latest research and subject matter experts to stay on top of the latest trends.

“The best way to predict your future is to create it”.

We’re seeing larger insurers creating their own future by widening their lead in advanced capabilities in analytics, data, digital channels, modern applications and innovative business practices. In addition, some midsize insurers are also creating their own future by deploying more advanced capabilities than their peers.

“What gets measured gets improved”

As saavy insurers start deploying new capabilities in underwriting, product, distribution, analytics, etc., it’s vital for them to be able to track their own progress. Novarica is helping insurers to “measure and improve” their own initiatives with our new benchmarking tool.

“The purpose of business is to create and keep a customer.”

Technology is playing a vital role for Property & Casualty insurers in creating and keeping customers. Below are a few advanced capabilities being deployed by insurers in 2015 to help with these efforts.

  • Customer: Mobile app to view customer relationship details, balances, key documents, etc.
  • Distribution: Mobile app/mobile optimized web for producers to provide access to customer, book of business, or sales materials
  • Product: Analytics-driven product design
  • Product: Products designed to optimize buying/selling experience through one or more of the following: (a) use of pre-fill data, (b) elimination of unnecessary questions, (c) streamlined underwriting process matched to control of risk/coverage levels
  • Distribution: E-Signature
  • Underwriting: Predictive scoring based on models leveraging internal and third-party data
  • Marketing: CRM-driven campaign management that shares information across distribution, underwriting and service channels
  • Billing: Electronic bill presentment and payment
  • Analytics: Self-Service analytics based on verified and accessible enterprise data
  • Analytics: Use of Big Data tools to mine enterprise data effectively (Hadoop, NoSQL, etc.)
  • Claims: Mobile FNOL with video/GPS data capture and pre-fill

“If you want something new, you have to stop doing something old”

The capabilities listed in our Benchmarking the “New Normal” 50 Advanced Capabilities for P&C Insurers are widely available to insurers and are deployed more or less widely by them today. These advanced capabilities are being driven by a combination of five elements: analytics, data, digital channels, modern applications and innovate business practices. Successful organizations in the future will re-imagine and re-conceptualize their product, service and operation strategies in light of technological changes.

As always I welcome your feedback. Send me a message at email or to learn more about Novarica’s Benchmarking the “New Normal” 50 Advanced Capabilities for P&C insurers, download a preview

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Finding the Benefits in Social Media

Karlyn Carnahan

I was recently asked, “How does social media really impact the insurance and re-insurance industry? While a lot of money has been spent, is it providing any benefits? Do we understand how it could provide benefits?” Here’s the answer I gave.

I see Social Media currently being used in the insurance industry in a wide variety of ways. Certainly, marketing and brand building by posting content on Facebook, Twitter, LinkedIn, YouTube, etc. are major uses. Carriers who focus on personal lines are using it to build their brand directly with consumers. Carriers who focus on commercial lines are focusing on industry sectors, not necessarily through public tools like Facebook, but more often through their own private forums.

Carriers who work with independent agents are often providing training, tools, and content to help the agents improve their own social capabilities. This is often provided as a benefit for their preferred sectors.

Carriers also put a lot of work into using social media to manage their reputations: watching for positive or negative mentions of their name in order to intervene.

Beyond brand building, though, carriers are also using social in Human Resources: posting jobs, targeting candidates, and for background searches.

Carriers are using social for claims; a lot of work in the fraud area is happening here. Generally, they are using it to determine the circumstances of the claim: what really happened. Was it vandalism? Or did the homeowners teenagers have a party? They use social to identify behaviors after the claim that may be contraindicated by the specific injury: you said you hurt your back, but you posted photos of yourself doing the limbo at a party. And they’re using it to find unreported sources of income when it comes to WC. Each line of business has specific areas that social can be used for fraud identification.

Social media is also being used for distribution management, both targeting and communicating with agents, but also on the sales side of targeting and communicating with specific accounts (think LinkedIn).

While there’s a lot of talk about using social media for underwriting, we’re definitely in the early stages of that. Most carriers who are doing this are doing it on a one off basis, and generally finding exposures or behaviors that they were unaware of, such as the commercial account who has added an exposure when no class code was included on the policy, the life customer who is engaging in risky behaviors, or the photos of the homeowner’s dog that show that it’s a particular breed.

Over time, I believe we’ll see a lot more work in using the content for underwriting trending and analysis, such as analyzing twitter feeds to monitor disease progressions or catastrophes.
In addition to looking at social media externally, a lot of carriers are using social media techniques inside the organization to drive improved collaboration, and are seeing significant benefits from that including improved decisions, faster decisions, and improved employee satisfaction.

Technology is not a “what,” it’s a “how.”

Matthew Josefowicz

I’ve seen a number of blog posts and articles over the past year warning agents not to get too excited about social media, since insurance prospects still favor other sources of information over social media…like personal friends and family.

As if social media wasn’t one of the most important ways that personal friends and family communicate.

This reminded me of a general principle for insurance and financial services technology: Technology is not a “what,” it’s a “how.”

No company needs a web strategy, a mobile strategy, a cloud strategy, or a social media strategy. What they all need is an awareness of the roles that these technologies play (or will play) in how their customers want to do business and how their companies can operate most efficiently.

For example, our Social Media and Independent Distribution report this year showed that 25% of agents/brokers under the age of 40 use social media to communicate with their underwriters. But this doesn’t mean insurers need a social media strategy, it means they need to incorporate an understanding of social media into their distribution strategies.

 

 

Social Media Strategies for Independent Agent Distribution

Karlyn Carnahan

Novarica’s latest research report, Insurer Social Media Strategies for Independent Agent Distribution, addresses the use of social media by insurers with independent distribution. Surveying insurers that write through independent agents as well as independent agents themselves, we looked at social media usage rates, the different rates for different uses, and the preferred platforms (especially Facebook, Twitter, and LinkedIn) for various uses.

We found that a striking majority—more than 70%–of the insurers we surveyed have some presence on Facebook, Twitter, or LinkedIn. However, 40% or more have no official social media policy in place—a fact that could create compliance risk and limit the company’s ability to capitalize on social media activity.

Additionally, about 30% of insurers responded that they use social media for one-to-one communication with both agents and policy holders. This suggests that some of the critical communication that used to take place via telephone or email is migrating to social media platforms. This data is notably split by age, as 25% of agents under 40 report using LinkedIn to communicate with specific underwriters at their insurers, double the percentage of those over 40. More communication may migrate to social media platforms, then, as baby boomers move into retirement and are replaced with GenX and Millenials.

The report concludes with a discussion of six ways insurers are supporting agents’ social media efforts, as well as four key recommendations to ensure insurers best leverage social media within their distribution strategies. Insurers that write through independent agents must understand that changes in communication platforms and behaviors will affect their most critical capability: their ability to manage relationships and communicate effectively with their distribution partners.

A free preview of the report is available here.