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 (www.novarica.com/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.

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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.

Predictions of Insurance Future from 2011 are Materializing…

Matthew Josefowicz

In January 2011, I wrote a post on this blog highlighting three glimpses of the future of insurance. The three issues I called out were:

  1. Underwriting without questions, as illustrated by the Aviva/Deloitte pilot project featured in the WSJ in November 2010
  2. Agents optional, based on general trends, with the specific example of the NAIC basically throwing agents under the bus
  3. Maximum profitability, as illustrated by the industry’s acceptance of the minimum Medical Loss Ratio provision of PPACA

I asked insurers to:

Consider a future in which:

  • Underwriting requirements come from third-parties, not your own efforts
  • Intermediaries are only one channel among many
  • Your total loss numbers are constant from year to year at a mandated level

Is that a future in which your organization could survive?

I believe the first two, which seem far out now, will be commonplace by the end of the decade. I will be happy to buy the drinks at the 2020 IASA show if I am wrong.

The third is much more contingent on political winds. But if health insurers capitulate on this point, P&C and life insurers need to clearly differentiate themselves from health insurers in terms of public perception or face the risk of operating with the same constraints[emphasis added].

As we’ve pointed out in recent posts, agents are already just one channel among many, even in previously unthinkable lines of business like small commercial. I also recently came across an example of underwriting without questions, MetLife’s Xcelerate system, as reported in IIReporter.

Perhaps most concerning for insurers, however, is a recent example that indicates the third item — government-mandated maximum profitability — is not too far off. The ban by Florida and several other states on “price optimization” is an indication that political pressures may bring a PPACA model to P&C.

However insurers choose to try to address these changes, they cannot ignore them much longer. The industry is changing rapidly, and insurers must ensure that they can adapt their business models and the technology capabilities that support their business models.

Novarica Research Update: M&A and Insurer Accelerators and VC Funds

Matthew Josefowicz

With investor money flooding the insurance technology sector and tech company M&A activity at a fever pitch, Novarica has published two new reports: “Insurance Software M&A Update 2015 Q2” and “Insurer Accelerators and VC Funds: Buying Innovation”.

With the recent acquisitions of Agile Technologies and Cover-All by Majesco, Oceanwide by Insurity, and CCC Information Services and Mitchell International by a private equity firm, as well as a slew of other acquisitions over the last 24 months, there is continued activity in this still highly fragmented sector

Novarica’s “Insurer Software M&A Update 2015 (Q2)” brief provides an update on the M&A in the insurance software sector with an overview of the main participants, information about recent transactions, and predictions for future activity. Solution providers discussed include: Accenture, Capgemini, Cognizant, Computer Sciences Corporation (CSC), Ebix, Guidewire, HP, IBM, iPipeline, Insurity, Majesco, Microsoft, Mphasis, Oracle, SAP, Sapiens, StoneRiver, TCS, and Vertafore. A free preview of this report is available at: http://novarica.com/manda2015/

Insurance Software Mergers and Acquisitions 2015

Insurance Software Mergers and Acquisitions 2015

Not to be outdone, several insurers have established either accelerators or venture capital funds in recent years. The idea of insurers with dedicated venture groups is not a new one. The need to find alternative avenues for growth and for investment returns, combined with a fear of technology companies disrupting insurers’ business models, has led to renewed interest. Insurers interested in establishing their own groups should be clear in what the goals and risk profiles of these groups should be.

Novarica’s “Insurer Accelerators and VC Funds: Buying Innovation” brief looks at current trends and issues in this space and provides a list of recent examples of accelerators, incubators, and insurer venture funds active today. The need to find alternative avenues for growth and for investment returns, combined with a fear of technology companies disrupting insurers’ business models, has led to renewed interest. A free preview of this brief is available at: http://novarica.com/insurance-vc-buying-innovation/

For more information about these reports, please contact us at inquiry@novarica.com

Overcoming Reluctant Users: Part II

Jeff Goldberg

Back in January I blogged about an issue that comes up frequently when talking to insurers about change management: how to handle end users who don’t want to move to a new system. It’s a frustrating (and yet common) experience, with one, two, or a handful* of people not “getting” the value of a change that everyone else** believes in. A reluctant user doesn’t necessary throw up roadblocks or even complain too loudly, but a lack of positive engagement can still slow down or hinder a project.

  • *If it’s more than a few end users, then there are bigger problems that need to be addressed.
  • ** If “everyone else” is actually a code word for “just management,” see the above comment.

My original blog post received a lot of feedback, with some people questioning why a company would implement a new system that end users are reluctant to adopt. While I’ve tried to clarify that there’s a difference between reluctance from all end-users and reluctance from just a few, it also got me to wondering about the different reasons users might have for pushing back on change. There is obviously no common person called “end user,” and in fact every company is made up of a variety of different people with different motivations. There are power users who don’t want to start from scratch, users who fear for their jobs, users who question IT’s ability to deliver, users who are scared of change, and other scenarios that get in the way of a successful transition.

In response to this, we looked to the experience Novarica has had helping insurers prepare for new system implementations, talked to various CIOs who have gone through change management problems of their own, and also thought back to those times when we had been reluctant users ourselves. And so that initial blog post has now been expanded to a full report. It covers different scenarios and complications that cause some end users to resist a new system, and it aims to help an insurer plan for the kind of change that everybody can rally behind.

On Monday, June 22nd at 2 pm (ET) I will be speaking more about this subject on our CIO Series Webinar: Preparing for Digital Transformation and Overcoming Reluctant Users. Interested participants may pre-register online at: https://attendee.gotowebinar.com/register/120109254

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Insurance, Big Data, and Game Changing Cost-Bases

Steve Papa
Board Partner
Andreessen Horowitz

Last week at the Novarica Insurance Technology Research Council Meeting, I got the chance to present and discuss some thoughts about how Moore’s Law has the potential to affect insurer value propositions and business strategies.

With chips getting faster and cheaper all the time, insurers have the opportunity to consider both incorporating new data sources and adding value-added services that would have been prohibitively expensive just a few years ago.

Screen Shot 2015-05-04 at 10.51.39 AM

To draw on another industry, take the example of Google Chromecast, a $40 device that has completely disrupted the Smart TV market. What if auto insurers leveraged this technology to provide a free, limited satellite radio device and to insureds who maintained a high driving score through a gameification app enabled by the same device?

As technology, data, and connectivity get cheaper and cheaper, insurance itself may migrate to being more like a SaaS offering and less like something that’s bought once and forgotten.

Is 2015 is the year the future arrives for insurance and technology?

Matthew Josefowicz

Last week, we held our 8th annual Novarica Insurance Technology Research Council Meeting (see here for Council info, agenda, and press release). This week, we’ll be blogging about some of the discussions and presentations.

One of the general themes of the Council meeting was the acceleration of the rate of change in technology and the effects on the insurance industry. As we pointed out in the keynote presentation of Novarica research, there’s a strong case for considering 2015 the “Year the Future Arrived” for insurers.



There are now real live examples of many of the things that industry watchers have been predicting for the last five years and more. To paraphrase Hemingway, changes comes slowly at first, and then all at once. Insurers and insurance IT leaders who are not prepared for rapid change need to start preparing now.

Clients and Council Members can download the full slide deck from the keynote presentation here.

Wearables and Gamification in Life Insurance Goes Mainstream?

Matthew Josefowicz

John Hancock’s new life insurance program that gives discount points for behavioral modification was covered in this morning’s New York Times.

The article was titled “Giving Out Private Data for Discount in Insurance,” which gives an idea of the initial media reaction. If these types of product offerings are going to catch on, insurers will need to invest in changing the narrative to “Insurer Encourages Healthy Behavior in Policyholders.” Nonetheless, it’s encouraging to see these kinds of initiatives getting mainstream coverage, and we believe this is only the beginning. As we said recently, the future just keeps getting closer

With so many US households still uninsured, insurers are going have to try new things to re-position their product, focusing on consumer needs. New technologies like wearables and the Internet of Things will be an important part of executing that strategy, but insurers shouldn’t confuse adopting new tools with adopting a new orientation.

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Insurance Industry Remembers that Investment Dollars Buy Access to Innovation

Matthew Josefowicz

Everything old is new again. Like the E-Venture Investment Groups of the late 90′s and early 2000′s, a new crop of investment activity is springing up in the insurance industry, with the hope of giving the industry a preview of tomorrow’s capabilities and approaches.

This includes single company initiatives like AXA Strategic Ventures and American Family Ventures, as well as the Des Moines-based Global Insurance Accelerator incubator, and the recently announced ACORD Insurance Innovation Challenge showcase for start-ups.

It’s almost as if the industry woke up and realized it didn’t have to sit and wait to be disrupted from the outside. A multi-billion dollar industry can buy some of its own innovation!

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Don’t Get Tripped by a Tipping Point!

Rob McIsaac

Late last year I had the opportunity to spend time exploring Silicon Valley in depth which created a new-found appreciation for the form and function of innovation that comes from that singular location. The interconnectedness and leverage that has been created by having a unique combination of talent, financing, risk taking and competition is impressive. The number of companies tied to financial services looking to form innovation centers in this unique environment continues to grow.

Another observation from that tour was the rather surprising connection between technology innovation and utilization in areas focused on entertainment. The recognition that HP’s first big order fulfilled out of “The Garage” went to Walt Disney is a point well taken.

Recently I had a chance to see this point of intersection from a different perspective, this time at the Disney World complex. This is another eye opening event that has some potentially key insights for financial services purveyors. It is not a story about magical mice but rather about technology advances and adoption. Insurance carriers would be wise to take note.

As a veteran of Disney trips, I didn’t expect to be amazed in any way. I was wrong. Visiting as an adult observer with too much time on my hands (translation: no kids to manage) afforded an opportunity to watch how new technology has changed the operation of the properties and the way customers interact with them. For example, upon entering the grounds, you are given a stylish armband that looks like a high end Fitbit device. This is how you track your reservations, book special events, manage your tickets and connect with groups on the property. It is also your virtual wallet. Wherever you go, simply touch the wristband to a reader and you are magically able to proceed.

Of course the flip side of this is that Mickey (or a delegate) pretty much knows where you are all the time. As a result, workflow capabilities are optimized. Buses seem to be at the right place at the right time. Support staff placement is optimized. Wait lines are minimized. There’s a smart phone app that helps manage the experience on those moments when you need a keyboard. For anyone with a Fitbit (or equivalent) on the other wrist, the learning curve is essentially zero.

But that wasn’t even the best part. Upon entering a place where value is consumed from the wrist-wallet, such as entering a park, they have deployed two-factor authentication. In addition to reading the wristband there are fingerprint readers everywhere. Scan your wrist, read your index finger and you are “good to go”. It is smooth, clean and fast. More to the point, Disney is now training tens of thousands of new people every day on how to use the technology. They are also setting a high bar for what a good, effective, non-intrusive security experience can be like. In a word, it is “slick”.

The implications for insurance are broad and potentially represent a tipping point which also happens to coincide with the number of Millennials in the US exceeding the number of Baby Boomers for the first time. People are ever more willing to give up personal information for the promise of a better deal, an enhanced experience and better service. Holiday trips can now join Amazon shopping experiences as a place where things just seem to work well and a byproduct of it all can be targeted messaging that can affirm that “smart people like you” found value in this next call to action.

Returning to a world dominated by last century technology, and last century experiences, will increasingly seem quaint and out of touch with a new reality. The fact that they are slow and painful may seal a deal of irrelevance.

Is it any wonder that Google appears poised to move into the insurance space or that Silicon Valley VC firm Andreessen Horowitz sees insurance as a business that is poised for disruption? Being tripped by a tipping point can be hard to recover from. Just ask Kodak.

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