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

Looking Long Term: News from the 2016 Life Insurance Conference

Tom Benton

This week I attended the 2016 Life Insurance Conference, jointly hosted by LIMRA, LOMA, SOA and ACLI. The focus of the conference was “Looking Long Term”, with sessions ranging from e-delivery for distribution, predictive analytics and other operational-focused areas to transformation, innovation and future capabilities, including a session I presented on “The Forecast is Clear: More Cloud in The Future”.

The opening keynote speakers were Jim Morris, CEO Pacific Life, and Josh Linkner, a best-selling author on innovation. Both presented thoughts on how the life and annuities business is looking to the future.

In Morris’ keynote he discussed how Pacific LIfe has taken a look at their future customers and developed principles for success, including speed/focus, relationships, flexibility and alignment. For example, they have initiatives now for simplifying processes and their products. I noted that absent from the strategy is “use cool new technology” – their focus is on better customer experience.

Linkner gave five steps to what he called “everyday innovation”. Actually he called the five steps “five obsessions of innovators”, which included “Get Curious” and “Get Scrappy”. One of his key points was that to be innovative, an organization needs to encourage creativity, which often leads to disruptive ideas.

My session on cloud computing was well attended – life insurers and vendors alike are interested in the adoption of cloud-based delivery in the industry. After describing where SaaS, IaaS and PaaS solutions fit into the array of options for external delivery of IT services, I presented information from Novarica’s recent survey of digital, mobile and cloud capabilities and their use at insurance carriers. Adoption of SaaS for core systems is just starting at Life carriers, but as our survey showed, many large and some midsize carriers are using SaaS-based non-core solutions. These carriers noted that speed of delivery and the ability to provide unique capabilities were the key drivers for implementing in the cloud, and focused on security, performance and pricing when considering specific vendors. Insurers are generally finding value in cloud deployment, but still face challenges with lack of predictability in pricing and with upgrades. Most notably, few are considering any formal ROI or metrics for these efforts, which is an issue for most IT transformation projects across the industry.

Overall our survey found that cloud and SaaS solution adoption is growing at life insurers, with most large insurers and a growing number of midsize insurers planning to grow, enhance or maintain current capabilities. The forecast is clear – there will be more cloud in the future for life insurers.

If you are interested in getting a copy of my slides and in discussing them further, please contact me at

Update from the CIO Insurance Summit

Rob McIsaac

It is amazing to think that we’re already into the second quarter of 2016. The year is moving fast, and with it the opportunity to see how carriers are responding to the urgency of a “new normal” is coming into clearer focus. I had the good fortune to be able to be the “Master of Ceremonies” for the CIO Insurance Summit in NYC on April 5th, which clearly provided insight into what is on the mind of participant carriers. The pace of activity is notably picking up for many lines of business although, as one of my mentors once shared, it is important to avoid confusing activity with progress. Real progress appears to be somewhat elusive but the quality of the dialogue definitively appears to be elevated. 2016 promises to be a very interesting time.

From our sessions in NYC a number of clear themes emerged that are worth sharing.

Cloud deployments are getting more real even as concerns remain in some quarters. We had a wide ranging discussion related to the opportunities and concerns that seem to concurrently emerge around the use of cloud based options for carrying mission critical workloads. In many organizations it appears that “security” and “compliance related risks” remain at the forefront of an inability to foster faster adoption. As we explored this, I discovered that many companies still haven’t made the connection that efforts to move CRM (SalesForce) and e-mail (Office 365) have already broken through a barrier that appeared daunting to carriers in the very recent past. Having effectively put these installations to the test, carriers with these implementations are increasingly willing to acknowledge that the security models are as good as, if not better than, what they are able to implement for their own environments. As additional mission critical workloads migrate toward this type of deployment (e.g., Workday for HRD and financials), it helps to push organizations to articulate what the real concerns are and how to best address them. The reality is that this is frequently not so much a technology issue as it is one that is linked to emotional, political or organizational issues that need to be addressed before the discussion turns to the selection of a hosting service. For CIOs and their teams getting in front of the issue to do effective education of business partners as well as developing a point of view on which cloud based providers are best positioned to be part of their tool kit (they are not all created equal) can be part of an effort to build momentum and organizational support. Going “full to bright” in a short timeframe may be too much for many organizations to accept, which runs the risk of triggering an enterprise immune system reaction that can be painful.

Data governance remains a significant concern. With a myriad of business units, products, core record keeping systems, and rules of engagement that may conflict from one line of business to another, this remains an area of notable concern – and investment – at carriers we spoke to. Most carriers still lag far behind the banking world in terms of an ability to understand their business from the outside looking in (rather than from the inside looking out). However, there continue to be advances in the idea that there is value in gaining a full view of both customer and producers, and that the investment in both technology and business process to allow for achieving informational insights from internal data can be quite high. A common theme among participants appears to be the desire to construct a 360-degree of customers but that breaking through some of the organizational barriers within companies can be daunting. For carriers considering this challenge, investing time and money to really build a robust data governance facility can be highly valuable. Even some of the compliance related effort for Know Your Customer (KYC) initiatives can also create operational and marketing benefits if used correctly. Once again, however, one of the challenges that can be most difficult to overcome is the “human” one. If line of business executives and managers are focused on optimization at the business unit level, while data analytics efforts around customers are focused at the enterprises level, the inherent conflict can substantially mute any resulting benefits to the organization. Being clear that this is not purely a technology issue is key to achieving desired outcomes. One key reality that becomes clear as companies talk about their desire to use better analysis of data to improve a range of business outcomes: while many talk about Big Data, struggles remain with managing Small Data in quantity.

Definitive plans to address Millennial needs remain elusive although awareness is elevated. We had a lively discussion about this issue, focused on a number of key challenges facing carriers. At a time when 10,000 Baby Boomers retire every day (and concurrently 9,000 children are born to Millennial parents each day) the opportunities associated with getting positioned to take better advantage of market dynamics would appear to be very clear. That said, most carriers acknowledge that they have not yet “cracked the code” on how to best position themselves in terms of both products and service models that will effectively speak to a new generation of potential consumers. We discussed some of the efforts being put forward by companies to better understand these dynamics (e.g., MassMutual’s coffee shops) but a reality is that the answers to changing market needs will require some level of experimentation and testing of hypotheses, an approach which may well be counter-cultural for the very organizations whose long term success is impacted by their ability to start thinking differently. Avoiding a “Kodak Moment” can be a function of how well carriers deal with a range of challenges including the demographics of their agency forces; the average age of an agent in the USA is now 59 with an estimated 25% of today’s agents potentially leaving the business by 2018. Concurrently, a number of carriers noted that their own HR policies and procedures do not appear to be adjusting appropriately to deal with the increased velocity of voluntary turnover associated with the emerging Millennials who will represent 50% of the USA labor force by 2020. Mentoring programs, efforts to create more varied experiences that allow for expanded horizontal movement within organizations, and increased flexibility related to geographic location have proven to be effective “tools of the trade” for some organizations as they’ve moved to adjust to a new reality, but the broader trend remains clear. The emerging generation of employees will have a very different relationship with employers in the foreseeable future than their parents or older siblings did. Implementing procedural changes for everything from employment procedures to knowledge management will be important to operational effectiveness.

The increased urgency at carriers is timely. With cycle times across many facets of the business being reduced, user tolerance for poor experiences being driven down and the competitive threats from many quarters being elevated, the current planning horizon is moving with surprising speed. Welcome to the future!

If you’d like to get a copy of the presentation materials used in NYC, please let me know by sending me a note at

On the Internet, No One Knows You’re a Small Insurer

Tom Benton

Recently, Chuck, Thuy and I attended the IASA Boot Camp in Hilton Head Island, SC. The event was started a few years ago by IASA to provide vendors with education and training on the industry, as well as networking and discussing IASA’s events and opportunities. This year’s sessions focused on learning more about how to better engage insurers and understanding their processes for vendor selection and solution purchase decisions. I had the opportunity to speak to the attendees about the challenges facing small carrier technology leaders.

Smaller insurers, typically with less than 25 IT staff and with net premium in the low $100M’s, face the same challenges as their larger peers: modernizing aging core systems, improving customer experience and finding ways to better leverage analytics. These and other concerns are more difficult for smaller carriers since they have fewer resources to dedicate to solutions. As vendors have matured their products and implementations in recent years, they are looking for ways to better meet the needs of smaller insurers.

The Boot Camp also featured presentations on how carriers make purchasing decisions, and on the second day there were lively roundtable discussions on topics that included RFI (Request for Information) and POC (Proof of Concept) processes, and how to better approach the sales process, including demos. I was part of an interesting session that included consultants that have coordinated RFI and POC processes, including me at Novarica, and vendors who have been through various processes from carrier-led to consultant-led. The key takeaway was that frequent and focused communication plays a key role in the success of the process, in particular when the process is used to prepare both vendor and carrier for a partnering relationship.

If you’re interested in learning more about our work with smaller insurers, please feel free to contact me directly

Leaving Las Vegas … and Rolling into Q2-2016

Rob McIsaac

I had the opportunity to participate in the 2016 iPipeline Conference in Nevada this week. This was very well attended by carriers and solution providers alike and offered a content-filled agenda that sparked good information sharing and networking. As carriers look toward the balance of the year, there certainly are a series of open challenges on the near horizon.

The Novarica presentation focused on what carriers need to do now to get ready for that future. Aging core systems, slow time to market for products, a lack of true innovation in many places, and customer service experiences that are frustrating memories of a bygone era in many other industries are part of the issue. Aging distribution partners (the average age of an agent is now approaching 60) and internal business processes that are so complex and devoid of technical support that the training curve may exceed the expected tenure of incoming Millennial employees are also items looking to be addressed. The resulting discussion was productive and fascinating. If you’d like to see the material we shared, please let me know.

The implications of the proposed DOL Fiduciary Responsibility rules also produced a lively discussion. Carriers recognize they will need to do something to address compliance in this arena, but most carrier plans could best be described as “fluid”. We just released an executive brief on the subject. Time is moving fast!

And, of course, given the forum, there was significant discussion about the whole e-App space and the implication for carriers. This continues to be an area where producer decisions on the platforms to use dictate the plans carriers need to execute, lest they give up shelf space that is critical to market share. This presses hard on IT resources and budgets. Interestingly enough, since no carriers we have talked with anticipate large budget increases to address the DOL mandate, other things will likely need to “give”.

All of which ties back to a theme we think is key for carriers now across many lines of business. 2015 was, in many ways, the year that the future arrived. 2016 is the year carriers have to start accelerating plans for what they plan to do about it. By 2020, for example, Millennials will represent half the US labor force and the youngest Baby Boomer will be 56.

Time to saddle up! Time waits for no company …

Related Reports:

  • DOL Fiduciary Responsibility and Potential Impact on Annuities
  • 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.

    The Future is in Better Products and Service: Thoughts from the Bay Area InsurTech Meetup

    Steven Kaye

    I recently attended a Bay Area InsurTech meetup, sponsored by AXA Lab, with the theme of “Millennials, mobile and the future of Insurance.”

    The session started with an overview of findings from an AXA-Alpha UX survey. Notably, Millennials’ preferred method of interaction with insurers is in-person, and they view insurance as important for safety but not engaging; expensive, but necessary.

    Next, speakers from three startups, moderated by Tuan Pham from Silicon Valley Bank, discussed both the survey findings and a broad range of issues ranging from how to design products to appeal to Millennials to establishing brands.

    Automatic ( offers an adapter that plugs into car’s ODBII ports, plus an app that displays info on your car and your driving habits. They offer everything from vehicle diagnostics to real-time driving feedback to finding where you parked your car to exporting data for T&E and taxes.

    One Financial (really, their investment Bee: reaches out to the unbanked, and has lower customer acquisition costs than banks because of use of kiosks. The company is building presence at farmers’ markets. Vinay Patel, One Financial’s CEO and co-founder, realizes banks can copy what he does, but by that time he’ll have built up a nice business.

    Sure ( offers what they call episodic insurance, which right now means being able to buy flight insurance on-demand from your phone. Wayne Slavin, the CEO and co-founder, discussed the importance of transparency, bundling opportunities, and the potential for outsourcing some function such as claims handling.

    I was surprised at how conservative discussion ran, compared to invocations of disruption and touting of Uber and Zenefits at other locations. For example, there was a discussion on the importance of following regulations. Connected cars, UBI, and driverless vehicles were seen as transformative, but the real impact would not hit for twenty years or so.

    A takeaway was that there was plenty of room for innovation in products and in engaging and serving Millennials, without startups seeking to be insurers in their own right.

    To all Life insurers: I’m a target customer. How do you educate me about your products?

    Thuy Osman

    Even though I work in the insurance industry, I was never interested in buying life insurance. I always thought it was so morbid; like if you thought about death and plan for death, death will come. Of course we all know it comes eventually for everyone. But, is there something to be said about being prepared financially for it? I must admit, the thought never crossed my mind until I became a parent and the responsibility of someone’s life was placed in my hands.

    Being a millennial, the first place I looked for information on life insurance was online. However, what I found on various websites was not useful, or compelling enough to get me to start the application process.

    As a last resort, I called the agent who sold me my auto and home insurance (something I had never done before). In 15 minutes, the agent explained to me the various life insurance products, the cost and coverage of each, and the benefits of each, based on the goals I was trying to achieve with this product. He even did a sample illustration to show me the different options offered by various carriers.

    Although the phone conversation was extremely helpful, I kept wondering: Why didn’t the agent call me to tell me about life insurance? He knows that I just moved, bought a house, and have kids. Why didn’t he try to sell me another product?

    I’m sure there are many more 30 something year olds out there thinking about life insurance to protect their families, but not knowing where to start. If this group is a target market for life carriers, carriers need to think about what they are doing to reach out to this group to educate them on the products they offer, asap.

    COLI / BOLI Special Interest Group Meeting Previews New Research

    Rob McIsaac

    On March 1, Novarica hosted our most recent special interest group meeting for insurance technology senior leaders focused on specific lines of business. The sessions, which provide an opportunity to share recent targeted research, also create an environment for significant networking between carriers, many of which are dealing with strikingly similar issues as they look to address both business and technology issues in very competitive environments. This week’s session was focused on COLI / BOLI, a niche space that is the domain of a small number of carriers offering highly specialized services which support the use of life insurance as an investment vehicle for funding specific types of benefits programs.

    Complex Product Requiring “White Glove” Service

    As became clear immediately in our discussions, these are complex vehicles that can generate notable top line premium volume, coming from a group of specialized and highly demanding producers. There is a notable amount of plan customization, generally with the degree of customization being highly correlated with the size of the individual cases. A number of the participating carriers noted that this is a “white glove” business that is characterized as a concierge oriented set of programs and business processes where relationships between the carrier and producer communities (as well as servicing TPA’s) are particularly critical for success.

    Legacy Systems and Lack of Customer Intimacy Impeding Speed to Market

    We also previewed an upcoming report which will be published in May through our Research Partners Program. From a technology platform perspective, this research highlighted the age of core systems (average PAS platform: 19 years old with a number now at 30+), which is creating both flexibility and speed to market issues.

    While the number of truly new products in this space is sharply lower than it might be for consumer products lines such as personal lines P&C, these carriers face a truly interesting challenge. Since they have little or no direct interaction with plan sponsors, they take their market research queues from top selling producers and TPA’s. That makes modern analytics of generally limited value on the marketing and product development fronts and requires that product development investment decisions be based on relationships and “market feel.” With inherent inflexibility in systems, the recovery time for reading a market wrong can be substantially elongated.

    Different Needs to Support Today’s Channel and Attract Tomorrow’s

    With producers in this space also aging (note the average agent is now 59+) carriers face an interesting challenge. The self-service/digitally-enabled capabilities that may be of limited value to top producers today could quickly become table-stakes for attracting and retaining production capacity in the future. Our discussions generally confirmed the research which said that this is an important near term planning consideration for carriers looking to maintain or extend their position in this space. One of the key items that came from these discussions was the need to start to truly think bi-modally with respect to distributor support. In other words, continuing to cater to the needs of top producing (and more mature) agents may be an important near-term tactical mandate, finding ways to also engage younger and more digitally savvy producers who expect easy information access and mobility as the basis for considering the placement of business with a carrier may become a critical strategic capability in a surprisingly short timeframe. Some notable examples are now emerging of life carriers starting to mimic the experience of banking IT organizations which have them developing “mobile applications first.”

    Security Even MORE Important Given Customer Profile

    Another area of considerable concern for carriers is security. While security is generally a “hot topic” for carriers across all lines of business, and other research done by Novarica has highlighted this blossoming as a Board level consideration, the issue is magnified in this space. Particularly in the case of BOLI, with banks as customers, the security gauntlet is elevated given that banks are both particularly tuned into risks (given the nature and frequency of their transactions) as well as the oversight of their own industry regulators. These security concern elements lead to a direct impact on carriers looking to support BOLI business for these institutions.

    This led to another fascinating discussion about handling suppliers that carriers may use for key functionality who do not, themselves, pass the security tests required by BOLI plan sponsors. We explore a range of remediation options that may exist for carriers concerned about both viability and liability.

    More Special Interest Group Discussions at Novarica Council Annual Meeting

    These sessions provide for a terrific exchange of information, both in terms of new research, and practical experiences as shared directly by carriers. We plan additional Special Interest Group sessions in the near future, with our Annual Research Council Meeting in Providence, RI on April 20-21 providing an opportunity for us to explore Individual Life, Group Life, Annuities, Workers Compensation, Personal Lines P&C and Commercial Lines P&C in more detail. In addition, we are planning a stand-alone session focused on Disability Insurance products that will be scheduled in Q3-2016.

    In many ways, 2015 was the year that the future arrived. For carriers, 2016 is the beginning of what carriers need to do in order to respond effectively to a brave, new, transparent world.

    Technology’s Changing Role for Group and Voluntary Benefits

    Rob McIsaac

    Today’s group insurance arena is a hyper-competitive sector, with technology playing an ever larger role in attracting, retaining, and profitably serving clients. Technology is also playing a pivotal role in allowing carriers to make the significant transition from the traditional group benefits model to one that requires the ability to concurrently support both group and voluntary benefits, allowing them to react to both an evolving regulatory environment and to fundamental changes in the demographics of the current labor force. To address these key considerations, carriers are moving to seek out more modern systems that can better support rapid product development and adapt to changes in products and pricing. Modern systems are also key to attracting and retaining top producer talent, given the need to provide increased transparency around key business processes as well as more real time access to self-service functionality.

    Carriers in the group and voluntary benefits space often use technology platforms that are chronologically newer than the core systems in the individual insurance market. This actually masks issues with aging technologies, however, since many current group solutions tend to have their origins in legacy client/server and web-based systems. Ironically, these systems can actually have greater inherent risks than much older mainframe-based platforms, given that the technologies used to develop them had substantially shorter useful lives, which has a very direct connection with challenges in finding the talent to support them.

    Many carriers are now looking to investment in technology replacement plans to solve this problem. Rather than pursuing wholesale conversion of monolithic existing platforms, carriers increasingly see replacements of individual legacy system components as a less-risky path forward. This creates an environment which allows IT organizations supporting these lines of business to build organizational “muscle” for these longer term transformation efforts by starting with key components outside of the core PAS platform. Underwriting, Billing and Claims are three examples of logical starting points on a measured multi-year journey to position carriers for long term success.

    For carriers in the segment, there’s a growing competitive urgency for making key systems investments. While there is a very logical transition that carriers can make from group to voluntary benefit offerings, this is not a domain that is preserved for group life carriers alone. Facing changes in their own traditional markers, both individual life and group health carriers increasingly see the voluntary benefits space as offering an attractive component to their own growth strategies.

    In our new Business & Technology Trends report, we explore these issues in more detail and offer examples of how group carriers are positioning their technology investments to support future growth plans.

    Related Reports:

  • Business and Technology Trends: Group Life/Annuity/Voluntary Benefits