Special Interest Group for Regional P&C Insurers

Martina Conlon

At Novarica’s recent Special Interest Group for regional P&C insurers, held in Boston on June 25th, the CIOs and other technology executives in attendance discussed many pressing trends in the insurance industry: cyber security, agent facing technology, core systems transformations, the use of analytics and predictive models. Despite differences in culture and architectural environment, the IT professionals in the room shared common issues and challenges, particularly when it came to making the core system business case without ROI, security frameworks for NPI transmission to 3rd parties, balancing system configuration and speed and ease of upgrade, and knowledgeable resources to support implementation and maintenance of the systems.

Not surprisingly, core system transformations was a hot topic of discussion throughout the day. Most of the CIOs at the table had recently participated in one. While the consensus was that these projects are entirely worthwhile, a few important takeaways from their experiences include:

  • Finding the right relationship with the vendor and investing in the relationship.
  • Configuring your system just enough to make it work for your company but not enough to take you off of the upgrade path that your vendor offers.
  • Having a plan and a parallel work stream for sun-setting old mainframes/solutions is an important part of the transformation project.

Top thoughts from the IT executives on the future of insurance included:

  • Most believe that Agents are here to stay. Carriers, even those who are moving into more of a customer-facing and direct model, will still use the agent channel. Recent reports about millennials found that they often still seek the advice and guidance of trusted professionals.
  • For most personal lines, the market will look more and more like Google – consumers will compare products against each other and make decisions on their own. Even for some smaller commercial lines this practice may continue to grow. However, in more sophisticated and complex lines of business, an agent still brings tremendous value.

Lots of disruption ahead in our industry, and the companies that attended this session are busy laying the technical foundation to enable the stability, efficiency, flexibility needed to be successful in the future.

Unexpected Competition: Only A Heartbeat Away!

Rob McIsaac

At Pegaworld this week, Dr. Mark Boxer, Global CIO at Cigna Insurance, delivered a powerful keynote address on the evolution of healthcare and the supporting technology in the United States. While acknowledging a range of challenges in the healthcare system today, he likened this to the opening lines from “A Tale of Two Cities”: it is The Best of Time and The Worst of Times, concurrently. The Best of Times component is characterized by the flood of new technology which is fundamentally allowing them to create and participate in a digital ecosystem that is like nothing we have ever seen before. The implications for other forms of insurance, including life carriers, are significant. The competitive game is about to get a whole lot more interesting.

The use of wearable technologies and related devices are anticipated to create a range of new connection points between customers and the carrier which allow for a far more interactive form of engagement. Through the use of these capabilities, Dr. Boxer talked about the transition from “sickness care” to “wellness care”, which allow them to refine how healthcare is integrated into consumer lives while making the process interactive. Monitoring of issues (e.g., diabetes, activity levels, etc.) is allowing them to create a lower cost model that has better outcomes. That’s a significant result that offers the promise of fundamentally re-architecting the nature of the relationship with their customers.

He also noted that their approach to client engagement starts at the point of “enrollment”. And, of course, this is the exact same enrollment process that Group Life carriers are participating in to gain mind, and wallet-share, from plan members. And therein lies a potentially significant challenge for traditional Group (and Individual) insurance carriers.

As we watch the transition from Group to Voluntary Benefits emerge, concurrently with demographic shifts that alter the face of tomorrow’s customer, there’s a clear wakeup call that is warranted. While many carriers continue to incrementally address issues related to aging technical environments in fairly traditional ways, considering like-structured companies as the future state competition, there are new threats that are emerging quickly. The Cigna depiction of how they anticipate weaving themselves into the daily lives of customers, where they are both receiving and sending information that is value added in both directions, is instructive. And, of course, armed with all the data and the digital relationship, the potential to cross sell other things to health insurance customers seems intuitively obvious. Being able to extend from traditional health coverages into other forms of coverage (e.g., life, disability, critical illness, etc.) seems a relatively modest extension of capabilities.

Which means that Group / Individual Life carriers, who anticipate that the voluntary benefits market will be a future state growth engine, may suddenly find themselves facing off against an unexpected … and unexpectedly well prepared … foe. The Internet of Things isn’t a theoretical construct or something that might impact insurance some day. It’s coming faster than many think. This will become very, very interesting!

As a result, the Tail of Two Cities metaphor could have a somewhat different meaning than Dr. Boxer intended. Armed with these capabilities, it could be the Best of Times for well prepared carriers … and the Worst of Times for those who fail to effectively plan for and integrate the “IoT” into their own operational fabric.

Advice to Vendors Preparing for IASA

Jeff Goldberg

With the IASA annual conference rapidly approaching, we’ve been getting a lot of questions from core systems vendors about how to best present themselves at big events like this. The advice is not the same for every vendor, but there are some points that are true for just about everyone.

1. Your sales team will not convince an insurer to purchase a core system if they aren’t already in the market for one. That means your primary goal is to make sure that you end up on an insurer’s long list when the time for replacement does come (on their schedule).

2. Event attendees will be seeing a lot of booths and meeting a lot of vendors. The majority of them will not remember the details or nuance of your pitch and they will not read every word of a 5 page brochure. At most they will take away two or three key facts. What do you want those three facts to be? Decide ahead of time, and make sure you work to highlight them in your conversations and in your marketing material. What are you selling, who is your target client-base, and what key features makes your system stand out?

3. It’s hard enough to convey the full scope of your system’s functionality in an hour meeting. It’s even more difficult to give demos in an event scenario. Instead of trying to walk someone through your normal demo script, you should have multiple parts of the system staged and ready to go. Don’t waste time keying in policy data or document text; instead, have several tabs open in a browser with pre-entered information, bring up the right tab based on your audience’s interest, and show the relevant parts of the system in action without having to step through lots of pages.

4. Positive quotes from referenceable clients are better than any marketing text you can write.

IT and Other Business Units

Matthew Josefowicz

“Don’t Align with the Business, Be the Business” has long been a mantra for CIOs seeking to ensure that IT is an integral part of their companies’ business strategies.

But too many IT professionals still refer to “The Business” as if it were an alien entity, and as if they were not part of it.

TheBusinessJar

One of our CIO panelists at the recent Novarica Insurance Technology Research Council Meeting raised this point, and we decided to change our terminology then and there.

Instead of “IT and Business” we will now use the phrase “IT and Other Business Units.”

After all, IT is a business unit like any other. It should think of itself that way, and encourage others to think of it that way as well.

And for anyone who uses legacy terminology? Put a dollar in the jar.

Four Obstacles Annuity Providers are Facing in 2015

Mitch Wein

Recently Novarica hosted a Special Interest Group Meeting in Boston for Annuity providers. The meeting was well attended with four key themes emerging:

  • Product Time to Market
  • Straight-Through-Processing and Related Issues around NIGO
  • Electronic Signatures
  • Security

The executives in attendance were looking at how technology can solve problems and enable capabilities. What struck me was the paradox of technology providing better and better ways to reach the customer, while at the same time introducing new issues that didn’t exist earlier. One participant noted that “Annuities are sold, not brought”. This comment provided insight into this area of insurance and why it is unlike other area. Clearly the customer and agent experiences are very important. How analytics and mobile can help is still being explored by the carriers.

Another area of keen importance is the product itself and the ability to modify or introduce new products quickly. We talked about innovations that are on the horizon, especially around customized product offerings that can be assembled in real time out of product features that have already received regulatory approval. Yet, today’s existing legacy systems can’t support these types of time to market innovations. A third area of importance is the ease of doing business for the agent & broker. E-app, illustration and e-signature have been deployed to facilitate straight-through-processing but in the non-captive third party distribution channels, the effectiveness has been more limited. Security is the overlay on top of everything. Carriers feel they are in a good position but noted breaches in firms like Target and Home Depot indicated that what they perceive may not be accurate. We talked about ethical hacking and proactive penetration testing as mechanisms to validate assumptions. All-in-all a terrific an interesting session.

Our next special interest group will be taking place June 25th in Boston, MA. This meeting will be geared towards Regional P/C carriers. If you or a colleague would like to attend, please feel free contact me at email.

Related Blogs

Special Interest Group 2015: Annuities

Rob McIsaac

Earlier last week, we hosted our first special interest group meeting focused exclusively on annuities. Increasingly we have found carriers value opportunities like this to spend dedicated time on very specific lines of business. We were certainly not disappointed this time! One carrier noted that “This is the first event I’ve ever been to that is focused only on annuities, and I’m very excited about that!” Indeed.

For the event, we shared updated information from our Business and Technology Trends report series. The market continues to evolve as new products are brought to bear which improved competitive positioning for carriers but which may test existing technology infrastructures in ways that were not anticipated in the past. One of the key business drivers for the future is “time to market” for new and enhanced products and, in many cases, legacy systems are simply not up to the task of supporting new variations in product features or distribution channels. A variety of approaches for dealing with this were discussed by the group.

Another key issue area relates to electronic applications and the broader subject of Straight-Through-Processing. We used the meeting as an opportunity to unveil new research that we’ve done highlighting carrier deployment patterns and experiences with both electronic applications and electronic signatures. This research will be part of a future Novarica publication but the preview at this session provided for a highly engaged interaction. One of the things that we were particularly pleased with was our ability to share “lessons learned” with the various vendors which can provide key information to other carriers as they put together their own implementation plans.

Another area which prompted lively discussion was security. No doubt fueled by concerns associated with recent breaches at places like Target and Anthem, CIOs are acutely aware of the potential risks and challenges. In addition to talking through some of the characteristics of current environments, we explored a range of best practices which carriers can consider in their future investment plans. The use of ethical hacking as a means of exposing, in a controlled manner, important gap areas was particularly interesting.

This was the third in our series of special interest group meetings and we are particularly pleased with the level of interest and engagement that they are providing. If you would like to review the agenda or discuss the research material we shared at the session, please let me know. You can reach me directly at email.

Our next webinar for a specific line of business will be on Wednesday, March 18th at 2 p.m. (ET), and will focus on the business and technology trends we are seeing in the group insurance space. If you would like to participate, please make sure to pre-register today to secure your spot.

This is also a good time to remind Research Council members that our annual meeting is coming up at the end of April in Providence, RI. We already anticipate that there will be time dedicated to a follow-up discussion between the annuity carriers that participated in last week’s session. We look forward to seeing you there!

The Experience is the Product

Matthew Josefowicz

I had a chance to present on customer experience in insurance recently at the Insurance Performance Association. It was an interesting event featuring several engaging speakers from outside the industry as well as business leaders and consultants from within.

My presentation focused on the role of technology in supporting customer experience, especially in a technology-transformed world where customer expectations are set by other, more advanced industries like banking and online retail. This is an important are of research for us at Novarica: our report on Insurer Digital Capabilities focused heavily on customer and stakeholder experience, and one of our recent Research Partner Program reports focused on this topic, especially related to ECM.

But even more important than deploying technology-enabled capabilities effectively is the incorporation of experience into the insurance product itself. As the slide below from my presentation illustrates, the overall experience of feeling covered is what insureds are buying, not just risk transfer.
(R)Evolution in Customer Experience in Insurance

Rather than start from a coverage and price, insurers may want to start with the customer’s need.

This is also the topic of our latest “Novarica Quick Quote” slideshare.

Strategic Alignment for Insurers

Matthew Josefowicz

As part of my presentation this week to the annual PCI Technology Conference on Technology Trends in Insurance: Change, Legacy, and Disparity, I discussed the need to align product, segment, channel, and process/technology in insurance.

Although some insurers have been discussing this need for a long time, changes in the data environment and information technology capabilities, and attendant changes in customer expectations, make this more important than ever.

Novarica PCI Tech Presentation 2014b

  • Product. Insurers need to broaden their definition of product. There is a disconnect between the way insurers see their products, which focuses exclusively on coverages and pricing, and the way customers see the product, which includes the overall experience of buying and being a customer. Insurers need to start from this customer perspective in order to design a product that effectively meets a market need for more than fair coverage at a fair price.
  • Segment. All business is program business. Insurers already have experience in aligning product, segment, and channel – it’s called “program business.” The insurance industry needs to apply this approach to the rest of their product portfolio.
  • Channel. Different segments will buy different products through different channels. Insurers should make sure they’re leveraging the right channels to sell the right products to the right segments, and not assume that they can push any product to any segment through their preferred channel.
  • Process and Technology. All of the above is only possible with the right processes and technology that are aligned to support the creation and delivery of the right products to the right segments through the right channels. Insurers should re-examine their processes in the light of currently available information technology capabilities and the experiential needs of their target market segments.

Only by aligning these four areas will insurers be able to compete for modern customers. For more insights from my presentation, Novarica clients can download the full deck here.

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.

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: