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.

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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.

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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.

CIO Series: 7 Steps to Deploy and Define a Multi-Divisional IT Strategy

Mitch Wein

It is very difficult to predict the future, yet IT is being asked to do just that by developing strategic long-term IT plans for their enterprise. Everyday IT is being asked to enable their firms by developing improved partnerships with their customers and agents, transforming internal processes into fully digital mechanisms, replacing core IT systems, all the while ensuring this is done in a secure and cost effective manner.

In order for an IT strategy to be successful though, it needs the help of key control areas like strategic planning, legal, regulatory and finance, as well as operating functions including underwriting, claims, actuarial, product development, marketing, etc. If this isn’t challenging enough, IT leaders in large organizations must be able to create a strategy that works in the context of multiple divisions, entities, and countries.

In order to provide IT executives with guidance on deploying and defining a multi-divisional IT strategy, Novarica offers CIOs the following checklist to consider when initiating a multi-divisional IT strategy project. This list is based on the direct experience of Novarica’s senior team and our CIO Research Council members.

  • Start top down across divisions and within a division, the validate bottom up.
  • Understand divisional business and IT strategy.
  • Determine cultural or local drivers
  • Consider having workshops with key business and IT representatives.
  • Do a SWOT assessment for each division.
  • Determine the senior level IT and business strategy sponsor in each division.
  • Map qualitative and quantitative benefits locally by division and measure success incrementally.

While the steps listed above are meant to be a suggestion and a start of how to go about this activity, ultimately the message is one of consensus and validation. The process used to develop a multi-divisional IT plan must be validated both at the enterprise and divisional levels, and the multi-divisional IT plan owner must take the time to gain consensus at the enterprise, business, and IT level, as well as in each division.

For more information about Novarica’s CIO Best Practices and Checklists, visit: http://novarica.com/cio-checklists/ or contact me at email for a complimentary 30 minute consultation.

What is the Impact of Agile Methodology Use at US Insurers?

Jeff Goldberg

The use of Agile methodology has become increasingly common in the insurance industry over the last decade, delivering a broad range of benefits to insurers including improved quality and delivery time for IT projects.

Start of Agile Methodology Use in Insurance

Start of Agile Methodology Use in Insurance

Novarica’s new Agile at Insurers report, based on a survey of 58 insurer CIOs from the Novarica Insurance Technology Research Council, found that:

  • Midsize insurers have adopted Agile more readily than large insurers. While almost all insurers use Agile to some degree, midsize insurers use it more frequently and adopted it earlier than large insurers.
  • There is little to no downside to adopting Agile for insurers, with positive effects accruing throughout IT, other business units, and even relationships to 3rd parties. Although a handful of insurers found the implementation of Agile problematic or troubling, they are vastly outnumbered by the carriers who have benefitted greatly.
  • Agile is not for everything. Although most midsize insurers use Agile for more than half of their project work, most large insurers use it for less than a quarter of their projects. Some types of projects, like legacy maintenance, are not great candidates for Agile.
  • Agile is not for everyone. While adopting Agile has significant benefits, it requires cultural change on behalf of business leaders to realize these benefits. For organizations in which business leaders are not willing to make these changes, it will be difficult to achieve any real benefits. But the wide adoption of Agile and the wide realization of benefits shows that this group of resistant business leaders is shrinking.

One of the values that Agile brings to an insurer is that it formalizes regular stakeholder review and involvement with technology projects, helping to create transparency and build better direct relationships between IT and other business units. Even insurers who choose not to adopt an Agile approach can learn lessons from the methodology about fostering communication, prioritization, and engagement across the enterprise, helping to treat IT as an ongoing strategy asset.

A free preview of our new Agile at Insurers report is available at: http://novarica.com/agile-at-insurers-2015/ or Novarica clients may contact inquiry@novarica.com to arrange a consultation on this topic.

Special Interest Group for Regional P&C Insurers

Martina Conlon

At Novarica’s recent Special Interest Group for regional P&C insurers, held in Boston on June 25th, the CIOs and other technology executives in attendance discussed many pressing trends in the insurance industry: cyber security, agent facing technology, core systems transformations, the use of analytics and predictive models. Despite differences in culture and architectural environment, the IT professionals in the room shared common issues and challenges, particularly when it came to making the core system business case without ROI, security frameworks for NPI transmission to 3rd parties, balancing system configuration and speed and ease of upgrade, and knowledgeable resources to support implementation and maintenance of the systems.

Not surprisingly, core system transformations was a hot topic of discussion throughout the day. Most of the CIOs at the table had recently participated in one. While the consensus was that these projects are entirely worthwhile, a few important takeaways from their experiences include:

  • Finding the right relationship with the vendor and investing in the relationship.
  • Configuring your system just enough to make it work for your company but not enough to take you off of the upgrade path that your vendor offers.
  • Having a plan and a parallel work stream for sun-setting old mainframes/solutions is an important part of the transformation project.

Top thoughts from the IT executives on the future of insurance included:

  • Most believe that Agents are here to stay. Carriers, even those who are moving into more of a customer-facing and direct model, will still use the agent channel. Recent reports about millennials found that they often still seek the advice and guidance of trusted professionals.
  • For most personal lines, the market will look more and more like Google – consumers will compare products against each other and make decisions on their own. Even for some smaller commercial lines this practice may continue to grow. However, in more sophisticated and complex lines of business, an agent still brings tremendous value.

Lots of disruption ahead in our industry, and the companies that attended this session are busy laying the technical foundation to enable the stability, efficiency, flexibility needed to be successful in the future.

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

Related Reports

Insurance, Big Data, and Game Changing Cost-Bases

Steve Papa
Board Partner
Andreessen Horowitz
GUEST BLOGGER

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.

IT and Other Business Units

Matthew Josefowicz

“Don’t Align with the Business, Be the Business” has long been a mantra for CIOs seeking to ensure that IT is an integral part of their companies’ business strategies.

But too many IT professionals still refer to “The Business” as if it were an alien entity, and as if they were not part of it.

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One of our CIO panelists at the recent Novarica Insurance Technology Research Council Meeting raised this point, and we decided to change our terminology then and there.

Instead of “IT and Business” we will now use the phrase “IT and Other Business Units.”

After all, IT is a business unit like any other. It should think of itself that way, and encourage others to think of it that way as well.

And for anyone who uses legacy terminology? Put a dollar in the jar.

New IT Benchmark Research Highlights Areas of Concern and Provides Insights on Spending and Budgeting Decisions

Matthew Josefowicz

External benchmarking data is an important tool for insurer CIOs in both self-assessment and communication with senior business management. Benchmarking data can provide critical support for spending and budgeting decisions, as well as highlight potential areas of concern.

Novarica’s new Quick IT Benchmarks for Insurers is based on 69 responses from the Novarica Insurance Technology Research Council and highlights key issues to consider when benchmarking. A few notable statistics from this report include:

  • Insurers spend 20% of their IT budgets on maintenance fees for hardware and software they already own, nearly twice as much as they spend on new hardware and software.
  • Insurers spend half their IT budgets on running the business, about 30% on growing the business, and only 20% on transforming the business.
  • About half of large insurers and less than 10% of midsize insurers have IT staffs that are mostly outsourced.
  • The average number of IT staff per enterprise application ranges from about 3 to 6.
Average Budget Breakdowns for Insurers in 2015

Average Budget Breakdowns for Insurers in 2015

In addition to the report’s findings, what makes this report significant is our “Supply and Demand” approach to IT assessment. Rather than focus exclusively on spending levels, our report contextualizes spending levels (Supply) against company size, new project volume, and current state of the organization, technology infrastructure, and product volume and complexity (Demand). This approach allows insurers to look at IT spending in a valuable new way. Benchmarking data is presented and understood within the context of the variation between peer circumstances and business needs.

On Tuesday, April 21st at 2 pm (ET) Matthew Josefowicz, President & CEO, Novarica will host a free webinar to discuss findings from this research. Interested participants should pre-register at: https://attendee.gotowebinar.com/register/120108378

A free summary of this report is available at: http://novarica.com/quick-it-benchmarks-for-insurers-2015/

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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