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.
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