Top Stories in Life/Annuity for July 2015

Steven Kaye

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

  • HP Fortify found all of the ten major smartwatch brands it tested had significant security vulnerabilities. Full Story.
  • Recent deals including ACE’s purchase of Chubb, XL’s merger with Catlin, and on the distribution side Willis’ merger with Towers Watson point to a change in the kinds of mergers and acquisitions happening in the insurance industry. Full Story*.(*Subscription Required)
  • The federal government announced several retirement initiatives, including DOL guidance on mandatory state retirement plans and sponsors’ fiduciary obligations when including annuities in retirement plans, and private-sector partnerships to improve Social Security Administration benefit projection tools. Full Story.
  • FeeX analyzes fees from users’ prior 401(k)s and advises them as to whether a rollover makes sense (and if so, if an IRA or the new 401(k) is the best choice).
    Full Story
  • A Silicon Valley startup is partnering with Capital BlueCross to offer fingerprick blood tests at retail outlets. Full Story.

For Novarica commentary, clients can download the Brief at

Previous Novarica Industry Intelligence Briefs for Life/Annuity

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: or Novarica clients may contact to arrange a consultation on this topic.

How Claims Technology is Helping Insurers to Differentiate Themselves in a Competitive Marketplace

Steven Kaye

Our annual study of insurer CIO budgets and projects showed that more than 40% of insurers are replacing or significantly enhancing their claims systems. Our new report on Business and Technology Trends in Claims, looks at issues and initiatives across the industry.

2015 Claims Replacement in Insurance

2015 Claims Replacement in Insurance

Claims has long been a key area of competitive differentiation for property/casualty insurers, and increasingly for life insurers as well, driven by the need to improve service levels, provide better analytical insights, and ensure regulatory compliance. While replacing core claims systems is the biggest focus across the industry, technology is driving changes across the claims value chain, from first notice of loss (FNOL) using mobile channels to skills-based routing of claims based on complexity to issuing real-time payments. Learn more in our new report, or contact us at to arrange a consultation on this topic.

Related Reports

9 Advanced Capabilities Life/Annuity/Benefits Insurers Plan to Implement in 2015

Matthew Josefowicz

With the rapid changes in technology-enabled capabilities, just keeping tabs on what has become “table stakes” or the “new normal” for Life/Annuity/Benefits insurers has become a full-time job.

Last month Novarica released its Benchmarking the “New Normal”: 50 Advanced Capabilities for Life/Annuity/Benefits Insurers” report, which includes a list of 50 advanced capabilities across nine functional and strategic areas, survey data from 20 CIOs, and a new benchmarking tool designed to help insurers track their own progress in deploying advanced capabilities.

Deployment of these 50 advanced capabilities is uneven today, but some of the capabilities that insurers are focusing on include:

  • Product Development: Analytics-driven product design
  • Marketing: Responsive social media engagement with distributors and/or policyholders
  • Distribution: Quick quote or appetite indication with minimal data entry
  • Underwriting: Predictive scoring based on models leveraging internal and third-party data
  • Customer Engagement: Mobile app to view relationship details, balances, key documents, etc.
  • Billing: Analytics to prevent premium leakage
  • Claims: Triaged straight-through-processing
  • Analytics: Use of Big Data tools to mine enterprise data effectively (Hadoop, NoSQL, etc)
  • Collaboration and Innovation: Enterprise collaboration that’s as easy to use as consumer-grade technology like GoogleDocs or Dropbox

One thing most of these advanced capabilities have in common is that they are being driven by a combination of five elements: analytics, data, digital channels, modern applications, and innovative business practices.

Five Elements of Advanced Capabilities in Insurance

Five Elements of Advanced Capabilities in Insurance

Creating an exhaustive list of all the advanced technologically-enabled capabilities that could be delivered by insurer CIOs would be exhausting indeed. For the purpose of this report and the Novarica New Normal Benchmark tool, we have selected 50 capabilities spread across nine different areas that are closely related to the core business of insurance: product development, marketing, distribution, underwriting, customer service, billing, claims, analytics, and collaboration and innovation. The 50 capabilities on the list were chosen by Novarica’s senior team of industry experts in active conversation with dozens of members of our Research Council (

While the list is admittedly subjective, we believe this list provides a good sampling of the most important advanced technologies in play for insurers today. In our view, these 50 capabilities are becoming the “new normal” for insurers.

For more information about this report, download a free preview or send us an email to set up a complimentary 30 minute consultation.

Related Report:

Cyber Risk: Insurers’ Challenge Outside-In and Inside-Out

Mitch Wein

The NAIC Executive (EX) Committee recently established the Cybersecurity (EX) Task Force to act as a focus point for cybersecurity insurance regulatory activities. The task force held its first meeting on March 29, 2015 in Phoenix, Arizona. Just before this meeting, the Task Force released its draft Principles for Effective Cybersecurity Insurance Regulatory Guidance (“Draft Principles”).

The message is clear, there will be regulatory pressure to do something around cybersecurity. The National Institute of Standards and Technology framework(NIST) will act as the basis of the eventual recommendations, with the understanding that what is expected will be practical, consistent, flexible and scalable. Additional data on the sale of cyber insurance products will be used to help regulators with financial oversight. As we reported in our Executive Brief on Cyber Risk trends in August 2014, insurers have been thinking about how to price and underwrite these risks for some time.

  • In March 2014, AIG introduced a new product called CyberEdgePC that covered property damage and bodily injury.
  • Insurance Journal reported in an article a year ago that TSC Advantage has also enhanced its cyber risk assessment Threat Vector Manager (TVM) technology for commercial organizations, critical infrastructure, and the public sector. That product offered customers security controls in areas including insider threat, physical security, mobility, data security, internal business operations, and external business operations.

Cyber risk coverage that has emerged in the last few years has included business interruption, rewards for capturing criminals, crisis management, cyber extortion of the network, data breach and complying with regulations, identity theft, and liability from defense costs, settlements, judgements and punitive damages.

How does a cyber-liability policy get priced? Not easily. As NAIC correctly points out, insurers will be interested in risk-management and disaster recovery protection of a firms network, data, digital assets, physical assets, and intellectual property.

Insider risk from employees and third parties in the supply chain will need to be evaluated as well. The Target store breach, which stole credit card data, was achieved through malware being installed on the security and payments system though a trusted third party supporting store heating and air conditioning equipment. The breach cost 150MM and Target’s reputation, not to mention the CEO and CIO’s jobs. Insurers will need to be very interested in employee access to systems and data access.

Of course, traditional protection like antivirus and anti-malware software, the frequency of updates and the performance of firewalls will be considered as well. The problem is complex, and the risk unknown. The risk continues to increase as the insurance business becomes more digital and smart devices proliferate, creating new attack vectors.

As a result, the cost is high for the insurance, and the insurers are limiting how much they will cover. A 2014 Crawford & Company study “The Future of Cyber Insurance” revealed that very few carriers are willing and able to indemnify over $50 million with the majority writing a maximum limit of $10 million or less. Today, the market to underwrite cyber risk is dominated by American International Group Inc., ACE Ltd., Chubb Corp., Zurich Insurance Co. Ltd., and Beazley Group Ltd. As a growing number of firms require their vendors to purchase cyber coverage, the loss experience will become more extensive allowing for more accurate pricing of risk. This lack of experience is complicated by a shortage of people with the skills needed to assess the risk. As a result, cyber loss control services are starting to emerge as well. Marsh just launched Cyber Monitor and Cyber view in partnership with Cyence, a cyber-security analytics service provider, to look at threat indicators and security analytics.

NAIC’s task force will be responding to this by looking at the protection of information housed in insurance departments and the NAIC; the protection of insurer-held consumer data; and collecting information on cyber-liability issued policies. Inevitably, regulation will emerge in the US as time goes by, both at a Federal and State level. Regulatory enforced reviews of carriers providing cybersecurity risk management and insurance coverage has begun to occur. Federal and state insurance regulators will also be looking to make a positive impact on this emerging insurance market.

The challenge is this: how does the carrier protect itself from cyber risk and assess how other firms the carrier insures protect themselves? Only time will tell how the challenge is met.

2015 Novarica Impact Awards Summit

Matthew Josefowicz

Novarica’s Impact Awards are the only pure peer-recognition honor for insurer CIOs. Each year, a panel of CIO members (no consultants, no vendors, no analysts) select from dozens of case studies submitted by their peers that highlight IT initiatives that had a real business impact.

This year’s Impact Awards Summit taking place August 13th at the Westin Grand Central in NYC will give attendees an opportunity to hear directly from most of the nominees through a series of panel discussions. Panels and panelists include:

Practices and Quick Hit Projects

  • Ameritas Project Execution Framework, Josh Everett, VP IT
  • Trustmark Testing Center of Excellence, Eshwar Pastapur, VP IT
  • Philadelphia Insurance Legal Bill Review, Joanne Curry, Business Relationship Manager

Expansion Projects

  • Citizens Property Online Marketplace, Steve Bitar, Chief of Consumer and Agent Services
  • CNA Enhanced Agent Portal, Brooke Groulx, Director of Automation Strategy
  • Tokio Marine North America Analytics and Agent Performance Management, Brent Cavan, Manager, Predictive Analytics

Transformation Projects

  • AFBA/5Star Life List Bill Solution, Birye Abebe, Director of IT
  • HCC New Product Line and Portal, Partha Srinivasa, CIO
  • MetLife Unified Global Trading Platform, Richard Leechchow, Investments IT

The nominated case studies above appear with more than 20 others in the fifth annual Novarica Best Practices Case Study Compendium, which is available at:

Past nominees and winners have included AIG, American Safety, Allstate Financial, Amica, Assurant, Brickstreet Mutual, Capitol, Cincinnati Financial, Encompass Insurance, Erie Insurance, Foresters, Great American, ICW, Legal & General of America, Oregon Mutual, Patriot National, Penn Mutual, PURE Insurance, RLI Insurance, Tokio Marine North America, XL Group, Zurich North America, and others.

I hope to see you in NYC! For more information about this unique learning and networking opportunity visit: or contact

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.

An Honest Look at the State of Big Data in Insurance

Jeff Goldberg

With the recent publication of Novarica’s Analytics and Big Data at Insurers report, it’s time to take an honest look at the state of big data in the industry. One of the most telling–and disappointing–charts showed that of the insurers working with big data, seventy percent were using traditional computing, storage, database, and analytics technology, meaning they’re working with SQL databases in their existing environment. Of all the other technology options (Hadoop, NoSQL, columnar databases, etc) only a small percentage of insurers use them and almost no insurer uses them extensively.


Compare that to the percentage of insurers who say they are using big data sources, which is significantly higher than the percentage of insurers using big data technology. This includes third-party consumer or business data, geospatial data, weather data at the top the list, with audio/video data, telematics, social-media content, and internet clickstreams lagging behind. But what’s really happening when those big data sources are loaded into a traditional structured database? Most likely, a few key elements are pulled from the data and the rest is ignored, allowing the so-called big data to be treated like “small data,” processed along with all the policy, claims, and customer data already being stored. For example, while a weather feed might be coming with minute-by-minute updates, most insurers are probably just pulling region condition along with daily temperature highs and lows, filtering it down to a subset that stores easily. While I’m not saying such reduced data doesn’t augment an insurer’s understanding of incoming claims (for example), it’s far from what we think about when we imagine how a big data analysis of the weather might impact our understanding of insurance claim patterns.

There’s no denying that there are a few exciting use cases of insurers truly leveraging big data, but it’s still extremely limited. The industry as a whole is getting much better at data analysis and predictive modeling in general, where the business benefits are very clear. But the use cases for true big data analysis are still ambiguous at best. Part of the allure of big data is that insurers will be able to discover new trends and new risk patterns when those sources are fully leveraged, but “new discoveries” is another way of saying “we’re not yet sure what those discoveries will be.” And for many insurers, that’s not a compelling enough rationale for investing in an unfamiliar area.

And that investment is the second problem. The biggest insurers may have the budget to hire and train IT staff to work on building out a Hadoop cluster or set up several MongoDB servers, but small to mid-size insurers are already stretched to their limits. Even insurers who dedicate a portion of IT budgets to innovation and exploration are focusing on more reliable areas.

What this means is that insurers–no matter how many surveys show they anticipate its adoption–will likely not see a significant increase in big data tech. However, that doesn’t mean the industry will let big data pass it by. Instead, much of the technology innovation around big data will need to come from the vendor community.

We’re already seeing a growing number of third-party vendors that provide tools and tech to do better analysis and get deeper understanding from big data, a second-generation of big data startups. Most of these vendors, however, expect that the insurer will already have a Hadoop cluster or big data servers in place, and (as we know) that’s exceedingly rare. Instead, vendors need to start thinking about offering insurers a “big data in a box” approach. This could means SaaS options that host big data in the cloud, appliances that offer both the analysis and the infrastructure, or even just a mix of professional services and software sales to build and manage the insurer’s big data environment on which the licensed software will run.

We’ll also begin to see insurance core system vendors begin to incorporate these technologies into their own offerings. The same thing has happened for traditional data analytics, with many top policy admin vendors acquiring or integrating with business intelligence and analysis tools. Eventually they’ll take a similar approach to big data.

And finally, some third-party vendors will move the entire big data process outside of the insurers entirely, instead selling them access to the results of the analysis. We’re already seeing vendors like Verisk and LexisNexis utilize their cross-industry databases to take on more and more of the task of risk and pricing assessment. Lookups like driver ratings, property risk, and experience-based underwriting scores will become as common as credit checks and vehicle history. These third-party players will be in a better position to gather and augment their existing business with big data sources, leveraging industry-wide information and not just a single book of business. This mean that smaller insurers can skip building out their own big data approach and instead get the benefits without the technology investment, and they can compete against bigger players even if their own store of data is relatively limited.

So while the numbers in Novarica’s latest survey may look low and the year-on-year trend may show slow growth, that doesn’t mean big data won’t transform the insurance industry. It just means that transformative change will come from many different directions.

On Tuesday, July 14th at 2 pm I’ll be hosting a Business Intelligence and Analytics webinar, which will review the recent report, go into more detail on big data, and cover how insurance is being transformed by the growth in available data and information both inside and outside the enterprise. For more information, visit:

Related Report

Top Stories Life/Annuity

Steven Kaye

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

  • ACI Specialty Benefits’ MacroLife uses gamification to encourage employee benefit interactions. Full Story.
  • Current financial planning models may not account sufficiently for unpredictability in portfolio returns and in investor spending due to life
    events. Full Story.
  • VSP is experimenting with embedding wearables in glass frames to track various health data. Full Story.
  • ADP has cut off its ADP RUN payroll clients from sharing data with Zenefits, claiming Zenefits has been pulling confidential data in an insecure fashion. ADP also filed a defamation lawsuit against Zenefits, claiming Zenefits was conducting a malicious PR campaign against the payroll services provider.Full Story here and here.
  • CB Insights reports close to a 500% increase in carriers’ investment in tech startups in 2014 globally. Full Story.
  • Aflac can now receive, process, and pay claims within one business day.Full Story.

For Novarica commentary, clients can download the Brief at

Top Stories Property/Casualty

Steven Kaye

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

  • Allstate has filed a patent for a driver behavior database that might include driver health information. The carrier might sell the information to third parties, with policyholder permission.Full Story.
  • The FAA has allowed the Property Drone Consortium to operate drones on behalf of customers. Full Story.
  • American Family and Liberty Mutual are both offering insurance discounts to policyholders who agree to share data from their Nest Protect smoke detectors.Full Story
  • Allstate has a portable hail damage evaluation system that vehicles can be driven into, leveraging analytics software and cameras.
    Full Story
  • BOLT Solutions Inc. introduced Bolt Google Connect to help carriers participate in Google Compare.Full Story.
  • Marsh has published a report on insuring drones, addressing insurance capacity and regulations affecting the market. Full Story.
  • Munich Re issued a report on potential impacts of autonomous vehicles on commercial and personal insurers.Full Story
  • CB Insights reports close to a 500% increase in carriers’ investment in tech startups in 2014 globally.Full Story.
  • The International Association of Claims Professionals at a regional conference noted 3-D laser scanning and printing as an increasingly useful
    technology for recreating environments to identify risks and to better understand accidents. Full Story.
  • The 2016 Chevy Malibu enables parents to get in-vehicle reports on their teenagers’ driving, including distance drive, number of braking events,
    and speed, via the vehicle infotainment system. Full Story.
  • Erie Insurance has been testing Google Glass for use in claims adjusting. Full Story.
  • One forensic investigation firm is using robots for property investigations indoors, in the dark, or otherwise not suited for drones currently. Full Story.

For Novarica commentary, clients can download the Brief at: