A Challenging Environment in the Industry

Frank Petersmark

I recently had the opportunity to participate as a judge for the ACORD Insurance Innovation Challenge held in Des Moines. The event brought together seventeen startups who each had five minutes to pitch their ideas and approaches, and another five minutes to field questions from the judges. Two winners were chosen who now move on to the finals competition in conjunction with ACORD’s annual meeting. There are several of these Challenge events being conducted in the U.S. and Europe, and at least part of the idea is to attract more innovative and entrepreneurial thinking to the insurance industry.

The View from Outside

The Challenge has the benefit of providing some perspective on how innovative and entrepreneurial types view the industry as a potential market. If this event was any indication, many innovators view the industry the same way fighter pilots viewed certain kinds of combat missions – as a target rich environment.

Nearly all of the participants were from outside of the insurance industry, and their startup ventures focused mostly on data aggregation for customer centricity, process improvements for policyholder and agent service improvements, and seamless straight through processing for underwriting and claims decisions. In short, many of the things that the industry doesn’t do particularly well currently. As I said, a target rich environment.

“Capital Rich and Service Poor”

Encouragingly, there were a few venture capital firms present, and a couple were even from insurance companies. Both the startups and the venture capital firms view the industry as capital rich and service poor, and that means opportunities for the kinds of approaches that will make a difference to the next generation of policyholders who many of these startups hope to turn into lifestyle customers.

Minimizing Distracted Driving

One of the startups focused on distracted driving by actively monitoring drivers and their behaviors, resulting in reports that indicate what adjustments might be made to improve safety and reduce premiums. The interesting part about their approach was that they had the ability to dynamically turn off smartphone apps that tend to cause distracted driving if given permission to do so.

Nudging Consumers Towards Healthier Behaviors

Another startup focused on the kinds of lifestyle changes that would result in customized life insurance products that included rebates or modifications for health related activities. Interestingly, their premise counts on the fact that the new generation of consumers is much more willing to share private information about their lifestyles in exchange for financial or other benefits, a fact that the industry has been slow to pick up on generally.

Shared Service Drones for UW and Claims

Still another had the bright idea of becoming a third party provider of a drone service that insurers would use for property assessments during the policy and claims processes. The startup would use vetted and licensed drone operators and charge a flat fee per fly by. That has a lot of potential.

Optimizing Existing Marketing and Processes

Finally, there were a few startups that sought to smooth cumbersome processes – one for reinsurance coverage by creating an online marketplace to connect needs with coverages, and another that proposed using advanced analytics to personalize the travel insurance market, thus leading to more sales.

More Change, More Responsibility for Corporate Leaders

In all, there were encouraging signs that the industry has begun to wake up to the fact that the ground is moving underneath it, and if in the end the industry doesn’t move quickly enough to keep its balance, there are others who will.

From our perspective, our recent research on the relationships between insurance CIOs and their boards of directors, and our view that the industry should appoint more board members with deep technology experience to their boards, is reflective of where the industry needs to go. There are even a few carriers that have begun to appoint board level technology committees as way to place the competitive and market implications of a well-executed technology strategy in their proper place – at the strategic top of the company. We’ll be presenting our research on this topic at the NAMIC Annual Convention on September 25-28, 2016 in Vancouver, BC, Canada. In the meantime, on to the next Challenge.

Novarica Council Gathers Insurer CIOs to Address The First Year of the Future

Matthew Josefowicz

Nearly 70 IT leaders from more than 50 insurers gathered last week at the 9th Annual Novarica Insurance Technology Research Council Meeting to participate in panels and workshop sessions with their peers, get insights from Novarica’s senior team, and attend keynote sessions from outside experts on operational transparency and cyber-security.

The First Year of the Future

We dubbed last year “The Year the Future Arrived” for insurance, when nascent trends like wearables, Internet of Things, consumer internet giants’ interest in the sector, and a growth of direct sales beyond personal lines became a reality. This year, the clock is no longer counting down, but counting forward.

Keynote: Nine Trends and Issues…


My keynote focused on our Novarica Nine for 2016 and Beyond, looking how these and other trends are shaping the industry, as well as what kinds of technology strategies insurers are taking to address these trends, and how they are managing their IT organizations to deliver these capabilities.

…100 Technology-Enabled Capabilities


We also reviewed our expanded “Benchmarking the New Normal” framework, which we will publish this summer, looking at deployment rates for 100 key technology-enabled capabilities across functional areas like product, marketing, distribution, customer engagement, billing, claims, and finance/operations and technology areas like data, digital, and core.

CIO Panel: Core, Agile, Evolving Customer and Employee Dynamics

Our CIO Panel, which included Kate Miller of Unum, Scott McClintock of OneBeacon, and Paul Brady of Arbellla, addressed strategic issues ranging from core systems replacement to embracing agile development to redesigning their organizations to make insurance IT an attractive career option for millennials.

Operational Transparency for External and Internal Customers

Our guest keynote, associate professor Ryan Buell of Harvard Business School, presented his research on operational transparency and its impact on customer service to a tremendously responsive and engaged group. We’d invited Dr. Buell to join us because his research is so applicable not just to the insurance customer experience, but to the relationship between IT and other business units. See this recent post for more on this session

Novarica Research on Core Transformation, Data, Digital

On the second day, the Novarica panel of Rob McIsaac, Martina Conlon, Mitch Wein, and Jeff Goldberg from our team discussed some of their recent research and customer projects in areas like core systems selection, transformation project assurance, data strategy, meeting agents’ digital needs, and a wide range of other trends and best practices.

Discussion Groups of CIO Members Focus on Their Key Issues

Special interest group discussions for group voluntary benefits, individual annuities, individual life, personal lines, specialty, commercial lines, and workers comp explored recent research relevant to each sector. In discussions co-led by a Novarica expert and a CIO chairperson, these groups addressed topics like enrollment standards, impact of the DOL fiduciary ruling, market dynamic changes, ISO rating, and core systems vendors.

Cyber-Security Threat Evolution and Preparation

Distinguished professor and Department of State cyber-security adviser Dr. John Savage gave a closing keynote on the cyber-security, emphasizing the importance of managing security beyond perimeter protection and staying engaged with industry groups to monitor the evolution of new threats globally.

Knowledge-Sharing and Networking

novarica-councilCouncil members valued the opportunity to network and learn from each other in a private, vendor-free environment, and many of the special interest groups have already made plans to meet again later this year. We’ll be publishing a report summarizing the discussions and panels next month, and the 10th Annual meeting will occur in late April, 2017.

For more information on joining the Council, senior insurer IT executives are invited to visit http://novarica.com/council and request membership. Membership is free and has no obligations.

Digitalization and Disruption: Thoughts from the MI IASA Conference

Frank Petersmark

I recently attended the MI IASA Spring Conference where I presented recent research on the continued and disruptive digitization of the insurance industry. The research resonated with many of the carrier IT and financial people in attendance, who find themselves and their companies at various points along the digitization continuum. One of the central themes that emerged in the ensuing discussions was how many in the room viewed this transformational trend as both a risk and an opportunity. Which way it was viewed really depended on the perspective of the viewer, with the more security oriented in IT expressing concerns over security, and the more customer (agent and policyholder) focused on the potential for engagement and information sharing.

That dividing line was more nuanced than it sounds, as on the whole most of the attendees of the session and of the conference were engaged in trying to figure out how to position their carriers and organizations for the digital onslaught to come. However, where the dividing line became a little less nuanced was in the positioning actions that many of the carriers in attendance were taking. During some of our discussions it became clear that the conference attendees represented a microcosm of what’s going on the industry overall, and that’s the creation of digital haves and have-nots. The interesting part about that was the fact that not a single conference attendee I engaged with indicated that their company was making a conscious decision to be a digital have-not; rather, it was in the ways their respective companies viewed the potential of digitization that was the tip-off.

For those who were focusing on the security and data protection concerns, and the need to tightly control the kinds of devices and platforms, the move to digital looms more as another threat that has to be dealt with rather than an opportunity to leverage. In fairness, their concerns are far from unfounded, but focusing on the potential problems and issues with digitization is missing the forest for the trees. As with any new technological trend, there will be issues and attitudes that have to be dealt with.

On the other hand, several of the attendees I spoke with were very excited about the possibilities of a digital insurance world, and the promise that brings for improving relationships, processes, and products. Many indicated that their companies were utilizing portals and mobile platforms for things like agent and policyholder self-service, and as a way to reach new market opportunities. The results seemed mixed thus far, but experimentation and adjustment are all part of the equation when adopting new capabilities. The same attendees were also interested in the ways a new generation of employees, agents, and policyholders might want to interact with and leverage digital capabilities and how they should be thinking about that inside carriers. It was also true that many of the attendees were just trying to figure it all out, and that’s fine so long as that figuring out process leads to actionable initiatives.

The good news was that there seemed to be widespread recognition among the carrier attendees from the financial, business, and IT functions, that the digitization of the industry was going to proceed whether their companies were ready for it or not. That readiness, and an orientation toward the opportunities that digital presents, will become the difference markers between the insurance industry digital haves and have-nots.

Related Research:

  • Hot Topics for 2016
  • Novarica Nine for 2016
  • Benchmarking the New Normal: 50 Advanced Capabilities for P&C Insurers
  • Preparing for Digital Transformation
  • Looking Long Term: News from the 2016 Life Insurance Conference

    Tom Benton

    This week I attended the 2016 Life Insurance Conference, jointly hosted by LIMRA, LOMA, SOA and ACLI. The focus of the conference was “Looking Long Term”, with sessions ranging from e-delivery for distribution, predictive analytics and other operational-focused areas to transformation, innovation and future capabilities, including a session I presented on “The Forecast is Clear: More Cloud in The Future”.

    The opening keynote speakers were Jim Morris, CEO Pacific Life, and Josh Linkner, a best-selling author on innovation. Both presented thoughts on how the life and annuities business is looking to the future.

    In Morris’ keynote he discussed how Pacific LIfe has taken a look at their future customers and developed principles for success, including speed/focus, relationships, flexibility and alignment. For example, they have initiatives now for simplifying processes and their products. I noted that absent from the strategy is “use cool new technology” – their focus is on better customer experience.

    Linkner gave five steps to what he called “everyday innovation”. Actually he called the five steps “five obsessions of innovators”, which included “Get Curious” and “Get Scrappy”. One of his key points was that to be innovative, an organization needs to encourage creativity, which often leads to disruptive ideas.

    My session on cloud computing was well attended – life insurers and vendors alike are interested in the adoption of cloud-based delivery in the industry. After describing where SaaS, IaaS and PaaS solutions fit into the array of options for external delivery of IT services, I presented information from Novarica’s recent survey of digital, mobile and cloud capabilities and their use at insurance carriers. Adoption of SaaS for core systems is just starting at Life carriers, but as our survey showed, many large and some midsize carriers are using SaaS-based non-core solutions. These carriers noted that speed of delivery and the ability to provide unique capabilities were the key drivers for implementing in the cloud, and focused on security, performance and pricing when considering specific vendors. Insurers are generally finding value in cloud deployment, but still face challenges with lack of predictability in pricing and with upgrades. Most notably, few are considering any formal ROI or metrics for these efforts, which is an issue for most IT transformation projects across the industry.

    Overall our survey found that cloud and SaaS solution adoption is growing at life insurers, with most large insurers and a growing number of midsize insurers planning to grow, enhance or maintain current capabilities. The forecast is clear – there will be more cloud in the future for life insurers.

    If you are interested in getting a copy of my slides and in discussing them further, please contact me at tbenton@novarica.com.

    Update from the CIO Insurance Summit

    Rob McIsaac

    It is amazing to think that we’re already into the second quarter of 2016. The year is moving fast, and with it the opportunity to see how carriers are responding to the urgency of a “new normal” is coming into clearer focus. I had the good fortune to be able to be the “Master of Ceremonies” for the CIO Insurance Summit in NYC on April 5th, which clearly provided insight into what is on the mind of participant carriers. The pace of activity is notably picking up for many lines of business although, as one of my mentors once shared, it is important to avoid confusing activity with progress. Real progress appears to be somewhat elusive but the quality of the dialogue definitively appears to be elevated. 2016 promises to be a very interesting time.

    From our sessions in NYC a number of clear themes emerged that are worth sharing.

    Cloud deployments are getting more real even as concerns remain in some quarters. We had a wide ranging discussion related to the opportunities and concerns that seem to concurrently emerge around the use of cloud based options for carrying mission critical workloads. In many organizations it appears that “security” and “compliance related risks” remain at the forefront of an inability to foster faster adoption. As we explored this, I discovered that many companies still haven’t made the connection that efforts to move CRM (SalesForce) and e-mail (Office 365) have already broken through a barrier that appeared daunting to carriers in the very recent past. Having effectively put these installations to the test, carriers with these implementations are increasingly willing to acknowledge that the security models are as good as, if not better than, what they are able to implement for their own environments. As additional mission critical workloads migrate toward this type of deployment (e.g., Workday for HRD and financials), it helps to push organizations to articulate what the real concerns are and how to best address them. The reality is that this is frequently not so much a technology issue as it is one that is linked to emotional, political or organizational issues that need to be addressed before the discussion turns to the selection of a hosting service. For CIOs and their teams getting in front of the issue to do effective education of business partners as well as developing a point of view on which cloud based providers are best positioned to be part of their tool kit (they are not all created equal) can be part of an effort to build momentum and organizational support. Going “full to bright” in a short timeframe may be too much for many organizations to accept, which runs the risk of triggering an enterprise immune system reaction that can be painful.

    Data governance remains a significant concern. With a myriad of business units, products, core record keeping systems, and rules of engagement that may conflict from one line of business to another, this remains an area of notable concern – and investment – at carriers we spoke to. Most carriers still lag far behind the banking world in terms of an ability to understand their business from the outside looking in (rather than from the inside looking out). However, there continue to be advances in the idea that there is value in gaining a full view of both customer and producers, and that the investment in both technology and business process to allow for achieving informational insights from internal data can be quite high. A common theme among participants appears to be the desire to construct a 360-degree of customers but that breaking through some of the organizational barriers within companies can be daunting. For carriers considering this challenge, investing time and money to really build a robust data governance facility can be highly valuable. Even some of the compliance related effort for Know Your Customer (KYC) initiatives can also create operational and marketing benefits if used correctly. Once again, however, one of the challenges that can be most difficult to overcome is the “human” one. If line of business executives and managers are focused on optimization at the business unit level, while data analytics efforts around customers are focused at the enterprises level, the inherent conflict can substantially mute any resulting benefits to the organization. Being clear that this is not purely a technology issue is key to achieving desired outcomes. One key reality that becomes clear as companies talk about their desire to use better analysis of data to improve a range of business outcomes: while many talk about Big Data, struggles remain with managing Small Data in quantity.

    Definitive plans to address Millennial needs remain elusive although awareness is elevated. We had a lively discussion about this issue, focused on a number of key challenges facing carriers. At a time when 10,000 Baby Boomers retire every day (and concurrently 9,000 children are born to Millennial parents each day) the opportunities associated with getting positioned to take better advantage of market dynamics would appear to be very clear. That said, most carriers acknowledge that they have not yet “cracked the code” on how to best position themselves in terms of both products and service models that will effectively speak to a new generation of potential consumers. We discussed some of the efforts being put forward by companies to better understand these dynamics (e.g., MassMutual’s coffee shops) but a reality is that the answers to changing market needs will require some level of experimentation and testing of hypotheses, an approach which may well be counter-cultural for the very organizations whose long term success is impacted by their ability to start thinking differently. Avoiding a “Kodak Moment” can be a function of how well carriers deal with a range of challenges including the demographics of their agency forces; the average age of an agent in the USA is now 59 with an estimated 25% of today’s agents potentially leaving the business by 2018. Concurrently, a number of carriers noted that their own HR policies and procedures do not appear to be adjusting appropriately to deal with the increased velocity of voluntary turnover associated with the emerging Millennials who will represent 50% of the USA labor force by 2020. Mentoring programs, efforts to create more varied experiences that allow for expanded horizontal movement within organizations, and increased flexibility related to geographic location have proven to be effective “tools of the trade” for some organizations as they’ve moved to adjust to a new reality, but the broader trend remains clear. The emerging generation of employees will have a very different relationship with employers in the foreseeable future than their parents or older siblings did. Implementing procedural changes for everything from employment procedures to knowledge management will be important to operational effectiveness.

    The increased urgency at carriers is timely. With cycle times across many facets of the business being reduced, user tolerance for poor experiences being driven down and the competitive threats from many quarters being elevated, the current planning horizon is moving with surprising speed. Welcome to the future!

    If you’d like to get a copy of the presentation materials used in NYC, please let me know by sending me a note at RMcIsaac@Novarica.com.

    Leaving Las Vegas … and Rolling into Q2-2016

    Rob McIsaac

    I had the opportunity to participate in the 2016 iPipeline Conference in Nevada this week. This was very well attended by carriers and solution providers alike and offered a content-filled agenda that sparked good information sharing and networking. As carriers look toward the balance of the year, there certainly are a series of open challenges on the near horizon.

    The Novarica presentation focused on what carriers need to do now to get ready for that future. Aging core systems, slow time to market for products, a lack of true innovation in many places, and customer service experiences that are frustrating memories of a bygone era in many other industries are part of the issue. Aging distribution partners (the average age of an agent is now approaching 60) and internal business processes that are so complex and devoid of technical support that the training curve may exceed the expected tenure of incoming Millennial employees are also items looking to be addressed. The resulting discussion was productive and fascinating. If you’d like to see the material we shared, please let me know.

    The implications of the proposed DOL Fiduciary Responsibility rules also produced a lively discussion. Carriers recognize they will need to do something to address compliance in this arena, but most carrier plans could best be described as “fluid”. We just released an executive brief on the subject. Time is moving fast!

    And, of course, given the forum, there was significant discussion about the whole e-App space and the implication for carriers. This continues to be an area where producer decisions on the platforms to use dictate the plans carriers need to execute, lest they give up shelf space that is critical to market share. This presses hard on IT resources and budgets. Interestingly enough, since no carriers we have talked with anticipate large budget increases to address the DOL mandate, other things will likely need to “give”.

    All of which ties back to a theme we think is key for carriers now across many lines of business. 2015 was, in many ways, the year that the future arrived. 2016 is the year carriers have to start accelerating plans for what they plan to do about it. By 2020, for example, Millennials will represent half the US labor force and the youngest Baby Boomer will be 56.

    Time to saddle up! Time waits for no company …

    Related Reports:

  • DOL Fiduciary Responsibility and Potential Impact on Annuities
  • 2015: Back to the Future- CIO Insurance Summit 10/6/15-10/7/15

    Mitch Wein

    I recently attended the CIO Insurance Summit in Chicago. Interestingly enough the Chicago Cubs had the DeLorean from “Back to the Future” just outside the hotel. This was because in the movie “Back to the Future Part 2”, the Cubs finally win the World Series in October, 2015. Of course, that evening they won a wild card game, putting them on track to be in the playoffs and possibly win the World Series, a feat not done since 1908. Well, we have arrived in the future, which was clear from the conference. There were a couple of overriding themes in the conference: digital, data and predictive analytics, customer driven services, business driven agility and maximizing IT investment and value. Let’s explore each of these in further detail:

    Digital. Every speaker in the conference talked about digital, digital, and more digital. What struck me were two pictures that SAP showed of the people in Vatican Square in 2005 and 2013 when the Popes were selected. In the 2005 picture, there is only one person holding up a phone and it is a flip phone. In the 2013 picture, everyone was holding a smartphone or a tablet to take a picture. What a change in just a few short years.

    As a result, expectations of how to interface with a financial services provider has changed. It started with banking but now it has reached insurance. For everyone speaking, the connection between the agent’s or customer’s digital device into back end business services and capabilities utilizing automated workflow was a minimum requirement. Agents themselves need to adapt to this new reality.

    While none of the speakers expected agents to disappear, all expected the agents to be augmented by technology in everything they do. Speakers talked about this customer experience being woven together through multiple clouds and different virtual organizations throughout multiple locations across the world. One speaker said we had moved from the “connected era” to the “interconnected era”. But there are challenges that were pointed out. Many insurers are still not well positioned for Omni-channel delivery. Additionally, may carriers can’t deliver solutions quickly using a bi-modal approach to test out these solutions and learn and evolve them in a highly nimble manner.  All the speakers talked about using “Fast IT” for mobile and analytics. But to create ideas to roll out quickly, one speaker said these ideas must come from empathy with the customer and the difficulty with the current customer experience.

    Shortages of people who have key skills in architecture and information security were cited as challenges limiting the ability to move forward. Many carriers were retraining people with legacy skills on new technology because of the value of their knowledge of the business processes. Insurers still have a long way to go. One speaker pointed out that 44% of clients had no contact with their carrier in the last 18 months and only 17% of clients are happy with the communications from their carrier. NTT Data has created a digital maturity model to help carriers understand where they are on their digital journey. One carrier CISO noted that, from his perspective, there was a “negative unemployment rate for the skills needed in their organization”. That’s a notable wakeup call to some of the challenges that have arrived with The Future.

    Data & Predictive Analytics. One of the speakers noted that 64% of all Americans have smartphones generating data.  Automobiles have shifted from mechanical based devices to software based devices, with as much as 40% of the cost of new cars attributed to software and related electronics. New cars are turning into computers and networks on wheels. The speaker from Equinix pointed out that a fully instrumented car in the near future is expected to generate 25 gigs of data per hour! And what about fully instrumented human beings. Exponentially more data!! What about sensors generating data about homes, equipment, etc. Where will all this data go? How will it be governed? How long will it be retained and how will it be secured? Of course the data will be both structured and unstructured.

    Virtually all of the speakers talked about the need to use all of this data within an integrated insurance workflow. It is not really about more data but additional insight and actionable information from the data. An example would be incorporating real-time data into underwriting; with the scoring of this data driving workflow.

    The single view of the customer is a challenge that many speakers discussed. Another challenge is data ownership. One example given here was real-time data about water flowing through the sewer system of a city in California and being geo-visualized on top of locations of highways, schools and factories. When the water main breaks, it will potentially close a school or damage the equipment in a nearby factory. Whose data is it? The city, the factory, the insurance company, the people who maintain the valves of the sewer system? Who owns the data and how it can be used and shared becomes a big issue.

    Customer Driven Services. Channel consistency was much discussed by the speakers. The importance of architecture in delivering this consistency was also noted. GMC Software talked about tools that allowed design teams and compliance to see what was being communicated across channels all at the same time and be able to make consistent changes all at once. New technology capabilities were seen by the speakers as enabling customer driven services. Service abstraction through REST APIs and PaaS were highlighted.  The importance of REST in particular led IBM to acquire Strongloop. IBM talked about how Strongloop enterprise Node generates REST interfaces automatically, dramatically speeding up development. “Fail fast and moving on” was a mantra that one speaker emphasized when discussing how to leverage these tools and bring new capabilities to market quickly.

    Underlying everything was the notion that customers do not need intermediaries to gather information about insurance products and can and contrast products themselves. One speaker pointed out that insurance offerings need to make the insured’s life better. Offering lifestyle, driving suggestions, or recommendations on maintenance for homes or equipment will generate discounts but also prevent losses and increase the quality of people’s lives. One speaker mentioned that a carrier was actually taking a piece of the premium paid and putting it into a retirement account for the insured if there was no claim in 3 or more years.

    Business Driven Agility. Many presenters talked about bi-modal IT. Here, “Fast IT” apps can be delivered quickly and changed easily to meet customer expectations. The “Fast IT” apps are logically separated from Core legacy systems that may still need to evolve using structured slower methods.  There were a number of examples identified in the conference. EasyJet in the UK was identified as having created a whole new experience for the customer. What was interesting was that the seat selection part of the process was running on a Microsoft Azure cloud infrastructure, yet the interface the customer sees is seamless.

    Another interesting example was the Snapsheet app (http://www.snapsheetapp.com/#claims) for mobile devices which is carrier branded and can be downloaded in real time and used to estimate claims loss by capturing images of the damaged car. We heard from Accenture about AXA Equitable using Duck Creek Rating to deliver a new direct channel in three months. IBM talked about how firms like Primerica were able to reduce mobile application development from 18 months to 5 months.

    Maximizing IT Investment and Value. Investment is being redirected to core system replacements, data analytics, mobile, cloud and software as a service architectures in order to increase agility. It was noted that these were formerly emerging technologies that have now emerged. Another element of maximizing IT investment was that all of the presenters talked of breaking down large projects into small (and faster) deliverables.  The Allstate policy administration 3 year replacement program delivered intermediate value every few months. CNA discussed using Waterfall and Agile for large projects but also having a bi-modal delivery process for small projects delivered in 60 days where return could be measured quickly. Prudential talked about “Running IT like a Business” utilizing a plan, build, run model to look at IT’s operating model, process and controls, application portfolio management and technology roadmap.

    Running IT as a strategic partner which is part of the business as opposed to being a service provider to the business was deemed critical to ultimately having a seat at the executive table. Having a platform capability view that can be assessed in a transparent way and aligned with critical business strategies ultimately improves investment decisions.

    So what’s the big message? IT is poised to experience digital shock and disruption. Its business will change even while basic insurance fundamentals stay the same. Not everyone will win as we move forward. Only the “digital haves” that understand what their competitors, both traditional and non-traditional are doing, understand the emerging technology capabilities, and have a vision of what markets, products and business capabilities they will be providing moving forward will succeed. The bottom line is this — 2015 is the year the future arrived and insurance arrive in the future.

    Related Research

  • US Insurer IT Budgets and Projects 2016
  • Agile at Insurers 2015
  • Analytics and Big Data in Insurance
  • Benchmarking the “New Normal” 50 Advanced Capabilities for Life/Annuity/Benefits Insurers
  • CIO Checklist: Running IT Like a Business
  • “Hot Topics” for Insurers in 2015: Social, Mobile, Analytics, Big Data, Cloud, and Digital
  • Benchmarking the “New Normal”: 50 Advanced Capabilities for P&C Insurers
  • Preparing for Digital Transformation
  • Update from Orlando: Themes for 2016

    Rob McIsaac

    I had the opportunity to participate in the revamped CSC user conference recently, which was a terrific opportunity to visit with both the issues … and the challenges … facing carriers as they move into the final stages of 2015’s Budget Season. With technology developments moving quickly and the reality of raised expectations around what “good experiences” should really be like, carriers face some important prioritization decisions in the near future.


    For carriers we see continued efforts to push toward the concurrent addressing of legacy technology issues while trying to improve capabilities related to product deployments and improved end user experiences for consumers and producers. Time to market continues to be a recurring theme for carriers although in the session I had a chance to facilitate there was a clear distinction raised by some CIOs who, armed with process metrics, were able to confirm that the IT group was no longer the “long pole” in that tent. This was but one manifestation of how better analytics can help organizations be more effective and efficient … while potentially helping build greater trust between IT teams and their “other business unit” customers.


    That said, one of the laments of the CIOs in the session was the overwhelming percentage of their spending annually that goes to “keeping the lights on”. For the vast majority of carriers this continues to hover at or above 75% (equal to the “Run” plus “Grow” spending in our new Insurer IT Budgets and Projects 2016 report), leaving limited headroom for transformational efforts and innovation.

    To that end, there was considerable discussion across the conference events related to both BPO services (as a mechanism for addressing legacy products and platforms) and increased interest in the role cloud solutions can play in the future. This is certainly consistent with other research Novarica has done and positive cloud experiences with SFDC and Office365 seem to be confirming that key workloads can effectively be handled for carriers. Both of these capabilities can ultimately allow CIOs to respond to what we are seeing in the 2016 budget surveys for carriers: a continuation of a theme that requires “doing more … without much more money.”

    Data and Digital

    Analytics and expanded digital capabilities are also top of mind for many carriers. The need to think about distribution system issues, highlighted by the average agent age now riding to 59 in the U.S. should be impacting more investment decisions than it is at the moment. The realization that Millennials now (and forever more) outnumber Baby Boomers does not yet seem to have sunk in for many organizations.

    Innovation, in varying forms, was a topic that emerged in almost every conversation at this event. In addition to the M&A activity that a number of carriers (and solution providers) embarked on in 2015 to build their own set of capabilities, there was considerable interest in the investment funds that a number of carriers have very publicly deployed over the course of the past year. For some small carriers, this raised a concern about the best way forward to competing in a rapidly evolving space. To that end, discussions about the Global Insurance Incubator (Des Moines, IA) and other local shared sourcing events proved interesting. Further, approaches that carriers have made to create innovation centers from Silicon Valley to Silicon Alley were very much on the minds of carriers in the sessions we facilitated.

    Talent and IT Organizations

    Another area of considerable interest related to some of the challenges carriers face with both managing an aging IT workforce to address their current needs, exacerbated by some of the challenges carriers have experienced with attracting and retaining a younger generation of associates to support their technical needs. Recent research we’ve done at Novarica both highlights the “Silver Tsunami” issue and offers insights into actionable steps CIOs can take now to address the concerns.

    The Future

    We have repeatedly said that 2015 has been, in many ways, the year that the future arrived. Competition among solution and service providers heightens their “game” for delivering the functionality carriers will need in their own battles to stay competitive (and relevant) in that future. The transformational journeys for L&A and P&C carriers are evolving along somewhat unique pathways, no doubt tied to the length of the tails associated with their primary product offerings. Irrespective of the lines of business, however, the realization that legacy solutions can’t provide the horsepower needed to address the future state needs of the carriers they support is increasingly clear for CIOs and their senior teams. Armed with a range of solutions for both technical capabilities and hosting options, the future promises to be dynamic. And yes, the insurance industry has clearly entered a period of interesting times.

    Next generation agents – Daniel Pink offers some advice

    Tom Benton

    Day 2 at the NAMIC Annual Convention began with a keynote from Daniel Pink, author of “Drive”, “To Sell is Human” and other New York Times bestsellers. His message for the NAMIC attendees was about selling, with what he called a “1-3-4″ message: 1 big idea, 3 principles and 4 takeaways.

    One Big Idea:  Seller Beware

    After pointing out that sales is generally viewed as negative and pictured as a slimy sales man (almost always a man) selling a used car, Pink pointed out that this view is from a time in the past, a time of “buyer beware” when customers had little information, few choices and limited ways to talk back. However, times have changed: instead of information asymmetry with sellers owning most of the information, we live in a new world of information parity where consumers have all the information, have many choices and multiple ways to talk back. In this new paradigm of “seller beware”, we need to reconsider how sales are done.

    Three Principles, Four Takeaways:  Summary

    Pink then proposed three principles to selling in this new world, and four takeaways based on current research on behavior in the new world. Here is a summary of thoughts from this part of his talk.

    Much of our thinking about who is best at sales is not true – we picture the ultimate salesman as highly extroverted, but in fact they are no better than ones that are highly introverted. Research shows that “ambiverts” are best – they are able to be introverted or extroverted based on context. We also assume that a direct approach is best for persuading customers to buy, but in fact research shows an interrogatory approach, asking questions, can be more effective when based on facts. Also a small, honest blemish on an otherwise strong offering can increase it’s attractiveness, another counter-intuitive result from research. Finally, giving the information a customer needs to make the sale easy, rather than trying to persuade them to change their minds, is effective. Pink presented his findings in a humorous but very informative presentation.

    What does this mean for the insurance industry?

    As good as the main presentation was, the real gem came in the last question of the Q&A session at the end of the keynote. A participant asked a great question: in an industry where agents are an aging population and we’re finding it difficult to find, train and make successful a new generation of sales professionals, who should we look to hire? Pink talked about avoiding strong extroverts and look for a few qualities that can be measured and correlate with successful sales candidates: ambiversion (as described above) and conscientiousness (shows ability to follow up, make calls, and stick with the sale). Pink observed that the new work generation grew up in households where they were served a “heaping bowl of self-esteem”, and didn’t learn how to handle rejection. He said this generation responds well to being trained in how to handle rejection, that it’s part of the process to encounter failure. They can be taught that sales is not just a transaction, but a way to help people and make a difference – values are important to the new millennial agents.

    Pink’s presentation offers important advice to developing the agent force for insurers. In a new world where consumers have an advantage of knowing about the products and services we offer, insurers need to look for and train a new generation of agents that are equipped to succeed by better knowing how to fail. Contact me if you’d like to discuss Pink’s presentation and how it can be applied to insurer distribution networks.

    Where will insurance disruption come from? Erik Wahl may have an answer…

    Tom Benton

    At the NAMIC opening keynote this year, Erik Wahl impressed the attendees with his graffiti art and thought provoking message – how we need to Unthink (title of his book) and unleash our creativity.

    Wahl encouraged the attendees to think differently, going back to the creativity we displayed younger in life, but that has been minimized as creative abilities atrophy while we learn to limit our answers to one best practice or one “right” answer. We learn to avoid risk and go with what we find most comfortable. Wahl illustrated his points by painting portraits of Lincoln, the Statue of Liberty, then finally unveiling a portrait of Albert Einstein by turning his final creation upside down.

    For some time there has been concern that disruption will only come from outside of our industry. The argument usually includes the thought that insurance executives and “forward thinkers” are only capable of incremental improvements, and they are so risk-averse in their thinking that transformative changes will only come from outside the industry from innovators like Google, Apple, Facebook or Amazon. It’s generally accepted that those “big four” are the only companies that have the resources and innovative thinking required to change a risk averse industry.

    Wahl encouraged the attendees to step back and look at the industry in a new way, taking the creativity we knew as our younger selves and apply that to our industry. After all, every kindergartner believes he or she can draw, but by the time we reach the end of our education Wahl claims only 8 to 10 percent of us believe it. He challenged industry leaders to not fear failure, but look to expand and contract opportunities to consider new ideas rather than get stuck in a laser focus on what we know – and that failure is a matter of opportunities and not of loss, limits or weakness.

    He compared our fear of failure to learning to paint. While the vast majority of us would say we cannot draw, Wahl asserts that being an artist is a practiced and disciplined skill – that we can learn to be creative and innovative through the same practice and discipline that artists apply to their craft. The message then is that we can create innovative solutions in insurance without facing disruption from outside the industry.

    This is a radical thought for an industry struggling with how to define itself in terms of new customer engagement expectations in the new “social, mobile and connected” world. Wahl spoke passionately about connecting with our customers emotionally, and illustrated this connection through his art.

    While we’ve been watching for disruption from outside the industry, Wahl tells us that we need to look within to consider how to better connect with our customer emotionally and “unthink” our long-developed risk aversion and return to creative thinking and solutions. If Wahl is right, we may already have what we need to innovate and disrupt the industry, and won’t have to wait and watch those outside the industry lead that disruption.

    What do you think? Can the industry learn to innovate, by looking at the issues differently and in a practiced, disciplined way? Or will disruption come from outside the industry and leave traditional insurers behind? Contact me if you’d like to talk about innovation and how to use Wahl’s thoughts to enable disruption within your company.