CIO Best Practices for Effective Board Communication

Frank Petersmark

While studying for my PhD in history I came across hundreds of examples of good and bad leadership. The one thing all good leaders had in common was their ability to clearly communicate and get people to take action. Each of these leaders had their own unique styles. For example, John Kennedy and Winston Churchill would use words, Napoleon and Henry VIII would use actions and Rosa Parks and Mahatma Gandhi would use silence.

So what does all of this have to do with how CIOs and their boards of directors communicate with each other?

One of the differences between more successful and less successful CIOs is their ability to communicate effectively with their boards. Being able to communicate effectively with your board will help make securing organizational support for IT initiatives, such as funding and resource commitments much easier, as well as achieving the strategic goals of IT, which, if aligned properly will benefit the entire organization.

Developing a common communications approach is a critical part of the CIO function. The checklist below is a great place to start for board meetings, presentations and for an IT leader’s overall communications with their board members.

  • Speak their language, not IT’s
  • Keep things simple
  • ABC – Always Be Contextual
  • Talk about organizational benefits derived, not technology functionality and capabilities
  • Present options, but clear about which one is best and why
  • Don’t hide the risks
  • Paint a picture of what the organization looks like after the effort
  • Recap and ask for support, and if necessary, sponsorship
  • Return with progress reports – good, bad, and ugly

On Thursday, September 24th at 2 p.m. (ET) I will get into more detail and provide additional insights into the best practices above. This 30 minute webinar will be open to all insurance CIOs and IT executives. To secure your spot, visit: https://attendee.gotowebinar.com/register/8008884846320246785

I would also like to invite Novarica clients who haven’t downloaded my new CIO Checklist Report: Best Practices in Board Communications for CIOs to download it today at: http://novarica.com/cio-checklist-best-practices-in-board-communications-for-cios/

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.

Novarica Impact Awards Summit Recap

Matthew Josefowicz

Our recent Novarica Impact Awards Summit provided a forum for IT leaders to present and discuss their nominated case studies with a broad group of Novarica council members and clients.

The projects presented ranged from Philadelphia Insurance’s adoption of a legal bill review solution that delivered a multimillion dollar payback to MetLife’s successful transformation of their global trading systems. Panel discussions highlighted the importance of IT’s ability to communicate effectively with other business units in delivering impactful projects, and many cited the adoption of agile as a success factor in their projects. While most of the projects involved working with technology vendors, some focused on the adoption of new practices and frameworks, and others on custom development in both traditional platforms and in the cloud.

Speakers-Comp

The panels also presented an opportunity for IT leaders to compare notes on project priorities and strategies, with many attendees noting that their organizations had faced similar challenges and worked toward similar goals. Several presenters and audience members described the importance of securing other executives and end users to act as champions throughout the organization, to speed adoption of new technology and processes.

One theme that rose to prominence this year was a focus on user experience—not just for customers, but for agents and carrier employees as well. AFBA/5Star Life incorporated the needs and requirements of more than 40 third-party administrator customers when designing a new List-Bill solution. CNA deployed an enhanced agent self-service portal for quoting and issuing endorsements, drastically improving agent experience and satisfaction. And Tokio Marine North America introduced a new analytics system to aggregate customer and agency data, empowering business users with insights into previously-unknown market segments.

Taken together, these and many other nominees represent a trend towards end-user focus. Insurer CIOs are recognizing that usability of a system by all its stakeholders must be a priority, whether a project involves cutting-edge analytics or core systems replacement. These projects have successfully balanced user needs with business and system requirements—essential for ensuring a project’s positive impact throughout the organization.

INN_Video_8_14

All of the nominated case studies are featured in Novarica’s Best Practices Case Study Compendium 2015, which is free to Novarica clients and council members.

Insurance Networking News was there to cover the keynote and conduct a short video interview on themes of recent impactful projects.

Project teams from nominated companies received their awards, and had an opportunity to network with each other an the other attendees.

Nominee-Comp

Networking Comp

To learn more about the Impact Awards program, see http://novarica.com/impact2015/

With 2016 Planning in High Gear, Special Interest Group Meeting for Large P&C Insurers Highlights Opportunities, Challenges and Risks

Rob McIsaac

Last week Novarica hosted the latest in our Special Interest Group series of CIO-oriented meetings, which in this case focused on large P&C carriers. This is a line of business facing both heightened competition and significant technology change, which is forcing thoughtful prioritization for project investment portfolios. As carriers grapple with current technical debt issues and the need to remediate aging core platforms they are concurrently needing to keep a sharp eye on a range of emerging capabilities including analytics, mobility and the potential for game changers, such as drones, to emerge as mainstream solutions.

In framing the current state of the technical space, we began our discussion by looking at spending patterns for the industry, which continue to trend in a narrow range as a percentage of DWP. Looked at another way, IT spending continues to grow by 3-4% per year overall. Given the range of new activities being required of IT, this reflects a “do more without much more money” paradigm. From our analysis this is leading carriers to move away from CapEx and toward OpEx where possible. It is also encouraging carriers to rethink what is really “core” and should be kept in IT as contrasted to what may be classified as a “chore”, which may ultimately be a utility function that can best be performed by an outside provider.

A lively discussion ensued regarding the correct way to look at IT spending by insurance companies. Although it has been an industry practice for many years, the participating CIO’s disagreed with measuring IT budget as a percentage of GWP. They felt that their budget will vary based upon major transformations and measuring budget as a percentage of GWP is misleading, at best. We explored how other industries (e.g., banking) approach this issue and why looking at something other than a unit measure focused on a top line revenue number might be more appropriate.

Data and analytics was clearly a hot topic for the carriers at this SIG. Data governance is a top of mind issue, with carriers approaching the (data) ownership issues in different ways. At the end of the day, regardless of process, IT organizations can’t do this alone but must provide enablement and support to other business units.

Another key issue carriers face is finding the right skill sets to perform the data analytics function of the future. In addition to seeking skills from some non-traditional sources (e.g., advanced degrees directly from university programs, with some carriers setting up company operation close to research universities to attract better talent), companies are working to set up internal programs to provide both an appropriate level of support and mechanisms for internal cross-pollination of human capital.

Talent in other areas is also very much a high priority issue. A key area that attracted significant attention during the discussions related to the quest for Business Analysts. One carrier mentioned a successful effort they have for hiring computer science undergrads directly into internally managed training programs which allows them to grow / groom talent for the future. Working closely with universities on curriculum can be critically important as significant differences were noted in the quality / applicability of undergrad experiences. CIO’s reported that a direct and hands on approach to understanding feeder programs can allow them to get best value. They also reported that the best sources may not necessarily be obvious; a close inspection of the talent (e.g., through the use of aptitude tests) can be very important in this regard.

Another carrier noted an interest in working with a broader community of other carriers and vendors to help build appropriate pools of skilled resources, including BA’s. Irrespective of approach to acquiring talent, the need for some of these specific skills was a recurring theme throughout the discussions.

Retirement of old platforms and realization of significant savings when “completed” was noted as a vital objective for some carriers. Maintaining the vigilance to take major transformational events all the way to “done”, which means avoiding a loss of momentum and focus, is deemed central to success and avoiding a situation where new systems deployed without retiring the predecessor platforms can actually make environments more complex, expensive and difficult to manage. Maintaining a shared IT and other business unit focus, collectively, on the financial prize can be key to ultimate success in these endeavors.

Near the end of the session, the discussion turned to BPM capabilities and experiences with them as either alternative to, or complements for, workflow capabilities embedded into core systems from leading vendors. Some success stories emerged for a variety of use cases, including for the acceleration of retirement of MS Office (or SharePoint / Lotus Notes) applications that have morphed from desktop capabilities into mission critical solutions which have actually made current environments more brittle and risky. This approach to “peeling an onion” can actually garner support from line of business organizations while building trust and confidence for broader transformational events.

As always, the format for these Special Interest Group sessions provided for a frank, open, thoughtful and (of course) private sharing of experiences and perspectives. Novarica’s belief is that 2015 will prove to be the year that the future arrived; for the carriers in Boston this week it was an opportunity to explore what it truly means to be at the tip of that spear!

Our next SIG event is going to be focused on Workers Comp carriers on September 9. Life carriers will be the focus for a SIG session on October 14.

Things are moving surprisingly fast in many quarters of the insurance industry and we are looking forward to these sessions. If you’d like to be included in a future event, please let me know directly at rmcisaac@novarica.com.

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.

Creating an Enterprise Blueprint and Roadmap for Insurance Carriers

Mitch Wein

On our most recent webinar: “IT Strategy and Architecture” we talked about how the demands on insurance IT have never been higher. Insurer IT groups are tasked with delivering an ever-expanding set of capabilities, including digital transformation, faster speed-to-market, better distributor and customer service, and better analytical capabilities.

Unfortunately, too many insurers are dealing with the challenges of overly complex IT environments and brittle or redundant systems that cripple their ability to deliver business value rapidly or cost effectively.

A vision is needed to address the business transformation, while leveraging technology trends and leading industry solutions. From this, a roadmap of projects must be defined to implement that vision, while keeping the business running.

Creating an Enterprise Blueprint and RoadMap for Insurance Carriers

Creating an Enterprise Blueprint and RoadMap for Insurance Carriers

All too often there is a disconnect between business and IT, but having a common purpose and common understanding throughout IT and other business units enables true teamwork. Novarica’s new IT Strategy and Architecture consulting offering can help insurers protect their long term investments, while guarding against Business/IT disconnect.

For more information, please view our webinar recording or email me to set up a complimentary 30 consultation.

Top Stories in Life/Annuity for May 2015

Steven Kaye

We’ve just published our Novarica Industry Intelligence Brief for Life and Annuity for May 2015. These reports highlight some of the most interesting industry stories from the past month, and present them along with Novarica commentary. Commentary is available to clients only, but we’ve posted direct links to the stories below:

  • MassMutual is cutting the term life application process from weeks to minutes using third-party data and algorithms. Full Story.
  • The National Association of Retirement Plan Participants offers a ranking of plan providers based on how well they help employees save for retirement. Full Story.
  • Employers offering voluntary benefits recognize the importance of mobile enrollment, according to a LIMRA survey. Full Story.
  • John Hancock’s purchase of Guide Financial gives them AI and behavioral finance tools to help both advisors and their clients.Full Story.
  • Will employers see more lawsuits from employees over excessive fees charged for retirement plan investments? Full Story.
  • HR software provider Zenefits is threatening benefits brokers’ business – and the market is rewarding it handsomely. Full Story.
  • The SEC may require mutual fund providers to provide disclosures of the effect of rising interest rates on the bond holdings of investors. Full Story.
  • NAIFA is trying to block implementation of the Department of Labor’s latest fiduciary ruling, and there may be some hope. Full Story.
  • Legal & General America launched a website to educate consumers on the need for life insurance and its real costs. Full Story.
  • Behavioral finance is all the rage, and LIMRA used it to understand why consumers don’t buy life insurance and how they can be encouraged to do so. Full Story.

For Novarica commentary, clients can download the Brief at:
http://novarica.com/may-2015-novarica-industry-intelligence-brief-life-and-annuity/

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Previous Novarica Industry Intelligence Briefs for Life/Annuity

Top Stories in Property/Casualty for May 2015

Steven Kaye

We’ve just published our Novarica Industry Intelligence Brief for Property and Casualty for May 2015. These reports highlight some of the most interesting industry stories from the past month, and present them along with Novarica commentary. Commentary is available to Novarica clients only, but we’ve posted direct links to the stories below:

  • Munich Re and HSB are sponsoring the Plug and Play Accelerator’s Internet of Things Accelerator. Full Story.
  • Google Compare asks more questions of consumers, not less. But is this a good idea for carriers? Full Story.
  • Government-imposed limits on profitability – not just for health insurance anymore? Full Story.
  • Corporate risk managers expect widespread use of drones in ten years – or much less. Full Story.
  • Insurers offer savings to consumers in return for information shared from their iPhones, including location and vehicle make and model. Full Story.
  • GuideOne is installing sensors in insured properties to provide advance warning of equipment failure and resulting losses. Full Story.
  • Forget self-driving cars, what about self-driving trucks? Or planes? Full Story here and here.
  • ACE is providing predictive modeling and analytics to claims adjusters to help them nip potential high-severity claims in the bud. Full Story.
  • Chinese conglomerate Fosun follows its purchase of Meadowbrook by acquiring the remaining shares of Ironshore. Full Story.

For Novarica commentary, clients can download the Brief at:
http://novarica.com/may-2015-novarica-industry-intelligence-brief-property-and-casualty/.

Previous Novarica Industry Intelligence Briefs for Property and Casualty

Major Trends in Global Insurance and Reinsurance and IT Implications

Mitch Wein

I recently attended the Insurance Insiders Conference in New York. The presentation and discussion panels focused on three major areas of disruption in the global insurance and reinsurance industry: capital and regulation, competition, and technology.

Capital and Regulation

  • Large parts of the world are awash with capital looking for a place to be reinvested. This includes a large increase in alternative capital (ex. Diversified pension funds, endowments). Diversified capital allocation models are guiding where the money is going.
  • CAT Bonds (risk-linked securities that transfer a specified set of risks from a sponsor to investors) are growing. CAT insurance pricing is at an all-time low
  • Increased global regulation may cause a retreat from long-term products since not all firms are being treated equally (ex. SIFI-systemically important financial institution)

Competition

  • Rate reductions are persisting, especially in Property. However, Professional Liability is stable. A low interest rate environment will remain in the short-term. There is more price decreases on new business vs. renewal. The will be continued activity in M&A in insurance. There has been an industry consolidation in the Lloyds Marketplace
  • Foreign Insurers are exiting the US because of higher capital requirements-especially in the US Life and Annuity segment
  • Opportunities are emerging to transfer risk from the public to the private sector.

Technology

  • Advanced predictive analytics in reinsurance is helping to optimize returns for strategic capital
  • Increasing amount, frequency and types of data is driving innovations in specialty lines like drone based claim inspection for catastrophes and crop damage
  • Cyberrisk mitigation is gaining in importance and has led to a focus on enterprise risk management. Related areas of growth are privacy liability and network security. However, the risks around cyber are not well understood by underwriters. Additionally there is a risk of duplicate and overlapping regulations in this area.

Even in the first two areas, technology’s impact is being felt. The use of new technology allows not only more scale, but also enables firms to diversify, triggering M&A’s to exploit synergies. What was very clear was that global insurers and reinsurers can no longer think of themselves as somehow insulated from the effects of the rapid changes in information technology that are disrupting the more consumer or commodity lines of the market. Global insurers and reinsurers need to incorporate a deep understanding of technology issues, both internal and external, into their strategic planning.

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.