Six Technology Priorities for Individual Life Carriers

Rob McIsaac

The individual life marketplace continues to be hyper-competitive with technology playing an ever larger role in insurers’ ability to attract, retain and profitably serve clients. With the release of our new Business & Technology Trends: Individual Life report, it is an ideal time to highlight six technology priorities in this area.

More robust policy administration
Replacing legacy platform environments with more modern, robust core policy issuance, management, and reporting capabilities is pivotal to properly positioning carriers for the future. While many aging, generally mainframe-based systems, remain capable of supporting basic policy processing and accounting functions, the costs associated with enhancing them are becoming increasingly problematic. Of potentially even greater concern, the risks of continuing to try and enhance these systems using aging technological underpinnings can create both resource challenges and delay getting capabilities and new products to market in a timely fashion. With cycle times turning ever faster, these platforms simply create competitive disadvantage.

Application capabilities
Carriers are targeting key improvements in both producer and end customer satisfaction, concurrently looking to increase operational efficiency through advanced self-service capabilities. One critical focus is on e-applications and increasing straight-through-processing through new business and underwriting. Carriers are also implementing e-signature and e-delivery capabilities to enhance user experiences while reducing costs and improving throughput. Across the spectrum in financial services, better service is frequently tied to user-controlled self-service which can both reduce turnaround times and error rates, something that is especially important on equity based products such as variable / universal life.

Business intelligence and improved analytics
Successful carriers are using business intelligence and analytics solutions to recognize and analyze market trends, product adoption, and producer performance. They are using it to draw out data that has been locked in legacy system silos, to evaluate the potential to change the new business underwriting process, and to assess the effectiveness of agent and field management compensation programs. This increasingly becomes an imperative as carriers look to both better understand (and reward) the appropriate types of behavior in increasingly complex and diverse distribution channels. Customer analytics can also allow carriers to build greater levels of customer “intimacy”, assisting in the identification of “next best offers” and activities that could be a prelude to financial events (e.g., a lapse) that might not ultimately be in the policyholder’s best interest. Rather than simply processing transactions, carriers will need to be able to assist in making the right decisions in the future. Amazon and other online retailers have already taught consumers what is possible; now carrier need to catch up in order to assure future relevancy.

Distribution and compensation management
Carriers are continuously improving distribution management functionality to include licensing and appointments, as well as support for greater flexibility around the frequency of both commission calculations and actual payments in compensation plans. Complex hierarchies remain an issue for many carriers; new and improved distribution management platforms allow carriers to more effectively link actual performance and desired results to improve bottom line financial results. They can also allow carriers to bring information together across previously disaggregated product silos or policy administration environments to drive better performance at a lower operational price point.

Carriers are accommodating new claims capabilities and support of living benefits payout options as well as replacing aging repetitive payout systems. While claims systems have not historically been at the forefront of planning, a combination of regulatory imperatives, market changes driven by concerns such as the Affordable Care Act (PPACA), and a desire to break the large problem of legacy systems down into more discrete consumable components primed for replacement is leading carriers to place increased importance on this space. Interest in this space has been steadily growing and is likely to continue as shorter tail products offer carriers and opportunity to make more direct connections between how they underwrite risks and the losses they subsequently experience.

Architecture and integration planning
While not a discrete system, increased focus is now being placed on developing a discipline that will allow of the integration of new capabilities, at times in concert with legacy platforms, which will allow carrier to transition workloads or functionality to new solutions in a staged approach, avoiding the notion of a Big Bang event. This also allows carriers to operationalize a new reality: the systems being deployed today will not have anywhere near the useful operational life of the systems they replace, particularly those implemented in the 1960’s-1980’s.

The technology priorities listed above are based on the expertise of Novarica’s staff, conversations with members of the Novarica Insurance Technology Research Council and a review of secondary published resources. To download a free preview of our new Business and Technology Trends Individual Life report, visit:

On Monday, May 18th at 2 pm (ET) I will present and discuss findings from this report on a free webinar. Interested participants should pre-register online at:

Related Reports
Quick IT Benchmarks for Insurers 2015 (April 2015)
“Hot Topics” for Insurers: Social, Mobile, Analytics, Big Data, Cloud & Digital (Feb 2015)
Life/Health/Annuity Policy Administration Systems (January 2015)
Internet of Things Update: An Executive Brief (January 2015)
US Insurer IT Budgets and Projects 2015 (September 2014)
Insurer Digital Capabilities and Strategies (July 2014)
Best Practices Case Study Compendium 2014 (May 2014)

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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A Contrarian View on Self-Driving Cars – Beware the Unintended Consequences

Rob McIsaac

While I embrace many (most?) things with a technology flair, I have to admit to being a bit amused with all the recent breathless excitement exuded over the idea of self-driving cars. To be sure, technology is making them ever safer and more fuel efficient. It is also augmenting the driving experience so that paper maps are going the way of LP recordings and being “lost” is now something of a personal choice rather than a state of condition, but I suspect that the rush to sell ad space may have people overlooking a few practical realities that could lead to surprising, if not dire, unanticipated, consequences.

I’m quick to point out, by the way, that driving my vintage BMW has a completely different set of experiences than driving a new one. No airbags, crash avoidance alarms, proximity radar or backup cameras. Driving it requires real and significant concentration and the consequences of an error can be real and immediate. While I’d never want to retrofit a blind spot warning system, I can appreciate the value. Heck, from the dark ages back in 1984, the vintage ride doesn’t even have a single cup holder.

I can appreciate ABS brakes and traction control too. These technology dependent devices can make drivers feel invincible … or at least support the idea that training and engagement are less important than they once were, since mistakes can much more easily be recovered from. Further, I can also appreciate that under “normal” conditions while cruising down the Interstate and experiencing the commuter equivalent of the “Talladega Draft”, where any open space on the road is an invitation for someone to dive in for advantage, advanced computer control can stay on top of following distances and emergency braking procedures better than the average distracted commuter trying to manage the car, the coffee cup, the kids and the cell phone concurrently.

No, my real concern will come about when we get to the point of auto-driver being a real possibility. At that point, under normal conditions, the onboard systems could handle all the easy stuff with a minimal amount of drama or trauma. Parking between 2 stationary objects? No sweat. Maintaining following distances at 70mph? Again, not much of an issue. The concern will emerge when bad or unexpected or unusual things happen and the computer control gives up and hands it back to the now, even more woefully unprepared occupant, under the tag line of “I don’t know what to do, you take it!”. A failed sensor, a set of road conditions that are unexpected, and a wide range of other factors could create scenarios where the on-board systems decide that they have reached max capacity. Or there’s just the Help Desk Rule #1 for electronic devices: when all else fails, reboot, and start clean.

In other forms of transport, such as high-speed trains and airliners, there is significant control automation even for such dicey maneuvers as station stops and landings. In the main, it works great. But when it goes wrong, it can go spectacularly wrong.

As a backup, these devices have alternative systems, called engineers or pilots, who are well trained and capable of taking over navigation in mid-transaction. They have a full training and testing regimen that they need to follow in order to maintain their certifications. When the training kicks in, the auto pilot comes off, and the results are generally good. Even at that, however, they aren’t perfect as some recent plane crashes have suggested. Training really does matter. A lot.

Which gets back to the driverless car concept. If the occupants are going to be expected to “take over” at any point in the journey, where is the training and experience going to come from? How will they practice dicey moments to build an experience base rather than becoming unwitting guidance systems for land-locked missiles that run amok?

Renting a car today can provide an interesting view if the future. Mastering such simple tasks as turning cruise control on and off varies so much between brands and model years that the first few miles out of the lot are like a training mission of their own.

So, one consequence of increasingly automated vehicles could be fewer, but sadly more spectacular, crashes that are hard to pinpoint “blame” for. The conversation around who is liable in such circumstances could be both long and full of rich legal entanglements. Breathlessly talking about self-driving cars and the end of accidents as we know them may be both significantly premature and a preview to different and more nuanced or complex dialogue.

Of course, on a weekend that required a surprisingly large number of re-boots to both my real world laptop and tablet devices at unfortunate moments, I find myself a little less concerned. If the technology crashes on an Excel problem, how can it possible handle a Jersey Jug-handle first time, every time? Or, maybe I should be more concerned. Time will tell. And that could be the actuarial nightmare scenario.

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  • Dealing with the COBOL Brain Drain

    Rob McIsaac

    As Baby Boomer COBOL programmers increasingly have the opportunity to say “bon voyage” to working 9-5 and retire, some Insurance IT executives are having restless nights trying to figure out how they are going to address the resulting brain drain. Not only are insurers losing vast amounts of programming knowledge, but they are losing vital business knowledge as well.

    Documentation on aging systems in many cases is more akin to tribal knowledge than a true knowledge management “system”, and the potential for things to go bump in the night increases as these environments face generational transition. For example, one CIO recently shared a story about the transition of responsibilities for running an annual production job from one retiring individual to another programmer. The transition involved, by definition, a year between education and execution. And what was the final result?

    A minor error sent an entire production run of annual statements, totaling 400,000 documents, to a single address! Somehow “oops” fails to capture the full magnitude of such an event.

    The insurance industry isn’t the only sector trying to figure out what they are going to do next. Banking, retail, manufacturers and even the federal government will be looking to find new sources for COBOL talent as the generational transition accelerates. As of 2015, 10k boomers achieve retirement eligibility daily, so the issue won’t resolve itself easily or quickly. This will be the pattern until 2029, so “hope is not a plan” may have never been a more appropriate sentiment.

    With such a competitive marketplace to find COBOL programmers what can you do? Three options immediately present themselves:

    1) Moving off big iron platforms dependent on COBOL, Assembler, VSAM and related technologies
    2) Finding COBOL programmers offshore
    3) Leveraging COBOL programs at local universities

    For many entities, the first option really isn’t feasible based on economic factors alone. The business case for converting old blocks of business can be weak at best, leading carriers to conclude that these systems will be running for the foreseeable future in tandem with more modern capabilities designed to handle new products, channels and priorities.

    The second and third options, however, can offer some immediate relief for these legacy programming needs. I’m pretty sure most people have a good handle on offshore providers, but some IT executives may not be familiar with the third option and I’d like to tell you more about it.

    Currently, I’m on the Advisory Board for the Computer Science and Engineering Department at North Carolina State University which provides some interesting visibility into both the demand and the development of new onshore resources. We are certainly seeing training programs emerge that are intended to restock some of the lost talent in this space. We are also seeing some fascinating collaborations between educational institutions, private enterprises and technology providers as they look to address gaps. One example of this is a collaboration between IBM, Blue Cross / Blue Shield of South Carolina and the University of South Carolina. BC/BS has the need, USC has the capacity to train and IBM has been an active participant in framing the curriculum and capabilities. Other examples are emerging as well which provide an opportunity to collaborate with either traditional colleges and universities as well as technical schools. Junior / community colleges may also provide some interesting options. We also understand that some companies are reverting to a tried and true technique deployed in the 1960’s: internal development programs to build new skills around aging technologies.

    At the end of the day, if the only tool a CIO has in their toolkit is a hammer, every problem looks like a nail. In this case, it is incumbent on CIO’s to develop a broader set of tools that can allow them to creatively and effectively build up the talent pool required to keep aging platforms and systems functional until such time as they can be retired. The reality for many mid-career CIO’s today is that these platforms may still be running after THEY retire, so considering the options sooner rather than later may minimize pain points.

    If you would like to learn more, or share your own experiences in this potentially mission critical area, please feel free to contact me at email.

    Agile and Continuous Delivery in a Regulated Environment

    Jeff Goldberg

    Many insurers are interested in the modern development methodologies of Agile and Continuous Delivery, but worry about how those approaches will work in such a highly regulated industry. When done properly, using an Agile development methodology and/or a Continuous Delivery approach shouldn’t prevent an insurer from putting controls and reviews in place to satisfy external regulations (and internal rigor). A test-driven approach supports both Agile and Waterfall development efforts.

    First, just because a development team is doing continuous delivery or packaging releases into two-week sprints doesn’t mean that code is being moved to production. One of the points of this approach is that code is constantly being built and deployed to a test server and that smaller chunks of effort are packaged for business user review. This means that some of the API integration and build issues that often hold up a project at the end are being nurtured and considered the entire time. It doesn’t mean, however, that actual production releases can’t go through the same rigorous testing and sign-off before ever moving to production servers. You can take an agile approach to a project with two-week sprints that doesn’t actually go into production more than once or twice a year.

    (Note that some organizations do consider continuous delivery to mean that once code has been committed by a developer, it can be tested and moved to production at any time. While this is interesting in theory I know of very few organizations that actually do it this way, and none in the insurance industry that do. The idea to embrace with CD is that you have a production quality branch ready to go at all times, but that doesn’t mean you have to actually move that branch to production outside of a predictable schedule.)

    Second, when done well, an agile approach actually results in more business user review and testing of a system as opposed to less. Testing is spread out over the entire process rather than done in one large burst at the end. A key value of the “sprint” concept is a continuous involvement of business users. Engineers are supposed to be delivering something every single sprint that can be demonstrated and reviewed by stakeholders. Unfortunately, this is where a lot of organizations fail to properly follow the agile methodology. A lot of companies (not just insurers) who embrace the idea of a sprint, really just treat it like a way for developers to chunk up rapid milestones. Agile is not the same thing as Rapid Prototyping. Without the business stakeholders regularly reviewing the results, adjusting priorities, and signing off on items, it’s not really following the agile protocol.

    Third, there’s a misconception that requirements in an agile approach are highly fluid or not well defined. While an agile approach is supposed to allow you to make rapid shifts in priority, it doesn’t mean as an organization you have to do so. If there are a set of regulatory-demanded requirements for a project, those are going to be at the top or near the top of the priority queue, and no amount of flexibility will mean that they get pushed off the list. Until they’re implemented and signed off, the project isn’t going to go into production regardless of how many sprints have passed.

    While I’m a big fan of an agile approach, I don’t think it is right for all insurers or even right for all projects at an agile-minded insurer. If the executives at an organization feel uncomfortable without very detailed project plans and requirements documents, the culture may not be right for agile. If you want to make some important feature updates to a legacy core system, you’re probably going to want to take a waterfall approach of defining the changes, implementing, and testing them; it’s often very difficult to do the sprint method with systems like that. But if you’re building a new web portal and the culture supports it, an agile approach can work great, especially when UI development is involved. And sometimes a mix is in order: if you are implementing a new core system, even if you take an agile approach you’re probably going to want to have some major planning and requirements gathering sessions up front so that you can define costs and timelines with your vendor.

    If you’re interested in talking more about Agile, Continuous Delivery, or other approaches to development, please feel free to email me to set up a complimentary 30 minute consultation.

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    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!

    Webinar: Group Life/Annuity/Voluntary Benefits

    Rob McIsaac

    In my last blog post I wrote about seven key findings from our Business & Technology Trends: Group Life/Annuity/Voluntary benefits report. In this post I would like to quickly highlight some of the top technology priorities, which I will be covering in more detail during our webinar on March 18th at 2 pm (ET).

    Technology is playing an ever larger role in insurers’ ability to attract, retain and profitably serve clients in the group life, annuities and voluntary benefits space. Some of the top initiatives include:

    • Solid product design that attracts a broad audience
    • Tools to help plan sponsors or enrollers to sell, market, or enroll individuals
    • Robust flexible group administration capabilities
    • Multi-channel marketing and sales
    • Administrative capabilities such as the ability to quickly and efficiently process and post payments

    Novarica research has concluded that success for carriers will revolve around these technology priorities. To learn more about these initiatives in more detail, as well as the latest trends and issues in the Group Life/Annuity/Voluntary Benefits space, pre-register for our webinar on Wednesday, March 18th at 2 pm (ET). I look forward to seeing you there!

    The Benefits of an IT Assessment in 2015

    Martina Conlon

    Our 2015 research indicates that insurers # 1 business priority is growing revenue, most typically through rolling out new or changed products and launching into new territories. Business agility is critical to compete today, and IT departments are charged with delivering rapid system changes to support these new products and business models. But the typical IT department is incredibly busy keeping the trains running and reacting to the increasing needs and demands of the business community. It’s easy to get caught up in the day to day and react to the tactical and miss the strategic. Doing an IT Assessment helps ensure that your technology and IT organization are aligned with your strategic goals.

    Our IT Assessment projects cover:

    • Budgets and spending
    • Staffing levels and staff profiles
    • Application portfolio and technology plans
    • Governance, oversight and reporting structures
    • Business/IT alignment
    • Intake, planning and execution processes

    We review your business goals and pain points, your technology, your strategic technology plans (if they exist) and IT organization to ensure you have the right staff, capabilities and systems to be successful. We leverage our knowledge of industry best practices to help ensure your competitive parity or differentiation.

    IT Assessments are most valuable when there are major changes in business direction, new IT leadership, concerns about business/IT alignment, business satisfaction or the cost of IT, or when you’re looking to assess your performance against your peers.

    If you’re interested in learning more about IT Assessments, please feel free to contact me at email to set up a complimentary 30 minute consultation.

    WSJ: The Driverless Car is Officially a Risk

    Mitch Wein

    There was a fascinating article in the WSJ the other day about the impact of driverless cars on Insurance.

    “WSJ’s Theo Francis joined the MoneyBeat show this morning to talk about how insurance companies and car-parts makers are already talking about the threat from driverless cars. It’s years off, to be sure, but some of these companies, like Cincinnati Financial Corp, and LKQ Corp are already discussing the competitive threat in the “risk factors” section of their SEC filings.”

    We have been talking about the impact of IoT generally, with driverless cars being one example. We are now reaching a tipping point. Sometime in the near future, the technology will be fully matured and the regulatory environment fully adapted to this new paradigm. All sorts of impacts will occur. Insurance coverage will transition from Personal Lines (where people do the driving) to Commercial Lines (where the manufacturer is responsible for the safety and accuracy of the vehicle). While less cars will be in accidents, accidents will still happen. When cars are damaged, the cost will be higher to repair due to the advanced electronics. These cars will probably be connected to the insurer’s claims systems and underwriting models, with the notion of metered insurance a real possibility. People may not even own cars in the future, but simply call the car up on an “Uber-like” service through their smartphone. The car itself may be its own self-contained business, optimizing its availability and the routes it drives based on P&L (the most popular routes) and insurance risk(where the most accidents occur). And what about a driverless ambulance that is auto-dispatched if your fitbit device indicates a health emergency. If the ambulance does not get to the hospital on time, who’s at fault?

    As we have said…the Internet of Things is actually the Internet of Transformation.

    Stay Tuned……

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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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