For Safe Driving, the Future is Arriving

Jeff Goldberg

Access to cheap, connected sensors and smart devices means companies can leverage data in innovative and meaningful ways. This new use of the Internet of Things will lead to changes in how and what insurance products are sold. In the automotive industry, services analyzing telematics data to recommend safer driving routes and encourage better driving behavior will become the norm. Liberty Mutual recently debuted RightTrack, an in-vehicle mobile application developed in collaboration with Subaru. The application provides real-time feedback on driver performance in order to educate and correct, and as a result make insureds safer.

In the future, consumers will buy insurance from insurers not just for the indemnification or risk but for additional risk mitigation services. Risk is never going completely away, but in different areas it will be greatly reduced (with automotive being the most obvious example). Claims and corresponding losses will go down, and rates will need to follow. This shift from indemnification to mitigation is a move away from how insurers have done business for hundreds of years, but it’s also in the best interest of the insured and a great opportunity to provide more and better service.

2015 Year in Review

Matthew Josefowicz

The Year the Future Arrived

At the spring meeting of our Research Council of insurer CIOs, we predicted that 2015 would be “The Year the Future Arrived” in insurance. New entrants, new expectations, and customer-centric innovation are starting to change the game for the industry. All of this is creating new challenges for insurance IT leaders and their teams.

More than One Hundred Insurers

Throughout the year, our team has helped more than a hundred insurers make better decisions about technology projects and strategy in this new environment. Our retained advisory clients call on us to help them understand new trends, issues, vendors, and best practices. Our research covers all these areas and more, with more than thirty new reports and briefs published this year. And we delivered dozens of strategy consulting engagements, ranging from vendor selections to project assurance for transformation programs, analytics strategy development, enterprise architecture review, and more.

Council Meetings and Community

Our annual Research Council meeting brought together more than 60 insurer CIOs in a private, sponsor-free, knowledge-sharing environment. And our Special Interest Groups brought together dozens more members in smaller, focused meetings of hard-to-find peers like those writing annuities, specialty P&C, or COLI/BOLI.

We’ve shared our insights with the industry at large, recording more than ten webinars, speaking at more than twenty conferences, and being quoted in more than two hundred press articles.

Expanded Team

As our business has grown, we’ve expanded our team with two new vice presidents and five new staff members. Our senior team now includes former executives from AIG, AXA, Liberty, Guardian, Marsh, Progressive, and Prudential. Our staff includes a diverse group of associates with degrees in classics, linguistics, economics, international relations, religious studies, and visual arts.

Celebrating the Year

We recently had a chance to celebrate our great 2015 results together at one of the several restaurants owned by our very first staffer-turned-restaurateur Tse Wei Lim, who created a custom cocktail menu for the occasion.


Looking Forward

As we head into 2016, we are grateful for the chance to work together, for the the trust that our clients place in us, and for the opportunity to help the industry adjust to the future that’s finally arrived.

For Life Insurers, the First Step is Admitting there is a Problem (in this case, with Customer Experience)

Rob McIsaac

I had a chance to speak at the recent North Carolina CEO summit and one of the key takeaways was that one of the hardest things for companies in any industry to do is adjust their business processes to reflect appropriately on the challenges and opportunities made possible by new technology and changing consumer expectations. This is especially true in insurance. The majority of carriers have perfected looking at the world from the inside out, which may be fine in an era of limited change, but it is exactly the wrong response in a period of dynamic activity and shifting expectations, punctuated by the threat of new market entrants.

This inside out thinking leads companies to focus on service-level agreements and other metrics which completely miss the importance of getting the actual customer experience right. Companies may well understand the correlation between poor customer experiences and financial outcomes (e.g., poor persistency rates or a failure to loss of assets under management), but they seem to fail routinely in understanding what the root cause events are driving these results.

A personal customer experience with business as usual

As a case in point, I recently went through a series of unfortunate customer service events with a large, national, life insurance carrier. The start came through a phone call to one of their support centers. This particular facility was in Ireland and their function was limited to letting callers know that the company was closed in the evening and would be open during “normal business hours”. Of course, “normal business hours” turns out to be the same hours when most consumers are at work, making it remarkably inconvenient. On the next day, a call during normal business hours and was routed to a call center in Manila. After almost an hour on the phone I discovered that this operation was only able to deal with non-registered products; that issue wasn’t picked up by the VRU when I dialed in. Once we got past that confusion, the call was routed to another call center in the Midwestern United States. At that point, a knowledgeable representative walked through the issue but concluded that since the transaction spanned multiple internal business units there was nothing he could do. The best response was to have an agent call me. The SLA for a call was 24 to 72 hours.

The empowered customer finds an alternative

Two weeks later, when no call came, I gave up and went looking for an alternative company to manage the assets. The multiple contracts involved were 30 years old, so this was not a new customer issue. It was however a life event issue which a new financial institution was happy to address. In this case, the company in question was a brokerage firm who happens to sell life and annuity products on behalf of a range of manufacturers. They were happy to set up the new accounts and handle the 1035 exchanges and had the experience wired before the original life carrier understood what had happened.

So, from a customer standpoint, I was quite happy. I was able to move the funds into an experience where there was a knowledgeable entity on the other end of the wire; the account opening experience was very Amazon-like, inasmuch as routine updates on the status of the transactions came to me in my preferred channel of communication.

Too little, too late

That might’ve been the end of the story except that the life carrier now seemed spurred into action. However, the action invoked processes that are little exercised and had unintended consequences. For example, multiple conservation letters were received offering to discuss options for keeping assets at the original carrier. Unfortunately, the conservation letters arrived after the proceeds had already been distributed to the new financial services company. Another bit of detective work found that the time lapse between producing (and dating) the letters and their actual delivery was 10 days. Based on the postmark, it was six days between the production of the letters and having them sent. They came via a bulk mail rate resulting in further delay.

The operation was successful, but the patient died

Through this whole effort, it is possible that the service-level agreements for every component in the process were met. The whole of the experience was very different than the sum of those parts, however.

Fixing this kind of problem doesn’t need to be particularly difficult or expensive. It does require, however, the recognition that there is a problem. One approach that we see taking hold now is the introduction of the position of Chief Customer Experience Officer. Frequently coming from outside of the insurance industry, from banking or consumer products, the individuals taking these roles have a charge to look at the carriers “from the outside in”. This is a promising development that many more carriers should consider as they kick off 2016.

To discuss this topic further, please contact Rob McIsaac at

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.

The future has arrived for insurance, but have insurers arrived in the future?

Matthew Josefowicz

The good news from the recent PCI Tech Conference is that futurists like Vivek Wadhwa give the insurance industry at least three to five years before it is disrupted beyond recognition by data, analytics, the internet of things, self-driving cars, 3D printing, hyper-aggressive technology companies, and essentially free energy.

The bad news is, many large insurers are still planning five year technology transformation initiatives to shed their legacy burdens and take advantage of today’s technology.

Insurer CIOs understand the challenge. They need to mitigate the effects of yesterday’s inheritances. They need to address today’s business needs, and they need to prepare the organization for tomorrow. They need a deep understanding of all three timelines, and the ability to help others understand.

This requires a new set of skills and new kinds of relationships. As one speaker put it, CIOs need to be communicators and story tellers as well as effective managers. They need visionary business executive partners who are willing to embrace the opportunities that technology creates in their ability to deliver innovative products to changing markets. CIOs also need technology partners who will not just deliver today’s solutions but co-evolve with them to meet tomorrow’s challenges.

“I will invest in any technology initiative that increases our agility,” said one insurer CEO who understands. But far too many CEOs are still at a loss as to how to quantify the value of technology and continue to manage their technology investments as if spending more than 5% of premium on IT were a greater sin than letting the future pass them by.

Meanwhile, while the conference was in session, Google Ventures announced an investment in innovative health insurer Oscar. The clock is ticking in insurance, and it’s not counting down anymore. It’s counting forward.

The Blockchain Insurance Company

Jon Leslie

Within the past two years, Bitcoin, the first and most popular form of “cryptographic currency,” has entered the mainstream. With roughly $3.4bn worth of Bitcoin (BTC) in circulation, over a half billion dollars of Venture Capital invested in the space (including into one potential billion dollar company), and Fortune 500 companies such as Dell, Microsoft, Overstock, and Paypal accepting the digital currency, it is an impressive track record for any seven-year-old technology.

And Bitcoin is not just a reapplication of existing technology (for instance, the way that the consumer internet was really 1970’s technology in a new setting). The very concept that enables cryptocurrency, the system for running a distributed self-regulating database called the “Blockchain,” is just as new as Bitcoin itself: seven years.

Novarica recently released a report, Bitcoin and Insurance: Overview and Key Issues, authored by Jeff Goldberg and myself. It outlines a brief introduction to Bitcoin and Blockchain and its implications for the insurance industry. We argue that, while insurers have ample reason to be cautious about entering this market, it is nonetheless an important area for the CIO to keep on her radar.

In the short term, the most important implementation of Blockchain will be the Bitcoin currency, which, due to its high volatility, technological novelty, and current constitutional crisis, carries with it particular risks (detailed in a Lloyds June 2015 report). There are opportunities available for the properly positioned carriers who are willing to proceed despite those risks, though it is not necessarily transformational for the industry.

Blockchain, on the other hand, may have much wider implications. At a basic level, Blockchain enables the creation of trusted contracts in a publicly-verifiable setting. Insurance policies are also trusted contracts, and many people have wondered about possible ways insurance policies could be moved into Blockchain’s exchange. A Blockchain policy could automatically pay out a claim based on preset conditions or based on information from a trusted third-party (for example, a crop policy that pays out based on weather service reporting).

Imagining the potential impact of Blockchain on the insurance industry isn’t just the realm of technology analysts. The Society of Actuaries held an actuarial speculative fiction contest, and a submission by Gennady Stolyaro II called “The Blockchain Insurance Company” (which the title of this posts steals from) describes in great detail how auto-insurance in the age of self-driving cars might work. In the story (available here), set in the 2020s, the slightly Hal-esque autonomous car informs the retired actuarial protagonist: “There is no management. The company runs itself – on the blockchain. The public blockchain ledger keeps a record of the capital contributions from each account and the corresponding shares issued. A contractual algorithm is built into the blockchain to deposit and withdraw bitcoins to and from each shareholder’s account in proportion to the company’s profits and losses.”

Although that story is obviously only one version of many possible outcomes, this is the kind of radical transformation in structure (both technological and organizational) that insurers should be open-minded about. One rule of thumb about genuinely new technologies is that they are over-hyped in the short-term, but often under-hyped in the long-term (hint: the Internet circa 1995). Whether or not one buys into the idea of sustained dialogue with our cars in the next decade, it is certain that the Internet of Things will require new forms of record-keeping, of which it’s very likely that Blockchain technology will be a crucial component.

Unexpected Impediments to Change

Jeff Goldberg

I heard a great story this week from a friend in insurance technology sales and he gave me his permission to retell it here. I’ll start with the story and end with the (questionable) lesson.


Back some years ago a man worked selling agency management systems and traveled down to Texas to pitch the system to a small agency. The agent in charge was an affable cowboy, fairly comfortable with his current process but willing to listen to a sales pitch. As they walked through the office, the agent introduced the salesman to an elderly woman (he called her “a lovely young lady” though she was at least 20 years his senior) who sat in front of an Underwood typewriter, her sole job to manually type up each insurance certificate by hand. The salesman, seeing an opportunity to discuss the values of the agency management software, explained that with their modern processing and document generation, all of the insurance certificates would be automatically created and printed without the need to type them up anymore.

The agent stopped him in his tracks and said, “That lady’s not going anywhere. She’s my momma.”


Needless to say, he didn’t get the sale. And surely there’s a sales lesson in there. Something about knowing your target before making a pitch. Of course, no matter how much research you’ve done there are likely to be some details you can’t discover in advance.

More interesting to me is how impediments to change can come from unexpected directions. Despite many rational and logical reasons to modernize core system technology, often companies put these decisions off for years or even decades. Sometimes it’s due to budget constraints, sometimes a company isn’t ready for the short term business disruption a big project entails, sometimes there’s a lack of understanding or belief in a modern system’s capabilities. And sometimes it’s because the person whose job will be displaced is the boss’s mother.

9 Advanced Capabilities Life/Annuity/Benefits Insurers Plan to Implement in 2015

Matthew Josefowicz

With the rapid changes in technology-enabled capabilities, just keeping tabs on what has become “table stakes” or the “new normal” for Life/Annuity/Benefits insurers has become a full-time job.

Last month Novarica released its Benchmarking the “New Normal”: 50 Advanced Capabilities for Life/Annuity/Benefits Insurers” report, which includes a list of 50 advanced capabilities across nine functional and strategic areas, survey data from 20 CIOs, and a new benchmarking tool designed to help insurers track their own progress in deploying advanced capabilities.

Deployment of these 50 advanced capabilities is uneven today, but some of the capabilities that insurers are focusing on include:

  • Product Development: Analytics-driven product design
  • Marketing: Responsive social media engagement with distributors and/or policyholders
  • Distribution: Quick quote or appetite indication with minimal data entry
  • Underwriting: Predictive scoring based on models leveraging internal and third-party data
  • Customer Engagement: Mobile app to view relationship details, balances, key documents, etc.
  • Billing: Analytics to prevent premium leakage
  • Claims: Triaged straight-through-processing
  • Analytics: Use of Big Data tools to mine enterprise data effectively (Hadoop, NoSQL, etc)
  • Collaboration and Innovation: Enterprise collaboration that’s as easy to use as consumer-grade technology like GoogleDocs or Dropbox

One thing most of these advanced capabilities have in common is that they are being driven by a combination of five elements: analytics, data, digital channels, modern applications, and innovative business practices.

Five Elements of Advanced Capabilities in Insurance

Five Elements of Advanced Capabilities in Insurance

Creating an exhaustive list of all the advanced technologically-enabled capabilities that could be delivered by insurer CIOs would be exhausting indeed. For the purpose of this report and the Novarica New Normal Benchmark tool, we have selected 50 capabilities spread across nine different areas that are closely related to the core business of insurance: product development, marketing, distribution, underwriting, customer service, billing, claims, analytics, and collaboration and innovation. The 50 capabilities on the list were chosen by Novarica’s senior team of industry experts in active conversation with dozens of members of our Research Council (

While the list is admittedly subjective, we believe this list provides a good sampling of the most important advanced technologies in play for insurers today. In our view, these 50 capabilities are becoming the “new normal” for insurers.

For more information about this report, download a free preview or send us an email to set up a complimentary 30 minute consultation.

Related Report:

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.