Don’t Get Tripped by a Tipping Point!

Rob McIsaac

Late last year I had the opportunity to spend time exploring Silicon Valley in depth which created a new-found appreciation for the form and function of innovation that comes from that singular location. The interconnectedness and leverage that has been created by having a unique combination of talent, financing, risk taking and competition is impressive. The number of companies tied to financial services looking to form innovation centers in this unique environment continues to grow.

Another observation from that tour was the rather surprising connection between technology innovation and utilization in areas focused on entertainment. The recognition that HP’s first big order fulfilled out of “The Garage” went to Walt Disney is a point well taken.

Recently I had a chance to see this point of intersection from a different perspective, this time at the Disney World complex. This is another eye opening event that has some potentially key insights for financial services purveyors. It is not a story about magical mice but rather about technology advances and adoption. Insurance carriers would be wise to take note.

As a veteran of Disney trips, I didn’t expect to be amazed in any way. I was wrong. Visiting as an adult observer with too much time on my hands (translation: no kids to manage) afforded an opportunity to watch how new technology has changed the operation of the properties and the way customers interact with them. For example, upon entering the grounds, you are given a stylish armband that looks like a high end Fitbit device. This is how you track your reservations, book special events, manage your tickets and connect with groups on the property. It is also your virtual wallet. Wherever you go, simply touch the wristband to a reader and you are magically able to proceed.

Of course the flip side of this is that Mickey (or a delegate) pretty much knows where you are all the time. As a result, workflow capabilities are optimized. Buses seem to be at the right place at the right time. Support staff placement is optimized. Wait lines are minimized. There’s a smart phone app that helps manage the experience on those moments when you need a keyboard. For anyone with a Fitbit (or equivalent) on the other wrist, the learning curve is essentially zero.

But that wasn’t even the best part. Upon entering a place where value is consumed from the wrist-wallet, such as entering a park, they have deployed two-factor authentication. In addition to reading the wristband there are fingerprint readers everywhere. Scan your wrist, read your index finger and you are “good to go”. It is smooth, clean and fast. More to the point, Disney is now training tens of thousands of new people every day on how to use the technology. They are also setting a high bar for what a good, effective, non-intrusive security experience can be like. In a word, it is “slick”.

The implications for insurance are broad and potentially represent a tipping point which also happens to coincide with the number of Millennials in the US exceeding the number of Baby Boomers for the first time. People are ever more willing to give up personal information for the promise of a better deal, an enhanced experience and better service. Holiday trips can now join Amazon shopping experiences as a place where things just seem to work well and a byproduct of it all can be targeted messaging that can affirm that “smart people like you” found value in this next call to action.

Returning to a world dominated by last century technology, and last century experiences, will increasingly seem quaint and out of touch with a new reality. The fact that they are slow and painful may seal a deal of irrelevance.

Is it any wonder that Google appears poised to move into the insurance space or that Silicon Valley VC firm Andreessen Horowitz sees insurance as a business that is poised for disruption? Being tripped by a tipping point can be hard to recover from. Just ask Kodak.

Related Novarica Reports

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Making a Project Succeed with Users Who are Reluctant to Adopt a New System

Jeff Goldberg

When planning for change management or a core system replacement, we focus a lot on getting buy-in and sponsorship from leadership. But even though end-users may be required to go along, getting their support is critical to success. So how do you handle it when the users of a system are reluctant or even openly resistant to change?

1. Get input and review from key users before the project begins. Make them feel some ownership and buy-in, even if they aren’t part of the decision making process. Include them in updates as the project proceeds so that they have time to prepare and, hopefully, get excited. Remember that time spent in up front education not only helps get reluctant users involved, it also reduces training time at the end.

2. Plan for proper training that includes not just how to use the project, but also what the values of using it are. If you can’t articulate the values before the project begins then something is wrong.

3. Implement a plan to push still-reluctant users. Have dates for shutting off replaced systems, metrics to track how people are using it, and firm incentives (both positive and negative) for adopting the system.

4. Especially with data and Business Intelligence, never forget that usability and design matters when getting users to adopt a new system. Integrate the new system into the existing daily process. Make it easy to use. Design isn’t an afterthought, it’s a key component of driving adoption and avoiding support request and mistakes.

As always I welcome your feedback. If you have any questions or comments, please feel free to send me a note at email.

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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.

The future just keeps getting closer…

Matthew Josefowicz

In case you were wondering when the great disrupters in Silicon Valley would turn their attention to the insurance industry, wonder no longer, and read this post on the Andreesen Horowitz site from 1/22/15.

How about an insurance company that empowers you to make smart lifestyle decisions? Examples: the car insurance company that routes you around dangerous intersections; the home insurance company that automatically summons a plumber when it detects water on the floor near the water heater; or the health insurance company that connects you with friends that are also trying to lose weight?

By encouraging us to keep safe, insurance companies can keep their payouts low. And we all bask in the glow of an insurance company that has our best interests at heart — because even though our interests are really aligned, it doesn’t always feel that way

Combined with the recent news about Google’s recent moves in auto insurance, it’s pretty clear that tech is starting to smell blood in insurance.

The barbarians are coming. Insurers need to suit up.

The barbarians don’t care about tradition, or the way it used to be, or what yesterday’s customers liked. They see only need and opportunity. Insurers need to adopt this mindset quickly.

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Enterprise Data Initiatives Now Taking Center Stage as Insurers Look to Improve their Digital and Analytical Capabilities

Mitch Wein

With insurance carriers of all sizes and lines of business focusing on improving their digital and analytical capabilities to meet customer expectations, the importance of enterprise data has never been greater.

Over the last 3-5 years data has once again become a key focus of the insurance industry. Data is now seen as a key enabler of the insurance industry’s evolution into a fully digitized provider of risk services focused on customer, not product.

When data is collected from either internal or external sources, the CIO becomes responsible for its storage, management and use. This becomes highly complex in today’s world since data is both structured and unstructured and is controlled by various legal and regulatory considerations, as well as internal security and risk policies. Based on the direct experience of Novarica’s senior team and its Council members, the following best practices should be considered when initiating an MDM initiative.

  • Create policies around data and how the data should be managed and controlled.
  • Establish organizational structure for data.
  • Link MDM architecture to business goals and objectives.
  • Consider supplementing internal data in an MDM infrastructure with enriched data and external big data
  • Determine what system or process creates the official data of record.
  • Determine the senior level project sponsor and who pays.
  • Deploy multi-year MDM programs in an incremental fashion.

MDM is more than a technology. It is a program of work involving an assessment of business needs, a data sourcing strategy, a data cleansing strategy to address quality, an architecture and integration initiative, data documentation and classification, as well as an organizational evolution for data governance and ownership. The goal is to create a single view of the master data which can then be referenced by all systems, reporting, and business processes.

Novarica’s experience has shown that the data governance and ownership dimension is often the hardest aspect of this program after identifying a business sponsor and developing a solid business case. Who manages the data, who owns the data, and who is ultimately accountable are difficult challenges that must be addressed.

If your organization is in the process of implementing an MDM program or if your efforts have stalled, please send me an email to set up a complimentary 30 minute consultation.

Recent Novarica CIO Checklist Briefs

  • Master Data Management: A CIO Checklist
  • Architectural Governance: A CIO Checklist
  • Preparing for Digital Transformation: A CIO Checklist
  • 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 Usage-Based Insurance (UBI) Short Cut: Developing a usage-based insurance program has now gotten easier

    Thuy Osman

    I’ve been following telematics in insurance since 2012 and the main thing I’ve noticed is that the application of telematics by insurers moves at a sluggish pace. While telematics service providers continually improve their platforms and services, offering insurers multiple ways to collect data (connected car, OBD plug in, mobile app), numerous data points to analyze (speed, braking, cornering, road type, etc.), and various applications for the analyzed data (from underwriting to claims), many insurers are still stuck in the initial phase of designing and developing a UBI program.

    Aside from the issue of patents, the concern I hear most from carriers who are in the process of developing a UBI program is the data approach. Deciding on what data to collect, how to collect the data, and how to store and analyze the data is a huge obstacle. The main point of the data process is to arrive at some sort of driver risk score. Instead of throwing time and resources to come up with that score, carriers can now partner with an external analytics vendor who will collect, analyze and synthesize the data into a risk score that can then be used by underwriters to determine eligibility for discounts or rewards.

    Partnering with an analytics vendor and using their program, such as Verisk Telematics Safety Scoring program (which, it was recently announced, is now approved in 41 states), essentially allow carriers to skip over the data process and jump straight to developing insurance products based on risk scores. Sure, carriers will still have to determine which driving behaviors constitute risk to their company. But, checking off the behaviors on a list for the analytics provider is far more efficient than planning out the hardware to collect the data, storing the data, and in particular, wading through pools of data to make some sense of it all.

    A few years ago at a summit for telematics in insurance, the presenters were talking about the possibility of deriving a driver risk score from the telematics data collected from a vehicle. At that time, only a small number of vendors had large enough data sets that could be representative of a segment of the customer driver pool. Today, analytics vendors and telematics service providers alike have collected enough miles and other driving data to develop an algorithm (however simple or complex) to calculate a driver risk score. In fact, providing carriers with a driver score is one of the standard services a TSP provides.

    For carriers who are looking to develop a UBI program, or even for carriers who are already entrenched in this process, partnering with an external vendor can save time and decrease the risk involved in launching such a program. As carriers see the benefit in this partnership and as they begin to outsource more to the data process to the data experts, maybe the application of telematics in insurance will pick up.

    If you’re interested in discussing this topic further, please contact me at email to arrange a call.

    Related Research

  • Telematics in Insurance: Key Issues and Trends 2014
  • Digital Failings

    Rob McIsaac

    We live in a brave new world now with digital devices and equipment surrounding us in a sea of capabilities that (generally) improve the quality of our experiences. They also allow us to extend ourselves in ways that would have been hard to contemplate until recently. While this has many great potential benefits, there are also some unintended consequences that we need to be mindful of, particularly as technologists. In a world that reflects the Internet of Things, smart buildings and self-driving cars are no longer future state fiction. They are modern realities that have real world implications associate with them when they work. And when they don’t!

    I was reminded of this in a recent analog world event. After restoring my Dad’s 35 year old Moto-Guzzi motorcycle, I’ve come to enjoy quiet country road excursions. Not long ago, while on a pleasant cruise I felt a little “hitch in the giddyup”. Was it real or my imagination? What I found was an analog failure in the ignition system. It entertained me with a gradual failing through diminished capability but provided plenty of time to return to the shop and get a replacement part. The failure was gradual, graceful, moderately elegant and easily controlled. Good thing too, since there is no backup system. The only path forward is the happy one.

    Which got me thinking about how different circumstances are in our digital world. Things work right up to the point when they don’t. One minute they can be fine and the next it is like someone flipped a switch. Lights out. One of my more exciting CIO moments was caused by such a failure. Our online portal was a composite of capabilities, some of which we owned and hosted, other served to us from trusted vendors. When it all worked, it was a thing of technical beauty. We had architected things on our end carefully too, with redundancy and failover capabilities embedded and tested.

    It turned out, however, that some of our third party solutions had taken a less robust approach which we did not fully appreciate. And so, when they went down … they took us with them. Like running into a wall. To our customers trying to argue that we were up and it was actually a third party problem that was keeping them from reaching the functionality they wanted was a moot point. It was our site with our logo; don’t try and deflect! Own it, love it, fix it was really all that mattered.

    All of which made us realize how important it is to plan a digital playbook that anticipates the non-happy path moments and can support nearly instantaneous cutover to a path less traveled. Digital advances are truly remarkable … but they require a different sort of planning when failure can be both instantaneous and catastrophic. A self-driving car that can fail like that would require some serious discussion about liability insurance and advanced training for an operator.

    New capabilities and new opportunities require new planning and architectural paradigms that must evolve concurrently. A digital framework constructed around analog ideas of what failure will look like will, almost certainly, lead to unfortunate results.

    As always I welcome your feedback. To send me a note or set up a complimentary 1 hour consultation, contact me via email.

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    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.

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    The Evolving Data Analytics Group: Applying Lessons from IT Organizations of the Past

    Jeff Goldberg

    I’ve been working with a lot of insurance companies who are struggling to find the right home for data analytics within their organization and I’m struck by the similarity these questions have to the more general evolution of IT organizations over the last two decades. Matt Josefowicz pointed this connection out in a blog post and I’d like to examine the phenomenon in more detail.

    When I call this a “struggle” I don’t mean that in a negative way. Often companies try out different approaches with an updated technology or a shift in process or–in this case–an entirely new group because they believe in its value to the business but industry best practices haven’t been worked out yet. This struggle is part of the growth and leadership process. That’s definitely the case now with data analytics and was (and is still!) the case with IT. There won’t be a general agreement about the best practices for a data analytics group within an insurance company for a long time yet (if ever) but we can shortcut some of the learning curve by looking at a similar evolution of the IT organization.

    The most common question: where does the role of data analytics fit? Should insurers create a new separate data analytics group or should different data analytics resources report directly to their respective business units? Insurers are trying it both ways right now, and there’s no sure right answer. This is the same centralized v federated (or horizontal v vertical) debate that has gone on for decades in regards to IT resources.

    By centralizing data analytics resources together in their own corporate unit, it (1) allows a sharing of skills, tools, and best practices, (2) avoids redundancy and rework, and (3) leads to an easier adoption of a corporate mission for insight and business intelligence. By federating resources out to each operating business unit it (1) allows very tight alignment of business goals with the assigned data analytics expert, (2) helps that expert gain a depth of understanding about the business that they may lack otherwise, (3) better promotes the mission of data analytics to business users.

    These are similar–if not the same–as the drivers in IT, and just like IT there are benefits to both approaches. In fact, for IT alignment, while shifting between a horizontal and vertical approach, many organizations have found that the shift itself is valuable, giving employees the opportunity to spread what they’ve learned to others, either in terms of business insight or best practices. So insurers trying different approaches to the organization of data analytics should be rest assured that multiple approaches all have value.

    The second similarity between data analytics now and IT organizations of the past is about recruiting talent. These days colleges offer a variety of information technology and computer science degrees, creating a pipeline of potential employees. But that wasn’t always the case, and insurance companies (and companies in other industries) had to staff their IT departments by hiring out of other engineering programs or find people who had a technical aptitude and train them in computer programming.

    With data analytics, there’s a similar lack of clarity about who to hire. Some insurers are recruiting PhDs and creating teams of data scientists, others are looking internally for technical staff who have a knack for data insight and exploration and can be cross-trained. But as demand grows, more universities will offer data analysis coursework at an undergraduate or masters level, increasing the availability of trained hires. Of course, just like IT, insurers will be competing against specialized companies to recruit those graduates, and will need to figure out how to attract them to our industry.

    If you’ve been struggling with the role of data analytics within your organization or are interested in benchmarking your company’s BI approach against your peers, please feel free to reach out to me. To send me a note or set up a complimentary 1 hour consultation, contact me via email.