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!

Webinar: Group Life/Annuity/Voluntary Benefits

Rob McIsaac

In my last blog post I wrote about seven key findings from our Business & Technology Trends: Group Life/Annuity/Voluntary benefits report. In this post I would like to quickly highlight some of the top technology priorities, which I will be covering in more detail during our webinar on March 18th at 2 pm (ET).

Technology is playing an ever larger role in insurers’ ability to attract, retain and profitably serve clients in the group life, annuities and voluntary benefits space. Some of the top initiatives include:

  • Solid product design that attracts a broad audience
  • Tools to help plan sponsors or enrollers to sell, market, or enroll individuals
  • Robust flexible group administration capabilities
  • Multi-channel marketing and sales
  • Administrative capabilities such as the ability to quickly and efficiently process and post payments

Novarica research has concluded that success for carriers will revolve around these technology priorities. To learn more about these initiatives in more detail, as well as the latest trends and issues in the Group Life/Annuity/Voluntary Benefits space, pre-register for our webinar on Wednesday, March 18th at 2 pm (ET). I look forward to seeing you there!

2015 Vendor Selection Best Practice for Insurance Carriers: Simplified vs Extensive RFI

Martina Conlon

In my last vendor selection blog post I highlighted a few best practices, one of which included using a simplified Request for Information (RFI) that was easy for the vendor to complete and for you to score. I’d like to delve into this topic more and explain why a simplified RFI can make or break the vendor selection process. A simplified RFI will get you through the vendor selection process much faster, and will help your selection team focus on what really matters – your unique requirements.

From a functionality perspective, don’t inventory the ordinary; instead focus on areas that are specific to your business. We know that any insurance application that is in production with several insurers will support basic transactions. For example, all policy systems have a new business, policy change and cancellation transactions so there is no need to spend time and focus on them. Instead, dig into features that matter to your business. Perhaps you need robust premium audit features to support your workers comp business, or you need advanced reinsurance capabilities to support your middle market commercial business. Ask questions in the areas where you may be stretching the capabilities of a vended solution.

Having been involved in over 50 vendor selection projects (rating, policy administration systems, claims, billing, agent portals, business intelligence, etc.), Novarica recommends that during the RFI phase the focus should be on discovering reasons not to consider a particular vendor (the “deal-killers”). Novarica’s experience has shown deal killers generally fall into one of four areas: Staff, Organization,Functionality, and Technology, easily remembered by the acronym SOFT.

Staff

  • Do the staff have the right skills and experience?
  • How well are they likely to understand your needs?
  • What resources are available for implementation and support?
  • What assurances will you have that the staff you meet during the sales process will really be the staff that you work with?

Organization

  • How stable is the organization?
  • Is it big enough for your company to do business with?
  • Is there a conflict in the company’s ownership (i.e., are they owned by a competitor)?
  • Who are their other clients?
  • How much of a role do clients have in product development?

Functionality

  • Does the solution support the lines of business, states, and high-level functionality that you need?
  • Which functions are actually live at reference clients?

Technology

  • Is the solution’s technical architecture compatible with your enterprise standards?
  • Does your IT staff have the skills to support it?

The typical Novarica RFI includes 100-150 questions. The typical response for 30-50 pages takes 2-4 hours to score. Your time is valuable – don’t waste days reading and scoring complex RFI responses full of information you probably already know. This simplified approach will typically allow you to narrow the range of potential suppliers in any particular solution category to 2-3 candidates much more quickly and effectively than with a large dense RFP.

For more information about vendor selection best practices, make sure to register for our upcoming Vendor Selection Best Practices webinar taking place Thursday, January 29th at 2 p.m. (ET) or send me a note at email.

2015 Vendor Selection Best Practices for Insurance Carriers

Martina Conlon

Over the last few years more and more insurance carriers have forgone custom software development projects and turned to the vendor marketplace to find solutions to their most pressing problems. While there are many advantages to leveraging vendor solutions, many insurance IT departments are not experienced in finding and evaluating solution providers to meet their needs.

The traditional methods used by insurance carriers for selecting vendors can limit success and take an inordinate amount of time, leading to challenges long before a project even begins. By focusing on asking the right questions and engaging business leaders and users early in the process, insurers can streamline the traditional process while providing far better results. Below I have highlighted a few vendor selection best practices, including:

  • Get business commitment to the process upfront.
  • Limit purchasing/sourcing departments control until the contract negotiation stage.
  • Focus on strategic needs rather than current practices.
  • Use a simplified RFI that is easy for the vendor to complete and for you to score.
  • Set the agenda of demos and evaluation meetings, rather than letting the vendor drive.
  • Focus on where your organizations is unique, don’t over analyze the ordinary.
  • Question vendor pricing models and negotiate for what you think is a fair partnership deal.

The best practices above are a sampling of the lessons learned during years of Novarica vendor selection projects and conversations with experienced CIOs. For more information about vendor selection best practices, register for our upcoming Vendor Selection Best Practices webinar taking place Thursday, January 29th at 2 P.M. (ET) or contact me via email.

The Future is Here, it’s Just Not Evenly Distributed

Matthew Josefowicz

The WSJ today reports that Google has secured insurance agent licenses in 26 states and deepened its relationship with CoverHound. Yesterday, Accenture released a study of independent agents showing disintermediation by online distribution was their number one fear.

On Tuesday, January 13th at 2 p.m. (EST) we’ll be presenting a webinar on Hot Topics for 2015 for insurer CIOs based on surveys of our Research Council members. 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.

Related Novarica Reports

Related Novarica Blog Posts

Novarica Webinar: Change, Legacy, and Disparity

Matthew Josefowicz

If you missed yesterday’s webinar on Change, Legacy, and Disparity in Insurance Technology, you view the replay here. Novarica clients can also download the presentation slides.

The webinar examines the themes of change, legacy, and disparity in the way insurers are reacting to rapid evolutions in the technology landscape. It includes a high-level summary of data from Novarica’s 2015 Insurer IT Budgets and Projects study, and concludes with four guidelines for insurers to thrive in this new age.

Big Banks, Small Banks

Lee Kyriacou, head of bank industry research

Interesting piece by Meredith Whitney in American Banker today on bank stocks, basically saying that in the current weak revenue environment, large banks (which are precluded from M&A) must improve returns by getting smaller, while smaller banks must improve returns by getting bigger. I agree more or less, but there’s an additional layer of complexity. Let’s break the problem into industry issues, and then look at M&A specifically.

The industry issue is not weak revenue or even low net income – in fact, both are at or near record levels. Rather, the core issues are: (1) ROA and ROE remain well below par, (2) top-line revenue growth has been lacking, and (3) huge fixed branch costs are no longer sustainable.

The first is largely about low interest rates and high capital usage; the second about lack of loan demand and one-time regulatory “hits” to fees; the third about technology and customer behavior catching up to free checking.

These industry issues require banks – both large and small – to:
(1) out-compete for superior loan growth or fee revenue,
(2) dramatically restructure their branch costs while investing in e-channels, and
(3) reduce their excess capital.

Now let’s translate these issues to large and small banks, and then add M&A. Large banks can do all three: win lending, restructure branch cost, and reduce capital. In fact, without M&A the large banks must live or die on how well they can out-compete – some will thrive, others will suffer. The mid-sized banks that thrive will create shareholder value by turning to M&A. However, for many smaller banks, the hunt for loans and branch cost reduction may prove too difficult, and as a result the exodus of the smallest banks will likely continue.

I’ll be publishing more on the different challenges of large and small banks this quarter, and I look forward to discussing this on our free webinar Thursday at 2pm ET on trends and issues for 2013. You can pre-register online here.

The Multi-Channel Imperative

Matthew Josefowicz

Good discussion on today’s webinar about mutli-channel communication with Generali. One of the biggest challenges for insurers is that unfortunately, new channels don’t necessarily displace old ones across the board. As this chart from our multi-channel survey report shows, agents gravitate towards the most convenient channel for each task.

My key takeaways for webinar attendees today:

  • The nature of the insured/distributor/company relationship has changed due to the increased flow of information
  • Distributors and customers expect rich information, speed and convenience, choice of channels with consistent experience
  • There are no more acceptable excuses for delays, inaccurate, or inaccessible information.
  • Insurance companies are investing to keep up with these increased expectations.

Growth of IT-Enabled Capabilities and Impact on Claims

Matthew Josefowicz

Just wanted to share a slide from this week’s webinar on claims and customer experience. While modern and flexible core claims systems are at the root of improving claims experience and financial results, insurers are also benefiting from other IT-enabled capabilities when it comes to claims.

On the webinar, I presented a version of this chart from our report on the Growth of IT-Enabled Capabilities, with call-outs highlighting the impact of each of these areas on claims and customer claims experience (click the image to enlarge).

While claims systems are the critical element of improving the claims process, other data and communications investments are critical assets as well.

 

New Report and Webinar on Data Services for Insurers

Martina Conlon

Like many other industries, insurance is undergoing a paradigm shift, from operating in an age of information scarcity to one of information super-abundance. Old data is moving faster, new data is proliferating and internal data is more accessible. Insurers no longer need to devote significant resources to gathering data about prospective risks and claims. Instead more data than ever is now available on-demand, and at lower cost, from commercial sources. In addition to claims, credit, consumer and cost information, we can now collect information on buying behaviors, geospatial and location information, social media and internet usage, and more. Our electronic trails have been digitized, formatted, standardized, analyzed and modeled, and are up for sale. As intimidating as this may sound to the individual, it is a great opportunity for insurers to use this data and insight to make more informed and better business decisions.

In our new report, Novarica Market Navigator: Data Services for US Insurers 2012 (Q1), we profile 15 vendors that offers a broad range of data to US insurers. More and more frequently, the CIOs we work with are being challenged to incorporate this external data into core systems and BI environments. This report is designed to give them an overview of the types of data, cost models, and technical details of major services providers.

I’ll be presenting and discussing our research in this area on a webinar on Monday, March 26 at 1 pm ET. Pre-register here.