Lessons for Insurers from Banking and Fintech

Tom Benton

At Novarica, we’ve noted that many emerging tech advances are implemented in banking first, followed in five years or so by property and casualty insurers, then after another five year lag they begin to appear at life and annuity carriers. In fact, at the recent LOMA Life Insurance Conference I mentioned that implementation of core systems in the cloud appears to be following a five year lag between P/C and L/A carriers and vendors.

With this in mind, I recently attended a conference kickoff session by Suresh Ramamurthi, Chairman and Chief Technology Officer of CBW Bank and former Google executive. Suresh and his wife, also a tech leader with experience at Lehman Brothers, purchased CBW (Citizens Bank of Weir (Kansas)) in 2009 and have been using the tiny bank as a platform for disruption of the banking industry. Suresh and CBW are on the forefront of the Fintech movement in banking, and the presentation provided some insight into possibilities for the future of insurance and Insurtech. Here are some thoughts from Suresh’s presentation:

  • In the age of Fintech startups, it no longer makes sense to be a “fast follower”. New technologies are being introduced at a fast pace, taking two years or so for implementation. Banks that adopt a “wait and see” approach to innovations in products and technologies are in danger of falling too far behind the curve.
  • We are in the “age of the individual” – companies that can’t personalize the tech experience for customers and for employees risk being considered behind the times.
  • The two most significant opportunities for transformation are in digital and data – companies need to consider not only changing their architecture for digital delivery of products and services, but also transforming their data and data management.

Suresh pointed out that the biggest obstacle to transformation is not technology, but knowing where to start, how to minimize disruption to the business, how to accelerate time to value, and how to ensure both stability and agility.

Suresh and CBW bank are demonstrating the importance of organizational transformation, proving that disruption can be applied from outside by a company inside the banking industry. CBW is a very small bank with relatively few resources, yet it has created a culture that allows rapid change and agility. CBW’s focus on emerging Fintech that provides advanced customer experience with strong data and digital capabilities is establishing them as a new leader in banking.

These lessons are important ones for insurers to note. As many carriers wait for disruption to occur in a risk-averse, slow-to-change industry, the best way to prepare is to create organizations that can adapt and implement quickly. Insurance leaders need to look at personalizing products and customer experiences. To enable these, they need to consider how they are architecting data and developing digital solutions that are stable and agile. Insurance carriers who want to lead in a new age of Insurtech need to prepare for disruption by being proactive, and not just reactive.

Please contact me if you’d like to discuss emerging Insurtech and strategies for improving customer experience.

The Digitalization of Insurance Comes Home to Roost in Austin

Frank Petersmark

At the recent Digital Insurance Conference in Austin, I had the opportunity to moderate two panels that highlighted the very different perspectives on disruption that digitalization is having on different segments of the industry.

Knowing is only half the battle

The first panel was with a sitting CIO and a former CIO in the P&C industry, and their collective perspectives can best be characterized as those of the disruptees, as compared to the disruptors. I spoke to many carrier people at the conference, and almost all of them acknowledged the new reality of the macro trends that are impacting the industry, most particularly the digitalization of the insurance industry. That’s the easy part. As the CIO panelists pointed out, however, it’s one thing to acknowledge and recognize the pressures coming from digitalization – particularly as it relates to customer centricity – and quite another thing to have the wherewithal to actually do something about it.

The past is not dead. In fact, it’s not even past

The CIOs on the panel were both from midsize insurers, and they correctly pointed out that it’s difficult to make progress on any one of these macro trends, let alone all of them, given the realities of budget constraints, ongoing core systems transformations, the constant shift of priorities, and the difficulty in acquiring and retaining the kind of IT talent that can push this rock forward. Those are real problems, and based on the panel and the many conversation I had with carrier people, that won’t be solved anytime soon.

Target-rich environment

On the other hand, the second panel I moderated featured three disruptors who in their own ways were reimagining how the insurance industry should work.

  • The first panelist had started a customer focused data aggregation service that allows small business owners to get insurance with just a few clicks – a clear threat to existing agent distribution channels in small commercial.
  • The second panelist started a service that while not completely disruptive to the industry, it nonetheless uses intelligent data to quickly compare policy contract contents and highlight the difference, a laborious mostly manual process for the industry.
  • The third panelist has placed themselves squarely between the consumer and the carrier, by creating a smart, wifi-enabled nine volt battery for home smoke detectors that has the potential to contribute to the smart home assault on home insurance premiums.

Each one of them viewed the insurance industry as an easy target for disruption, given its poor track record with customer experience and process transparency.

Lack of resources for innovation

That was the general theme from nearly all of the disruptors attending the conference. Many of them had the kinds of ideas and solutions that might play well in other verticals, but the disruption barrier to entry is so low for the insurance vertical, they’ve chosen to go there first. Unless you’re a Fortune 50 insurer, it’s becoming increasingly clear that much of the digital transformations entering the industry are and will be from outside the industry, leaving the industry in more if a reactive mode for the foreseeable future.

Who watches the future?

One way for insurers to get ahead of this is to continue to advocate for the strategic imperative of technology and its effective use at the executive and board levels. One way that midsize insurers can accomplish this is by appointing technology experienced board members, and by considering the establishments of board level technology committees as way to place the competitive and market implications of a well-executed technology strategy in their proper place – at the strategic top of the company. We’ll be presenting our research on this topic at the NAMIC Annual Convention on September 25-28, 2016 in Vancouver, BC, Canada. These are the kinds of actions that might help many carriers change their digital disruption orientation from reactive to proactive.

Novarica Council Gathers Insurer CIOs to Address The First Year of the Future

Matthew Josefowicz

Nearly 70 IT leaders from more than 50 insurers gathered last week at the 9th Annual Novarica Insurance Technology Research Council Meeting to participate in panels and workshop sessions with their peers, get insights from Novarica’s senior team, and attend keynote sessions from outside experts on operational transparency and cyber-security.

The First Year of the Future

We dubbed last year “The Year the Future Arrived” for insurance, when nascent trends like wearables, Internet of Things, consumer internet giants’ interest in the sector, and a growth of direct sales beyond personal lines became a reality. This year, the clock is no longer counting down, but counting forward.

Keynote: Nine Trends and Issues…


My keynote focused on our Novarica Nine for 2016 and Beyond, looking how these and other trends are shaping the industry, as well as what kinds of technology strategies insurers are taking to address these trends, and how they are managing their IT organizations to deliver these capabilities.

…100 Technology-Enabled Capabilities


We also reviewed our expanded “Benchmarking the New Normal” framework, which we will publish this summer, looking at deployment rates for 100 key technology-enabled capabilities across functional areas like product, marketing, distribution, customer engagement, billing, claims, and finance/operations and technology areas like data, digital, and core.

CIO Panel: Core, Agile, Evolving Customer and Employee Dynamics

Our CIO Panel, which included Kate Miller of Unum, Scott McClintock of OneBeacon, and Paul Brady of Arbellla, addressed strategic issues ranging from core systems replacement to embracing agile development to redesigning their organizations to make insurance IT an attractive career option for millennials.

Operational Transparency for External and Internal Customers

Our guest keynote, associate professor Ryan Buell of Harvard Business School, presented his research on operational transparency and its impact on customer service to a tremendously responsive and engaged group. We’d invited Dr. Buell to join us because his research is so applicable not just to the insurance customer experience, but to the relationship between IT and other business units. See this recent post for more on this session

Novarica Research on Core Transformation, Data, Digital

On the second day, the Novarica panel of Rob McIsaac, Martina Conlon, Mitch Wein, and Jeff Goldberg from our team discussed some of their recent research and customer projects in areas like core systems selection, transformation project assurance, data strategy, meeting agents’ digital needs, and a wide range of other trends and best practices.

Discussion Groups of CIO Members Focus on Their Key Issues

Special interest group discussions for group voluntary benefits, individual annuities, individual life, personal lines, specialty, commercial lines, and workers comp explored recent research relevant to each sector. In discussions co-led by a Novarica expert and a CIO chairperson, these groups addressed topics like enrollment standards, impact of the DOL fiduciary ruling, market dynamic changes, ISO rating, and core systems vendors.

Cyber-Security Threat Evolution and Preparation

Distinguished professor and Department of State cyber-security adviser Dr. John Savage gave a closing keynote on the cyber-security, emphasizing the importance of managing security beyond perimeter protection and staying engaged with industry groups to monitor the evolution of new threats globally.

Knowledge-Sharing and Networking

novarica-councilCouncil members valued the opportunity to network and learn from each other in a private, vendor-free environment, and many of the special interest groups have already made plans to meet again later this year. We’ll be publishing a report summarizing the discussions and panels next month, and the 10th Annual meeting will occur in late April, 2017.

For more information on joining the Council, senior insurer IT executives are invited to visit http://novarica.com/council and request membership. Membership is free and has no obligations.

Operational Transparency, Agile, and Perceived Value

Matthew Josefowicz

Our guest keynote speaker at the recent Novarica Insurance Technology Research Council Meeting was professor Ryan Buell of Harvard Business School, who presented some of his recent research on operational transparency and its impact on customer service.

Transparency Changes Perceptions

The main finding of Dr. Buell’s research is that service providers perform better when they see the impact that their work has on customers, and that customers are more appreciative and feel better served when they see the work that has gone into providing services to them.

Here’s a video of Dr. Buell presenting on this topic as it relates to government services, from his website:

I invited Dr. Buell to join us after encountering his research online, and realizing how important this topic was not just for insurance customers, but for the internal customers of insurance IT leaders.

Insurance is an opaque product

For customers, insurance is an invisible and mysterious product. Few customers know what goes into underwriting and issuing a policy or processing a claim. Even for distributors, a major source of frustration is not understanding when or how decisions are being made. Some insurers have found that simple process additions like progress bars, proactive process notifications, or simple explanations can have an impact on customer and agent satisfaction levels.

IT is also an opaque product

IT is an equally opaque product to its internal customers. Leaders and staff in other business units generally have a poor understanding of IT, why things that seem simple are complex, how long tasks actually take, and generally just what the heck those technology guys are doing all day. This lack of understanding and lack of transparency leads to frustration and turns other business executives towards trying to manage IT with the only tool they do understand: budgets. This rarely leads to value creation.

For IT, Agile is helping

With the mass adoption of Agile development by insurers, this is starting to change. One of the main benefits of Agile is enforcing regular communication and review of progress between technology staff and other business units.

As shown below, the majority of insurers report that this is improving end-user satisfaction with delivered products, relations between IT and other business units, and even IT job satisfaction.


Through frequent interactions and reviews, other business units feel greater ownership in IT projects, and IT feels like it’s making a difference in achieving overall business goals.

Future collaboration

We believe that insurers can benefit from an operational transparency orientation in multiple areas, and we’re currently in discussion with Dr. Buell about future collaboration and activities with our team and Novarica Research Council members. Contact me if you’re interested in learning more.

Related Research

  • Novarica Nine Insurance Technology Trends and Issues for 2016
  • Agile at Insurers 2015
  • Insurance Enterprise Software Reverticalizes

    Matthew Josefowicz

    This week’s announcement of Accenture’s spin-off of Duck Creek Technologies to a joint venture with a private equity firm underscores a trend we’ve seen in the insurance enterprise software and services market — increased verticalization.

    When we first started tracking M&A in this space nearly a decade ago, we focused significant attention on the tech giants like IBM, MSFT, ORCL, and SAP, pictured on the left of our 2015Q2 market view below, as well as the financial investors, pictured on the right.


    Source: Insurance Software M&A Update 2015 Q2

    While financial investors have gotten much more active in this space in the last five years (lured no doubt by the successful Guidewire and Majesco IPOs), the tech giants are no longer much of a factor. They seem to be focusing much more on their horizontal strengths like cloud and data analytics.

    Why is this happening? Well, insurance enterprise technology is not like general enterprise technology. It has a distinctive and closely-connected customer community that values vertical expertise and relationships above all, it requires maintaining a network of partnerships or a comprehensive set of vertical services, and has a business rhythm and sales process that rarely aligns with that of horizontal enterprise technology companies.

    Insurance technology companies have been most successful on their own, and frequently struggle to maintain relevance when they are swallowed up by larger companies with broader markets. Right now, most of the M&A activity in this space is taking place among the vertical insurance software providers themselves. We expect this to continue for the foreseeable future.

    Talking to the Board, Talking to Millennials (and How the Two are Related)

    Matthew Josefowicz

    As insurers increasingly become tech companies that sell insurance, ensuring that the highest levels of management understand that technology is a source of competitive advantage rather than a risk should be on every CIO’s list of priorities for 2016.

    Our annual Quick IT Benchmarks report provides Insurer CIOs with data on the state of IT spending and initiatives at their operational peers. These benchmarks are designed to provide both an opportunity for self-assessment and a tool to help CIOs communicate with senior management at their companies. In a recent report on Technology and Corporate Governance in Insurance (check out the webinar here), we found that few corporate boards have the experience to manage IT in a strategic way, yet that’s precisely what will be required over the next few years as boomers retire and millennials take their place in society.

    This generational change, and the change in mindset it will necessitate in insurers, is the real theme of our recent report on the Internet of Things. While the IoT is not exactly pervasive yet, the larger point is that it’s symptomatic of a change in the expectations consumers, agents, and employees have of technology. Proactive, usability driven, smart – how many insurer’s systems currently measure up to these expectations?

    Related Research

    Policy Admin, Corporate Governance, and Disrupted Distribution

    Matthew Josefowicz

    Policy administration system replacement and evaluation activity is at an all-time high across the industry. Across both life/annuity and property/casualty, policy administration systems vendors are offering suites that include not just traditional policy and rating functions, but billing, claims, portals, documents, and business intelligence capabilities.

    Yesterday, we published our 2016 Novarica Market Navigator on P/C PAS solutions (complementing the LHA edition published last month). This report covers more than 50 vendor solutions, with individual profiles averaging more 10 pages, providing detailed information on the functionality of all of the sub-components on the system. These reports also include single-page executive summaries for each vendor.

    Together, they provide more than 900 pages of research on these important vendors. Jeff Goldberg and Tom Benton will review and discuss this research in a webinar on Wednesday at noon.

    Large strategic projects like policy administration system replacement highlight the importance of corporate governance when it comes to technology strategy. According to our recent research, 89% of insurer CIOs say their board members don’t know the right questions to ask about technology, and end up overfocusing on risks rather than opportunities. Frank Petersmark and I will discuss this on a webinar on March 28.

    Life and retirement board members will have a lot to think about as the new DOL regulations take effect, requiring sellers of retirement products to act as buyer fiduciaries, and completely disrupting distribution in this marketplace. Several large insurers have cited this change as the reason for divesting their distribution arms, and more change is afoot. Rob McIsaac has been discussing this with our annuity and retirement Council members, and shares his thoughts in a new executive brief.

    Google learns selling insurance on commission is hard; industry rejoices prematurely

    Matthew Josefowicz

    According the the WSJ and Insurance Journal, Google will announce today that it is suspending Google Compare for all financial services including insurance.

    It turns out, selling insurance for commissions through comparison sites is much harder than it seems. This was obvious to anyone who read InsWeb’s 10Ks from 15 years ago. Comparing rates doesn’t necessarily lead to buying directly from the site that lets you compare rates. Google seems to have figured out that it can make a lot more money selling advertising to insurers than selling insurance on commission.

    It’s an interesting example of how innovation works in the Valley. They tried something, it didn’t work the way they wanted it to, they learned something, and they shut it down.

    Unfortunately, some industry observers are drawing the wrong lesson. An industry source quoted in Insurance Journal says “U.S. consumers are still enamored with their agents.” But it’s pretty clear that the massive growth of direct personal lines and the current investment in direct commercial lines shows this is at best an overstatement.

    Again, the lesson is not “the old ways are best.” The lesson is “new market dynamics mean new models.” Commissioned sales is less remunerative than selling ads. Google learned their lesson. They’re moving on.

    One start-up’s stumble does not signal an end of disruption

    Matthew Josefowicz

    The insurance industry enjoyed another collective moment of schadenfreude yesterday when Zenefits’ CEO resigned after the company was found to have bungled agent licensing. But here’s something that appeared in no headline:

    Zenefits bungles licensing; insurer customers go back to preferring inefficent processes and bad buyer experiences.

    Just because Zenefits stumbled doesn’t mean they will fall. And even if they do, it doesn’t mean someone else won’t pick up the ball and give customers what they need. Maybe a company from inside the industry. Maybe not. Maybe a combination of both.

    For example, on the same day that Zenefits announced their problems, P2P start-up Lemonade announced relationships with several top-tier reinsurers.

    For those of us old enough to remember the first dot-com boom and its impact on the insurance industry, there’s an interesting difference this time around. Back in the 90′s, the aspiring disrupters were ahead of the market. This time, they’re in sync with the market and ahead of the regulators. Like Uber and disrupters in other industries, they’ll struggle with regulations. But if they create enough customer value, eventually they’ll win those struggles.

    And as the DOL is proving, sometimes regulators can disrupt markets all by themselves in an attempt to be more customer-centric.

    Insurers need to keep these external market shifts top of mind when making IT plans and decisions. External pressure, customer expectations, and innovation and putting new pressure on insurers’ data, digital, and core processing capabilities. IT leaders have a critical role to play in positioning insurers for the future that’s already here.

    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.