J.D. Power Study Shows Digital is About Customer Service, Not Just Cost-Saving

Chuck Ruzicka

In today’s environment where retention is critical, the quality of a carrier’s claims service and handling is a major source of competitive advantage. Other than the bill, claims are often the only contact that a customer may have with an insurance company. A new study from J.D. Power found that while the majority of claimants would prefer to check the status of their claims online, consumers would also like the option to call a representative for first notice of loss. This study highlights that digital service is a complement to call-center service, not a replacement for it. Early business strategies around what used to be called e-business focused on the cost savings of “self-service.” But digital is about engaging customers where they are, not pushing them to lower-cost channels.

News and Views Roundup: Zenefits, Drone Use, Workers’ Comp Profitability, Customer Experience, Plans for DC Products

Tom Benton


Tom Benton on DC plan advisors planning to adjust products in the wake of the DOL Ruling





Rob McIsaac


Rob McIsaac on Zenefits launching new products for small business





Mitch Wein


Mitch Wein on consumers’ increasing interest in customer experience, and not just price





Steven Kaye


Steve Kaye on recent profitability in workers’ compensation





Jeff Goldberg


Jeff Goldberg on Travelers’ use of drones during Hurricane Matthew

Consumers are Increasingly Interested in Experience, not just Price

Mitch Wein

A recent piece from Wharton highlights the growing importance of carrier providing a “delightful experience” to the insured and/or the beneficiaries as well as acting as a trusted advisor throughout the customers’ lifetime, providing continuing value. Novarica has written about how millennials are not just interested in the price and risk transfer characteristics but in the lifetime value of the carrier and the experience the carrier provides. Millennials are much more likely to switch carriers if they have a poor experience. Analytics can help carrier gather metrics around how well carriers are doing and what they need to improve. In particular, on claims an intelligent process facilitate through analytics and workflow and differentiate claims between simple and complex, providing an optimized experience.

Case Study Highlight: Enabling One-Day Health Claims Payments at Aflac

Matthew Josefowicz

As we approach the announcement of the Novarica Impact Awards in the fall, we will be highlighting one Impact Award nominee each week on our blog. The Novarica Impact Awards are voted on by over 300 members of the Novarica Insurance Technology Research Council, making them the only purely peer-reviewed awards program in insurance technology.

Many of this year’s impact award nominees share some common characteristics – the use of Agile methodology, a focus on communication, strong executive support, and planning for substantial user training as a key part of unlocking value creation.

This week, we look at an Aflac project to enable one-day health claims payments.

The One Day PaySM initiative was a response to a direct challenge from Aflac’s CEO to create a unique claims payment process. Aflac’s goal was to reduce average claims processing time from four days to one. Over the course of the 12 month project, Aflac used Agile methodology to ensure delivery and quality, which they credited with enabling their speedy delivery and enhancing collaboration between IT and business teams, especially when supported by co-location of IT and other business units. The lessons learned have since been applied to a full restructuring of the IT organization. The project has resulted in 87% of online claims meeting One Day Pay requirements—a year-over-year increase of 43%. Customers submitting claims online reported a satisfaction rate of 91%. The direct deposit capability also reduced the company’s carbon footprint, saving an estimated 16,000lb of paper.

For more detail on this project and more than 30 others, including cases from MetLife, Prudential, The Hartford, and Trustmark, see Novarica’s Best Practices Case Study Compendium 2016.

News and Views: Brexit, Home Automation, Data Security, the DOL, and Customer Satisfaction

Novarica’s team comments on recent insurance and technology news

Britain has voted to leave the European Union.

Mitch Wein

Novarica comment by Mitch Wein, VP of Research and Consulting: “Yesterday, the UK voted to leave the EU. Nigel Farage, the UK Independence party head, declared it “Independence Day”. What does this mean for multi-national insurers? The impact is far reaching. Consider regulations regarding data, financial product definitions, privacy, and the overall regulatory framework including capital requirements. Access to Europe’s single market, some 500 million people, will be impacted by tariffs which will be placed on transactions over the existing VAT. And what about employees that come from the EU and work in London? What will be there status going forward? Brexit only highlights the importance for global companies of maintaining flexible, globalized IT operations to be able to handle unforeseen events. Risk and contingency planning is key. Much to sort out. Stay tuned.” More from Mitch on the potential impact of the Brexit is here.

Home automation can help save on claims and Esurance launches mobile app for self-service home inspections.

Matthew Josefowicz

Novarica comment by Matthew Josefowicz, President and CEO: “These two stories are nice examples of how ubiquitous, low-cost communications changes what’s possible within the insurance value proposition. Personal lines insurers can go from providing loss reimbursement to loss avoidance in a way they never could have before. I especially enjoyed the Esurance story, because I’ve been using the idea of self-service home inspections via smartphone video in conference presentations as an example of new potential capabilities for the last several years. Nice to see it happen in the real world!” More from Matt on the arrival of the future here.

The digital currency Ethereum dropped in value due to a huge attack.

Jeff Goldberg

Novarica comment by Jeff Goldberg, VP of Research and Consulting: “Ethereum is a cryptocurrency that many believe will surpass Bitcoin as the choice for businesses dealing in more complex contracts due to its ability to allow the creation of programmatic “smart contracts” on top of its blockchain base. Emerging technologies always have some stumbles during their maturation, but in the case of cryptocurrency, a technology stumble means direct losses of millions of dollars rather than a few hours of downtime. This isn’t necessarily a repudiation of Ethereum, but rather a reminder that there’s a difference between the security of a platform and the security of applications built on top of that platform. Even if the underlying blockchain is secure, those who participate in smart contracts on Ethereum will also need to trust the party that designed and programmed the contract. Eventually there will be a variety of standard base contracts that have been vetted by the community for security, and businesses will be able to adapt them to their needs rather than start from scratch.” More from Jeff on Blockchain here.

15% of agents at Citizens Property Insurance Corp face termination if they don’t sign new data security compliance agreements.

Mitch Wein

Novarica comment by Mitch Wein, VP of Research and Consulting : “The NAIC issued its Preliminary Draft Data Security Model law in March, 2016 for comment. This model law draft will become the basis for state laws and regulations over the next few years as each state adopts a version of it. The model law makes clear that insurers will be liable for data breaches. It also specifies minimum requirements largely based on the NIST framework, and gives policyholders the right to have class action lawsuits. The insurers know this is coming and are now working to minimize their financial exposure to these new regulations. The Citizens appointment agency agreements are holding agents responsible in the event that a customer’s data is breached due to the fault of the agency’s cyber-security practices. Citizens is establishing a minimum requirement for agents. Of course, the agents will sign these agreements in order to continue to sell Citizens’ insurance products. However, if a breach occurs, Florida’s Citizens Property Insurance Corp would be the deep pockets for a lawsuit, not the small agent. Citizens would try to get the money back from the agent but the agent may or may not have the money. It is also unclear as to whether small family-run agencies have the expertise to deploy the technology protections required.” Learn more about Novarica’s IT Security Planning Workshops here.

Variable annuities sales dropped by nearly 20% in Q1 and the DOL ruling will have some other side-effects.

Don Metz

Novarica comment by Don Metz, VP of Research and Consulting: “The first quarter 2016 drop in variable annuity sales of 18% and dramatic increases in indexed annuities with a 35% increase and fixed annuities with a 48% increase reflect the ongoing turbulence in the annuities market that will likely remain for some time. With the surprise inclusion of indexed annuities under the BICE in the final rule the potential for even greater turbulence is high. While many are pointing to the recent DOL fiduciary rule announcement as the principal driver of this shift, the reality is that variable annuity sales have been steadily declining for several years. Consumers continue to be concerned about overall market volatility and manufacturers continue to be challenged by the persistent low interest rate environment, neither of which appears to be calming down in the near term. These issues also mask a broader shift in the market as the investment goals of the baby boomer generation shifts from accumulation to payout as they retire and preservation of capital and income guarantees become crucial. This shift is exacerbated by a next generation that is more cautious in their investments and more skeptical of market volatility. The DOL fiduciary rule along with these broader market and consumer issues indicates that the annuities industry may be subject to a high degree of turbulence for the foreseeable future.” More from Novarica business and technology trends in annuities is here.

Study Finds Customer Satisfaction is Falling for Large Auto Insurers and Rising for Small Ones.

Chuck Ruzicka

Novarica comment by Chuck Ruzicka, VP of Research and Consulting: “Customer perceptions of the insurance industry are falling despite large investments in analytics and digital technology. Pricing increases are offsetting improvements in service in the customer’s mind. While these trends are consistent across the industry, they may be creating an opportunity for smaller or regional insurers to gain some ground on larger, more national brands as consumers become open to alternatives.” More from Novarica on business and technology trends in personal lines is here.

How Claims Technology is Helping Insurers to Differentiate Themselves in a Competitive Marketplace

Steven Kaye

Our annual study of insurer CIO budgets and projects showed that more than 40% of insurers are replacing or significantly enhancing their claims systems. Our new report on Business and Technology Trends in Claims, looks at issues and initiatives across the industry.

2015 Claims Replacement in Insurance

2015 Claims Replacement in Insurance

Claims has long been a key area of competitive differentiation for property/casualty insurers, and increasingly for life insurers as well, driven by the need to improve service levels, provide better analytical insights, and ensure regulatory compliance. While replacing core claims systems is the biggest focus across the industry, technology is driving changes across the claims value chain, from first notice of loss (FNOL) using mobile channels to skills-based routing of claims based on complexity to issuing real-time payments. Learn more in our new report, or contact us at inquiry@novarica.com to arrange a consultation on this topic.

Related Reports

Top Technology Priorities for Personal Lines Carriers

Jeff Goldberg

Today’s personal lines marketplace is more competitive than ever due to slow growth, intense price competition and customer acquisition costs rising.

Personal Lines insurers have always been a leader in insurance technology innovation and conversations with CIOs and research in the space shows that trend will continue, with technology playing an ever-larger role in insurers’ ability to attract, retain, and profitably serve clients. Across the industry, insurers continue to make investments across the Novarica Insurance Core Systems Map.

Novarica Insurance Core Systems Map: Personal Lines

Novarica Insurance Core Systems Map: Personal Lines

In a market with very competitive conditions and intense profitability pressures, personal lines carriers are focusing on growth strategies, expense reduction, and improving underwriting results. Below I have listed four technology priorities CIOs and business executives should consider to remain competitive.

Business Intelligence
A data quality initiative, which examines data warehousing, operational data stores, and appropriate data marts, is key before undertaking more advanced business analytics initiatives. Once data quality is ensured, carriers can then overlay business intelligence tools. Predictive analytics tools for carriers with sufficient data are becoming more popular. Small carriers should look at working with an organization that can provide pooled data and insights. All carriers can use models to improve underwriting insights, to more consistently apply pricing, and to improve claims activities. In addition, third party big-data sources are going to become more and more prevalent for personal lines insurers. Companies who take advantage of this first will have an edge in pricing and retaining business.

Policy Administration Systems
Upgrades to policy admin systems will help carriers gain operational efficiencies and flexibility in the ability to add data. Using business rules to manage workflow and predictive analytics to build pricing models can improve risk selection, risk pricing, and reduce operating expenses. Carriers should look for highly configurable solutions with product configurators, simple rules, and tools for launching new rating algorithms. They should also look for the ability for business units to make their own modifications, though practical experience with configurable systems reveals IT often still ends up managing most changes. As long as the time and cost of such work for IT is reduced, that’s still a big value.

Agent Connectivity
Extending functionality to the agents continues to rise in importance. It’s less and less about differentiation and more and more simply the price to pay to be in the game. At this point in time, most personal lines insurers have built an agent portal, and are often quite proud of the results. As a next step, both agents and carriers would prefer to receive and provide information electronically and process that information with as little human touch as possible, eliminating double entry. Real-time upload, download, and data translation deliver tangible benefits including reduced costs of handling, improved data quality, and improved turnaround time.

Claims Management
Streamlining claims management by automating processes improves customer service by speeding up claims service, providing consistent and fair best practices to all customers, and delivering personal service. On top of these customer benefits, insurers who have implemented modern claims systems report tangible speed-to-market benefits. If a carrier hasn’t already begun to upgrade their claims administration system, now is the time to start. Carriers who are using modern systems are rapidly gaining competitive advantages by improved efficiencies in claims handling and improved data leading to better outcome management. In addition, better claims processing has become a significant part of how personal lines insurers market themselves to consumers and how consumers select an insurer.

These technology priorities are based on the expertise of Novarica’s staff, conversations with members of the Novarica Insurance Technology Research Council, and a review of secondary published resources. For more information, download a free preview of our new Business and Technology Trends: Personal Lines report at: http://novarica.com/business-and-technology-trends-personal-lines/ or email me to set up a complimentary 30 minute consultation.

Related Reports

Trends in Claims

Mitch Wein

According to Novarica’s 2015 US Insurer IT Budgets and Projects report, approximately 20-30% of insurers are replacing claims systems.

On Wednesday, May 28th at 2 pm (ET) I will be hosting a webinar, which will examine trends and issues in claims management systems, as well as review highlights from our Market Navigator report on leading claims vendors. Attendees of this webinar will also learn about:

  • Current market overview
  • Present state of claims system technologies
  • Advanced capabilities in claims
  • And more
Investments in Insurance Claims Technology 2015

Investments in Insurance Claims Technology 2015

Claims technology continues to play a crucial role in a carrier’s ability to differentiate, control costs, and deliver a consistent level of high service. Insurers continue to replace claims systems at a heavy pace. With the impact of mobile and social media starting to be felt as well, modern claims capabilities are a must for insurers.

To pre-register for this event, visit: https://attendee.gotowebinar.com/register/120108826

A Contrarian View on Self-Driving Cars – Beware the Unintended Consequences

Rob McIsaac

While I embrace many (most?) things with a technology flair, I have to admit to being a bit amused with all the recent breathless excitement exuded over the idea of self-driving cars. To be sure, technology is making them ever safer and more fuel efficient. It is also augmenting the driving experience so that paper maps are going the way of LP recordings and being “lost” is now something of a personal choice rather than a state of condition, but I suspect that the rush to sell ad space may have people overlooking a few practical realities that could lead to surprising, if not dire, unanticipated, consequences.

I’m quick to point out, by the way, that driving my vintage BMW has a completely different set of experiences than driving a new one. No airbags, crash avoidance alarms, proximity radar or backup cameras. Driving it requires real and significant concentration and the consequences of an error can be real and immediate. While I’d never want to retrofit a blind spot warning system, I can appreciate the value. Heck, from the dark ages back in 1984, the vintage ride doesn’t even have a single cup holder.

I can appreciate ABS brakes and traction control too. These technology dependent devices can make drivers feel invincible … or at least support the idea that training and engagement are less important than they once were, since mistakes can much more easily be recovered from. Further, I can also appreciate that under “normal” conditions while cruising down the Interstate and experiencing the commuter equivalent of the “Talladega Draft”, where any open space on the road is an invitation for someone to dive in for advantage, advanced computer control can stay on top of following distances and emergency braking procedures better than the average distracted commuter trying to manage the car, the coffee cup, the kids and the cell phone concurrently.

No, my real concern will come about when we get to the point of auto-driver being a real possibility. At that point, under normal conditions, the onboard systems could handle all the easy stuff with a minimal amount of drama or trauma. Parking between 2 stationary objects? No sweat. Maintaining following distances at 70mph? Again, not much of an issue. The concern will emerge when bad or unexpected or unusual things happen and the computer control gives up and hands it back to the now, even more woefully unprepared occupant, under the tag line of “I don’t know what to do, you take it!”. A failed sensor, a set of road conditions that are unexpected, and a wide range of other factors could create scenarios where the on-board systems decide that they have reached max capacity. Or there’s just the Help Desk Rule #1 for electronic devices: when all else fails, reboot, and start clean.

In other forms of transport, such as high-speed trains and airliners, there is significant control automation even for such dicey maneuvers as station stops and landings. In the main, it works great. But when it goes wrong, it can go spectacularly wrong.

As a backup, these devices have alternative systems, called engineers or pilots, who are well trained and capable of taking over navigation in mid-transaction. They have a full training and testing regimen that they need to follow in order to maintain their certifications. When the training kicks in, the auto pilot comes off, and the results are generally good. Even at that, however, they aren’t perfect as some recent plane crashes have suggested. Training really does matter. A lot.

Which gets back to the driverless car concept. If the occupants are going to be expected to “take over” at any point in the journey, where is the training and experience going to come from? How will they practice dicey moments to build an experience base rather than becoming unwitting guidance systems for land-locked missiles that run amok?

Renting a car today can provide an interesting view if the future. Mastering such simple tasks as turning cruise control on and off varies so much between brands and model years that the first few miles out of the lot are like a training mission of their own.

So, one consequence of increasingly automated vehicles could be fewer, but sadly more spectacular, crashes that are hard to pinpoint “blame” for. The conversation around who is liable in such circumstances could be both long and full of rich legal entanglements. Breathlessly talking about self-driving cars and the end of accidents as we know them may be both significantly premature and a preview to different and more nuanced or complex dialogue.

Of course, on a weekend that required a surprisingly large number of re-boots to both my real world laptop and tablet devices at unfortunate moments, I find myself a little less concerned. If the technology crashes on an Excel problem, how can it possible handle a Jersey Jug-handle first time, every time? Or, maybe I should be more concerned. Time will tell. And that could be the actuarial nightmare scenario.

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  • 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.