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.

Document Management and ECM – New Novarica Market Navigator Report

Tom Benton

Insurers are showing increasing interest in improving workflow and customer experience.  This often includes providing multiple communication channels, such as mobile texting, social media and video, along with traditional paper and e-mail.  The growing amount of unstructured data from these communications brings challenges for management, storage, workflow and distribution along with leveraging the data for analytics and reporting.

Insurers are finding that legacy document management systems are not able to meet demands for customer experience and workflow initiatives.  Many find that replacement is necessary, and that current document management / ECM (Enterprise Content Management) systems have capabilities that are difficult to add to legacy systems. Updating can also provide opportunities for improved process flow along with new deployment options such as SaaS or hosted ECM solutions.

Novarica has published an updated Market Navigator on Document Management and ECM Systems, available now.  This report presents an overview of the current solution provider marketplace to assist insurers in drawing up their shortlists of potential providers based on vendor market position and offering details.

 

Here’s the Problem… A Process Is Only As Good As Its Weakest Link!

Rob McIsaac

Recently, I decided that I needed to update my life insurance portfolio. With a range of life events taking place, and a 10 year term policy purchased in 2004 coming to a natural end, I was poised to take quick action. Suffering from mild OCD, I actually started the process a full 8 weeks before the anniversary date. Little did I know that I was dancing on a razor’s edge in terms of timing. This sort of “secret shopper” experience has been frustrating, humorous and thought provoking all at the same time. Does it really need to be this hard? If a process is only as good as its weakest link, this one sets a new standard on the low side of the scale.

In an era of instant access, and nearly instantaneous gratification, I went online to start shopping at an aggregator site. To my surprise, this was less functional than the site I recalled from 10 years ago but it did earn me a call back from a call center agent. After going through the medical questions, we landed on the need to “draw fluids”, a process that could take 2-3 weeks to complete. Given the green light, this process started. It took 3-4 weeks to actually schedule the blood draw.

Thinking the process had run amuck, I went to a second carrier directly. After completing their app online, I was called back in minutes for the medical questions. Because of how I answered one question, I was cautioned that I wouldn’t qualify for the super preferred rate and that the agent had no idea what the premium might be. The thrust of the conversation was that it would likely be around 50% more, but that this was just a SWAG. Clearly surprised that I wanted to proceed anyway (not a great trait in sales) we again marched into the need to draw fluids. A process that could take, I was assured, 2-3 weeks.

The third carrier was a traditional Agency company that I decided to test to see if the web site channel worked. Although it took several business days for someone to respond, when they did, the agent was effective and knowledgeable. She was able to share different premium scenarios and suggest which products might best fit the need. While the low end price was higher than the direct company super-preferred rate, the “likely” rate based on the medical questions was lower. And, of course, drawing blood would take several weeks.

Several interesting points in the process:

  • For all practical purposes, the questions the carriers asked were exactly the same. The only variations seemed to be in looking at my driving record (3 years or 5) and my parents issues with illness (before 60 or 65). Other than that, it was cookie cutter.
  • All three companies declined the opportunity to get medical records (fluids, EKG, chest x- ray) directly from my doctor, despite the fact that they were available as part of an annual physical done two weeks earlier. All wanted to have their own chance to stick me with needles.
  • All three carriers used the exact same service to do the fluid draw and on site visit. Some effect envy for me there, since I got a “three for one” deal on the fluids and the list time. Each carrier wanted their own EKG original so I had to sit through that multiple times, but only partially disrobe once.
  • The direct carriers are decidedly poor at staying in touch with process updates. With them it feels like I’ve fallen into an abyss. The agency carrier seems to be far more engaged through my touch point.
  • Across the board, the process seems broken … or at least archaic. I became a little worried about coverage gaps with the ’04 policy exporting, but I shouldn’t have been concerned. The old carrier indicated that it takes a calendar quarter to actually lapse the contract … whose premium would triple on the next anniversary barring action on my part.

    At a time when the balance of consumer’s financial lives is so readily available through self service and guided experience, this seems like a trip back in time to a different world. Actions are measured in weeks and quarters rather than minutes and hours. Rather than full transparency on information and pricing, the process feels both secretive and ill-informed.

    The process also seems to be intentionally inefficient. When my doctor did his version of the fluid analysis, we had results in 2-3 days. The paramedic firm used by all three carriers said it took 2-3 weeks. How could that possibly be?

    Left to a natural course, this process could run (in total) 6-10 weeks, by my estimation. At that point, I will be presented with “take it or leave it” offers from all the carriers involved. I will, of course, have a personal choice to make at that point, armed with full disclosure and valid pricing as inputs. In the end, it will have a happy outcome for some.

    This got me thinking about my own children and their Gen Y peers. They would be highly unlikely to participate in an exercise as slow and as painful as this one. Baby Boomers like me may now be closing in on purchasing their last life insurance contracts as other life events loom.

    For carriers, the time to think about the required paradigm shifts is coming quickly. Those footsteps you hear are future generations of prospects but they may be running away, rather than toward, you!

    Big data, mobile capabilities, access to a form of Telematics and other devices may all prove to be game changers sooner than we think. Remember what life was like before SmartPhone? I don’t either…

    Evolution in London Market Vendor Landscape

    Catherine Stagg-Macey

    The 325-year-old Lloyd’s market makes changes slowly. The complexity of the risk, the uniqueness of the market place and the importance of relationships are all factors in the speed of change.

    However, one area of noticeable change in the last three years is the core solution offerings to Lloyds. Traditionally, a small number vendors serving the local insurers, syndicates and managing agents developed software for each client. These vendors were small in size with management and development staff drawn from the Square mile.

    There was significant re-use of the software across clients but the software offered was some way off from being productized. As a result, the clients (insurer, syndicate, managing agent) would be faced with on-going services bill to maintain what is essentially a bespoke core systems implementation. This had the advantage of being significantly fine-tuned to each client’s requirements but at a cost.

    The Lloyds vendor market was known for mostly over-promising and under-delivering. CIOs would make comments like “our vendor is the best of a bad lot”. The sector is notorious for difficult and painful implementations. With only one or two new deals a year for vendors, it was a hard market to ensure continued investment in the solutions.

    For years, the idiosyncrasies of the Lloyds market (messaging into the Bureau, peculiarities of business process, and complexity of the risk) were significant barriers to entry for other vendors.

    Then two trends converged to create a more interesting target sector for the non-traditional London market vendors looking for continued growth:

    1. Mainstream software market matured significantly and insurers were able to partner with vendors with sophisticated partner programs, and strong delivery records to take on some serious legacy system challenges.
    2. Lloyds/London market insurers started to expand globally and were open to looking at more mainstream solutions for their non-Lloyds business. Several made investments in Europe or the US for their regional businesses and successfully implemented new underwriting and claims solutions.

    The result is several of the big names in the core P&C systems market now have the global Lloyds or London market insurers as their clients, albeit for their non-Lloyds books of business for underwriting. Implementations are mostly in the US or in Europe.

    The Claims area is a different picture. Several vendors have made the necessary investment (with thanks to their charter client) to be London market compliant and support Claims in the Lloyds market. This mostly involves modifications to messaging to be compliant to the London market message standard of ECF.

    So the next uncharted territory is for a mainstream vendor to partner with a London market insurer and invest in the localization requirements. Our view is that is probably 18-24 months away.

    It’s a good time for the insurer in the London market. There is increasingly more choice from established, well-funded vendors with better implementation track records and experience in product management. It’s a challenging time for the incumbent traditional London market software players as the competition is going to really hot up with these new market entrants. Time to buy ring-side tickets.

    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:

     

    Business and Technology Trends: Individual Life

    Rob McIsaac

    This week, Novarica released the most recent of our Business and Technology Trends reports, focused on the Individual Life Insurance market segment. The report is available for immediate download from Novarica’s research library or directly via the link http://www.novarica.com/b_and_t_trends_individual_life_2014/

    Five years after the official end of the Great Recession, this is a segment of the insurance industry that continues to face significant challenges. Low interest rates and heightened levels of competition continue to cause economic pressure for companies involved in the sector. Slowing sales in 2013 exacerbated that pressure even as demographic changes in the market highlight future trends which carriers can ill afford to ignore.

    There are, however, opportunities for the future, as carriers consider concurrent preparations for both the maturing of the Baby Boomer cohort and the rise of Millennials. Baby Boomers are now reaching retirement age at a pace of 10,000 individuals per day, which accelerates a range of changes in their financial needs. The latter group represents a larger, more diverse and technically more astute generation that has seen relatively low penetration by traditional life carriers. This is a discerning demographic group that has had expectations for services and information transparency heavily influenced by experiences with entities like Google, Apple, Facebook and Amazon. In order to take advantage of these opportunities, carriers should be carefully rethinking operational processes and the underlying technology investments that enable them.

    This report explores the range of business trends, including changes in the regulatory environment, which are framing the market for Individual Life products. It also highlights the technology trends, and illustrative examples, for the investments decisions that carriers are now making in preparation for the future.

    This report confirms what has been seen in other Novarica research: in the current business climate, CIO’s and their teams are being asked to do more without much more funding. This report can be used to both confirm existing priorities and refine future investment plans.

    Turning Insurance Outside-In

    Matthew Josefowicz

    Across the great formal presentations, panel discussions, and roundtables at our 7th Annual Council Meeting this week, one theme kept jumping out for me: the need for insurance to become more demand-led in market, operational, and technology strategies.

    As an industry, we have a tendency to view the world from the inside out. We need to reverse that perspective and look at the our industry and our operations from the outside in. We need to start from market and operational needs as we plan product, service, and technology strategies, rather than starting from our own understanding of capacities.

    Our keynote speaker, data and analytics expert Adam Braff, hit on this theme in his opening presentation on “Cooking with Big Data,” with the first of his 5 guidelines: “Figure out what people want to eat before you go shopping.” Too many analytics efforts start with gathering data rather than thinking about how insights might be operationalized to drive better business results. The supply of data and analytical capability is leading in too many cases, rather than the demand for insight.

    My presentation on Trends in Information Technology and Insurance focused on how changes in the ability to access, communicate, and analyze information means that buyer and distributor expectations about speed, flexibility, and even value propositions, are diverging from insurers’ own understandings of the world. The supply of risk analysis and distribution is leading in too many cases, rather than the demand for coverage.

    In our CIO panel, a common theme of the panelists from AFLAC, The Hartford, Great American, and New York Life Investment Management was re-orienting IT organizations to be more focused on the creation of business value. This involves educating IT staff about business needs and goals as well as educating business leaders about the implications of their requests. The supply (and cost) of technology is leading in too many cases, rather than the demand for capabilities.

    This will be a massive shift for the insurance industry, but one that is necessary to undertake. Access to information, communications technology, and analytical capability is democratizing the ability to price and sell risk. Insurers (and insurer operational and IT executives) that focus on the demand for coverage and capabilities will be better positioned to meet that demand. Those that don’t may soon find themselves with much less demand for what they have to offer.

    The 7th annual Novarica Insurance Technology Research Council Meeting was held in Providence RI on April 30-May 1, and was attended by more than 70 insurer CIOs and senior IT executives. A report based on the discussions at the meeting will be published shortly.

    Other recent Novarica reports on this theme include:

     

    Commercial/Specialty Underwriting Automation: Cui Bono?

    Matthew Josefowicz

    Good article recently in I&T on Commercial Insurers and Underwriting Automation., covering some recent studies by various industry analysts. Here’s a quote:

    Complex risks are still much more hand underwriting and will be for the foreseeable future,” says Matt Josefowicz, managing director at Novarica. “It’s all about empowering those underwriters with more communications tools and more data. A lot of the tech investment for underwriting in the specialty and large commercial side involves bringing all the information needed to make decisions to the underwriter’s fingertips as quickly as possible.

    Complex-risk underwriters present a challenge when implementing new technologies, Josefowicz explains. “The individual underwriting desks have a lot of political power,” he says. When dealing with high-value cases, these experts have a great deal of specialized knowledge and tend to call the shots for which technologies they want to use.

    One of the main questions in automating commercial and specialty is in answering the question Cui Bono? – “to whose benefit?” As we discussed in our report on Centralized and Federated IT Models, it’s hard to drive IT strategy centrally when the political power in an organization is federated. Commercial and Specialty CIOs need to work closely with their business leaders to make sure they are addressing their key data and technology issues. If the P&L heads can’t be convinced of the local value of an IT initiative, appeals to a weak central power are rarely successful.

    For more on business and technology trends in Specialty Lines, see our recent report.

    Straight Through Chicago

    Rob McIsaac

    Last week’s LIMRA/ LOMA Retirement Conference in Chicago provided an interesting overview and update for what is happening in the industry today. Jim McCool from Charles Schwab noted the importance of having carriers move to establish trust with consumers, and the need to de-clutter and simplify products and business models. He highlighted the example of Apple as a company that has taken a potentially complex space and made it elegantly simple with a terrific user experience that inspires trust and confidence.

    This was a great build on a presentation I had an opportunity to deliver at the conference on Straight Through Processing.

    The reality in the United States is that 10,000 Baby Boomers are now reaching retirement every day, something that will persist for the foreseeable future. The opportunity for carriers to prepare for this is now. Further, with low interest rates and continued cost pressure, finding ways to reduce operational expenses while improving customer experience (for both agents and customers) is critical.

    Another reality is that customer experiences are increasing being set by companies like Apple, Facebook, Google and Amazon. They have perfected ways to make complex things simple, easy to use, innovative and “delightful” to customers. With expectations set there, business practices that are dependent on paper and rooted in the 1950′s are increasing arcane and inaccessible to agents and customers alike. The need to drive toward electronic applications and electronic signatures is crucial for carriers across lines of business. It is both a crucial step toward better customer experience now … and a precursor to bring able to deliver on meaningful mobile capabilities.

    This was an opportunity to highlight findings from a recent Electronic Signatures Executive Brief we published.

    When asked if there was a potential crisis due to aging in the producer community, the executive panelists at the conference’s main session noted that there is. Allianz, Schwab and Wells Fargo all acknowledged the problem and highlighted approaches they are taking to prepare for a new generation of advisors.

    In some places, the agent / advisor community is actually aging faster than the general population at large. This also highlights the importance of creating better and more compelling user experiences for both producers and end clients. Moving to simplify business process, allowing for the electronic execution of transactions and “going mobile” are all key to this. Carriers will continue to need to compete for advisor “mind share” which will require experiences that can be concurrently compelling to multiple generations of users. All of this, of course, ties back to the Hot Topics we see for insurers in the near future.

    The Apple analogy continues to resonate, particularly if carriers want to truly remain relevant in a highly competitive environment.

    While there are certainly complexities inherent to the life insurance, annuity and retirement plans segments of financial services, the future is clear: STP is moving from being innovative to becoming a “cost of doing business”. Hope is not a strategy and indecision is not a winning game plan.

    New Brief: Wearable Technology and Insurance

    Tom Benton

    Over the last two years, fitness tracking bands, smartwatches and Google Glass have fueled the next wave of consumer electronics:  wearable technology. Financial services firms and insurers are already starting to find innovative ways to use wearables. In my new brief, Wearable Technology and Insurance , I outline three key capabilities and some examples of how these enable innovative applications for insurers and financial services firms. 

    In some respects, “wearables” are not new – after all, the Dick Tracy comic strip introduced their iconic “wrist radio” just after World War II.  What is new is that smartphone adoption and more efficient smaller batteries are enabling new devices and applications.

    I currently have two wearables on my wrist – a fitness tracking band (the Fitbit Flex that I have been wearing since June 2013) and a smartwatch (a Pebble – I was one of the 69,000 or so who backed the project on Kickstarter back in May 2012, but I started wearing it regularly earlier this year).  I am seeing more and more people wearing these devices and with the recent introduction of Android Wear, Google’s extension to the Android operating system for wearable devices, we can expect 2014 to be the “year of the wearable”.

    As wearables gain adoption by consumers, innovative insurers will find ways to use them in engaging customers.  Others should consider how wearables will fit into mobile and customer communication strategies.  Wearables are on the way – how can you leverage them for customer interactions?  Read the brief and let me know your ideas.