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

Matthew Josefowicz

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

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

YearTheFutureArrived

 

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

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

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.

TheBusinessJar

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.

Top Stories in Life/Annuity for April 2015

Steven Kaye

We’ve just published our Novarica Industry Intelligence Brief for Life and Annuity for April 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:

  • A New York State Representative has proposed employer-employee funded universal retirement accounts. Full Story
  • Defined contribution plan providers are doing more to educate employees about roll-in options. Full Story.
  • Traditional asset management firms are launching their own takes on the “robo-advisor.” Full Story.
  • Lincoln Financial Group and MetLife are using third-party data to speed up the application process for prospects. Full Story.
  • John Hancock is incorporating data from FitBit activity tracking devices into its discount and rewards program for life insurance policyholders. Full Story.

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

Previous Novarica Industry Intelligence Briefs for Life/Annuity

Top Stories in Property/Casualty for April 2015

Steven Kaye

We’ve just published our Novarica Industry Intelligence Brief for Property and Casualty for April 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:

  • Nationwide is automating estimation of hail damage to vehicles. Full Story.
  • Archer-Daniels-Midland Company’s crop insurance unit is using drones to identify and assess crop damage. Full Story.
  • Dutch researchers are building flood probability maps mining data from Twitter. Full Story.
  • Progressive is raising rates on riskier drivers participating in its Snapshot program, to help pay for deeper discounts for better ones. Full Story.
  • Progressive has also added a prototyping unit to its innovation groups. Full Story.
  • Lincoln Financial Group and MetLife are using third-party data to speed up the application process for prospects. Full Story.
  • IBM is leveraging data from connected vehicles, mobile devices, and networked appliances to offer cloud-based analytics services and tools. Full Story.
  • Hartford Steam Boiler’s internal venture capital group has invested in a mobile platform leveraging the industrial Internet of Things for monitoring equipment and other functionality. Full Story.
  • XL Group has joined the ranks of carriers with venture capital groups with its XL Innovate unit. Full Story.
  • Mitchell International presents future scenarios for the use of smartglasses in claims adjusting. Full Story.
  • The Economist Intelligence Unit published a report on insurers’ adoption of technologies including analytics, cloud, mobile, and social media. Full Story.

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

Previous Novarica Industry Intelligence Briefs for Property and Casualty

  • March 2015
  • February 2015
  • January 2015
  • 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.

    Claims
    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: http://novarica.com/business-and-technology-trends-individual-life/

    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: https://attendee.gotowebinar.com/register/120109071

    Related Reports

    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/

    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.

    Related Research:

    New Webinars Announced for April

    Business & Technology Trends: Specialty Lines
    Thursday, April 16th from 2 – 2:30 p.m. (ET)
    Presenter: Mitch Wein, VP of Research & Technology
    Pre-registration required

    The specialty lines marketplace continues to be extremely competitive and requires a significant amount of operational flexibility to meet the needs of the insurer and the insured. Across the industry, insurers continue to make investments across the Novarica Insurance Core Systems Map to drive growth and improve operational efficiencies. On Thursday, April 16th Mitch Wein will provide in-depth analysis on current business and technology issues in specialty lines, data about the marketplace, and examples on how specialty insurers are leveraging technology to help attract, retain and profitably serve clients.

    IT Benchmarking for Insurers
    Tuesday, April 21st from 2 – 2:30 p.m. (ET)
    Presenter: Matthew Josefowicz, President & CEO
    Pre-registration required

    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 and can highlight potential areas of concern. On Tuesday, April 21st Matthew Josefowicz will present findings from the Novarica Insurance Technology Research Council Quick Benchmarking Poll, which takes a “Supply and Demand” approach to IT, allowing organizations to gain a better understanding of the significance of peer data.

    Related Blog Posts

  • 5 Technology Initiatives for Specialty Lines Insurers in 2015
  • Commercial/Specialty Underwriting Automation: Cui Bono?
  • Related Reports

  • Business and Technology Trends: Specialty Lines
  • Quick IT Benchmarks for Insurers 2015
  • Research Update: Distribution and Compensation Management

    Mitch Wein

    Insurance distribution is changing rapidly – not just because of new market entrants, but also because of rapid evolutions and changing needs in the hyper-competitive agent/broker marketplace. Many insurers find that their distribution and compensation management (DCM) systems are not up to the job of keeping pace with these changes.

    Recently Novarica released two new DCM reports designed to get insurers up to speed on market trends and vendors in this key area:

  • Novarica Market Navigator: US Property/Casualty and Life/Health/Annuity Distribution/Compensation Management Systems is 85 pages long and includes similar detailed profiles of solutions from Aurea Insurance Solutions, CallidusCloud, CSC, FAST, IBM, Majesco, Oracle, Outline Systems, SAP, StoneRiver, Vertafore, and VUE Software. The report is available to Novarica clients and for purchase online at: http://novarica.com/nmn_dist15q1/
  • Novarica Market Navigator Distribution/Compensation Management Systems 2015

    Novarica Distribution and Compensation Management Systems 2015

  • Novarica Business & Technology Trends: Distribution and Compensation Management provides an overview of DCM business and technology issues, data about the marketplace and 16 examples of recent technology investments in DCM. The report is available to Novarica clients and for purchase online at: http://novarica.com/business-and-technology-trends-distribution-and-compensation-management/
  • Insurer IT Plans for Distribution and Compensation Management

    Novarica 2015 Insurer IT Plans for Distribution and Compensation Management

    DCM, although not as competitive as other categories within the insurance market, faces many of the same pressures and transitions. These reports are a great first step to help your organization move forward with its DCM initiatives. To set up a complimentary 30 minute consultation, contact us.

    5 Technology Initiatives for Specialty Lines Insurers in 2015

    Mitch Wein

    Yesterday Novarica published its latest report in its Business & Technology Trends Series focusing on Specialty Lines insurers. This report is based on the expertise of Novarica’s staff, conversations with members of the Novarica Insurance Technology Research Council and a review of secondary published sources.

    Below I just wanted to quickly highlight 5 key technology initiatives our research uncovered:

    1. New technologies such as IoT will begin to impact specialty lines carriers. Advances in sensor technologies have led to the embedding of sensors and networking of those sensors into a range of applications, with some insurers taking advantage of the resulting availability of real-time data.
    2. Billing efforts focus on handling both retail and wholesaler billing needs. Account billing is becoming a higher priority as part of a shift to a more customer-centric approach. Specialty carriers are building more support for large complex accounts.
    3. Carriers are pursuing long-term data strategies. They are starting with data quality initiatives and focusing on implementing data warehouses, operational data stores, and appropriate data marts. Carriers are prioritizing reporting tools to allow the business to run ad hoc reports and obtain insights. Predictive modeling has emerged as a key driver to better claims and underwriting outcomes.
    4. Improved underwriting and product development flexibility are key considerations. Carriers are continuing to upgrade to highly configurable policy administration systems to improve underwriting and enable product development flexibility to speed entry to profitable niches. Preferred solutions allow the definition of a variety of data elements with product configurators, simple rules and tools for launching new rating algorithms, and the ability for the business to make their own modifications.
    5. Specialty carriers are extending functionality to agents and policyholders in their agent and customer portal initiatives in order to drive revenue by improving ease of doing business and to generate operational efficiencies. Real-time capabilities such as policy inquiry, billing inquiry, and claim inquiry are typical features. Specialty agents would like faster risk acceptance decisions.

    In many lines of business, rates will continue to decrease, putting more pressure on insurers find efficiencies through business intelligence initiatives, policy administration & billing systems replacement and rating engines. For more information about this report, or to set up a 30 minute consultation, feel free to contact me.

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