When it Comes to Driving, the Future is Not Now

Chuck Ruzicka

Intel CEO Brian Krzanich spoke at the Los Angeles car show this week about a new $250 million investment Intel Capital is making in autonomous-car software, touting the company’s ability to build processing systems capable of processing the vast amounts of data self-driving cars are expected to produce and consume. Even more more futuristic news came this week in the form of augmented-reality windshields, inspired by sci-fi movies, being developed at several car companies to help make people better drivers.

It’s important to keep in mind, though, that the same risks that auto insurance carriers have always had to take into consideration are still around. If anything, they may even be amplified by today’s technology. This week, the National Highway Traffic Safety Administration reported the largest annual percentage increase in highway fatalities in fifty years. The chief culprit, according to the article, is distracted driving due to smartphone usage. The future of driving is rapidly approaching, and is in some ways already here. But it’s important for carriers not to let themselves get so wrapped up in what’s coming in the next decade that they lose sight of what’s happening right in front of them.

What if Startups Worked *With* Governments?

Steven Kaye

Nexar Limited announced it would be using its app users’ smartphones for vehicle-to-vehicle communications, warning other vehicles of road obstacles or sudden stops. Smartphone accelerometers and gyroscopes are sensitive enough to register potholes or other road damage. Nexar monetizes data, offering it to both insurers and to municipal governments. It also provides data to autonomous vehicle manufacturers for testing and training purposes.

Autonomous vehicles face many challenges, including decaying U.S. transportation infrastructure as noted in this Reuters article from March. Maybe startups can do better working with municipal governments, rather than pursuing regulatory hacks.

Hartford Steam Boiler Partners with L&T Infotech with Potential IoT Implications

Tom Benton

As more IoT devices go online, the challenge for insurers is how to manage data from various devices and leverage that data to assess risk. In Novarica’s report on “Internet of Things, Wearables, and Insurance Customer Experience” from April 2016, we noted that one of the main challenges is a lack of standards for interoperability and communication between devices and the systems that collect and analyze their data.

This week, Hartford Steam Boiler (HSB), a subsidiary of Munich Re specializing in equipment breakdown insurance, announced a partnership with L&T Infotech (LTI), a global IT services firm with expertise in automation of device data collection through their automation platform, MOSAIC Automation. While the deal focuses on broader system integration and management, there is potential for LTI to support the wide variety of devices and systems that HSB monitors for clients and provide standardization across HSB’s process, platform and application architecture. With LTI’s platform providing data and analytics, HSB can focus on expanding coverage to equipment with a broader set of supported sensors and on better use of the data being collected to reduce costs and enable new capabilities. HSB has shown interest in these capabilities before, investing in Waygum’s mobile app for interacting with IoT sensors last year.

While much attention is put on IoT devices for auto and smart home application, use of IoT devices and analytics for commercial applications has great potential. Most manufacturing plants, commercial office buildings and even solar farms have large numbers of sensors and systems for equipment control and monitoring, but the information is often trapped in proprietary systems with customized interfaces. LTI’s MOSAIC and platforms like it promise to consolidate the data across various interoperability standards and provide analytics that insurers can apply to risk analysis and claims. Insurers may also explore the possibility of providing value-added services to clients to predict equipment failure and have backup solutions in place to reduce downtime. IoT analytic capabilities could enable insurers to evolve from claims analysis to claims prevention, which can benefit clients by reducing the cost of equipment failure.

Question Assumptions

Matthew Josefowicz

Sometimes, the received wisdom is just wrong. Even if there is a ton of data to work with, the key assumptions that drive the analysis are not valid.

Sometimes, senior practitioners can be blinded by their own historical experience, and can miss the importance of signals emanating from a rapidly changing market.

Of course, electoral politics moves faster and more erratically than the insurance industry does. But last week’s election provided a stark reminder that the unimaginable can become real very quickly when a major market participant stops playing by the rules that everyone “knows” are true, and when an underserved market segment suddenly has a new option that they never had before.

Insurers should take care that they are not blinded by their own histories as they seek to understand the demands of tomorrow’s customers and the impact of disruptive forces.

Workers’ Compensation Special Interest Group Members Find Agreement on Cybersecurity, Core Systems Replacements

Jeff Goldberg

Four members of the Novarica Research Council special interest group for Workers’ Compensation met in mid-November, at a meeting hosted by Builders Mutual in North Carolina. A summary of key topics of discussion is below:

Cybersecurity There was general consensus that the best overall security strategy was containment and damage control. Insurers understand that attacks are inevitable and even the best systems won’t stop every incursion, but are taking steps (such as working in virtualized environments) to prevent potential breaches and quickly detect and neutralize them if and when they do occur. Common tools and services included LogRhythm, Dell Secure Works, IDS, MX Logic, Webroot, NovaFour, Open DNS, and Websense. Training is an equally important element, as unaware employees may open infected emails, documents, and flash drives.

Core Systems Replacements Participants agreed that it’s important for carriers to realize that core system replacement projects aren’t IT-only initiatives, in execution or in implementation. One carrier was able to bring up 13 states in two years by sequestering SMEs from IT and business units as an integration team, going so far as to locate their common workspace away from other employees. Not only was this approach effective, it eased adoption and training, as each BU had its own ambassador to explain the decisions that led to end-state functions and processes.

As that carrier’s CIO pointed out, vendor engagement is also a crucial success factor for CSR projects. While this CIO recommended that insurers should lean on vendor expertise, it’s also important to ask vendors to push back. Vendors are typically willing to implement anything the insurer requests, but a good vendor partner will feel comfortable saying “no” to unnecessary configurations. Another CIO agreed that OOB functionality is often best preserved, but for truly unique products, customization may be necessary. And clarity of requirements is crucial for effective projects, something carriers should plan sufficient time to execute well.

Predictive Analytics Carriers are using a small assortment of services and systems to develop and launch predictive analytics, including Deloitte, SAS, Valen, and EagleEye (now Guidewire Predictive Analytics). For this group, the activity is largely focused on renewal scoring, and carriers are only beginning to pivot to new applications like premium audits and new business. Surveys show that Workers’ Compensation carriers are more likely than other insurers to apply predictive analytics towards claims severity and fraud detection, though this trend was not reflected in the meeting group.

Carriers made the critical distinction between building a PA model and executing it. Regarding the former, carriers underscored the need to track and audit predictive model performance over time, confirming that a model has made a correct predictions and allowing them to adjust and “train” the model to make more accurate predictions in the future. Especially for smaller insurers who have strong community ties, there is a reluctance to leverage predictive models if it means eliminating human workforce. It’s important in those cases to tie any predictive model-based automation directly to growth goals rather than efficiency/cost-cutting goals.

Millennials Carriers’ most common frustration with Millennials came from the hiring process, which highlighted larger divides between how workers find jobs and the sometimes formulaic HR job descriptions and hiring processes. CIOs considered how best to match an employee’s particular talents with the correct level in a corporate hierarchy and salary structure, which often don’t support flexing job responsibilities to suit employees. As an example, even if an internal role is classified as “IT Specialist 1,” the externally facing job listing needs to have a more compelling title and description that is tailored to the desired applicant.

But carriers also grappled with communicating internal attitudes of company loyalty and upward mobility to a generation which largely believes companies won’t be loyal to employees. One CIO mentioned that recruitment at local colleges had been fruitful, but it can be a long branding effort.

One carrier highlighted their positive experience with PredictiveIndex.com, an online analytic service that highlights matches between job prospects and open positions. Employers and applicants each complete brief surveys (which consist of one-word descriptions of a position’s responsibilities and the type of person who would succeed), and the system returns matches that are extremely accurate.

Results, Regs, and Rates

Source: NYTimes.com 11/9/16

Matthew Josefowicz

Well, a few things certainly look different this morning. Here’s some quick thoughts for insurance technology strategists in light of the coming Republican administration and congressional majority.

1. Stop worrying about the DOL. A Republican administration is likely to reverse the pending DOL regs requiring investment product salespeople to act as customer fiduciaries. While this may still happen long-term, it’s unlikely to be implemented in the next two years.

2. Start worrying about healthcare again. However flawed the ACA may have been in the industry’s eyes, at least it was a known quantity. With the incoming administration’s plans to “repeal and replace” facing no opposition, everything may be up for grabs again.

3. Start worrying more about the states. With Federal regulations likely to be eased over the next few years, powerful regulators in democratic-leaning states are likely to get more aggressive. New York’s proposed cyber-security regulations may be just the beginning.

4. Keep worrying about interest rates. While the incoming administration has said they favor higher interest rates, market uncertainty, a global low interest environment, a rhetorical focus on jobs creation, and a Fed chair whose term lasts until 2018 may indicate that the current ultra-low interest rates will continue for the next few years at least. Insurers will remain in the double-bind of being resource strapped while badly needing to invest in new capabilities.

News and Views: Core in the Cloud, Self-Driving Trucks, Claims Satisfaction, and Blockchain Consortium

Tom Benton


Tom Benton on the first successful self-driving truck delivery from Uber’s Otto.





Chuck Ruzicka


Chuck Ruzicka on a new study from J.D. Power on what customers want out of their insurance company’s digital services.





Rob McIsaac


Rob McIsaac on Liberty Mutual Benefits’ move into using cloud computing.





Mitch Wein


Mitch Wein on the new consortium of European reinsurers piloting blockchain.

Self-Driving Truck Makes First Delivery

Tom Benton

Last weekend, Uber’s Otto self-driving technology arm completed a live test delivery of 50,000 cans of Budweiser beer from a brewery in Ft. Collins, CO to Colorado Springs, 120 miles away on Route 25. The trip was monitored by Uber engineers, but once the truck was on the road, the driver engaged the self-driving mode on the truck, outfitted with $30,000 in technology focused on autonomous highway navigation.

The live test is the first where a Level 4 autonomous system was used to complete a live truck delivery. Level 4, as defined by the National Highway Traffic Safety Administration and SAE (formerly the Society of Automotive Engineers), means that conditions are limited — in this case, to a well-defined highway with good weather and known construction zones — and a driver takes control when the conditions are not defined. The Uber/Otto-outfitted truck had a driver present, but not behind the wheel for the majority of the delivery trip. The driver had the ability at any time to retake control of the vehicle, but otherwise was free to read, text or almost anything else (except ironically he would certainly not be allowed by state law to pop open any of the almost unlimited cans of beer being delivered).

Self-driving trucks can have a significant and quick impact on highway safety, reducing the estimated annual 400,000 crashes and 4,000 fatalities, according to the article. Drivers are still required for ensuring safe movement of the trucks to and from the highway, but can be otherwise occupied during the long runs on interstate highways, which are manageable for companies like Uber to map and monitor for conditions that may require human interaction.

This successful test is another step toward acceptance of self-driving technologies for both commercial and consumer use. Insurers need to consider the risk-reducing potential of these systems and the increased level of repair costs due to expensive self-driving technology that could be damaged during accidents, whether in autonomous mode or not. The future of trucking is here -– it may not be long before you see driverless trucks rolling along your local interstate.

J.D. Power Study Shows Digital is About Customer Service, Not Just Cost-Saving

Chuck Ruzicka

In today’s environment where retention is critical, the quality of a carrier’s claims service and handling is a major source of competitive advantage. Other than the bill, claims are often the only contact that a customer may have with an insurance company. A new study from J.D. Power found that while the majority of claimants would prefer to check the status of their claims online, consumers would also like the option to call a representative for first notice of loss. This study highlights that digital service is a complement to call-center service, not a replacement for it. Early business strategies around what used to be called e-business focused on the cost savings of “self-service.” But digital is about engaging customers where they are, not pushing them to lower-cost channels.

Life in the Cloud is Now a Reality

Rob McIsaac

One of the more rapidly developing issue areas in the portfolio of items facing IT organizations is how and when to best leverage cloud-based services. Many carriers have moved important (but non-production) work loads into cloud based options, including both application development and testing. This has given carriers the opportunity to try the services out on important work, even while grappling with some of the more daunting issue areas related to establishing guidelines for using cloud based resources; the most common issue area CIOs and their teams need to address is security. Of course, for many carriers, as they explore top tier cloud providers (e.g., Amazon, Microsoft, Google, etc.) more deeply, they actually find that the security they offer can exceed what is associated with a carrier-managed environment. Armed with this insight, more carriers are moving mission critical workloads into cloud based offerings for an ever-increasing list of functions including email platforms, HR solutions, financial systems, claims processing and underwriting. At our recent special interest group meeting for Group/Voluntary Benefits carriers we noted the degree to which cloud based solutions were not only gaining traction but were looking increasingly attractive to carriers in this space. That all provides a good backdrop for this week’s story highlighting Liberty Mutual Benefits’ successful implementation of a core systems suite based on Amazon’s AWS offering. We fully expect to see this type of deployment gain greater traction in 2017 for a variety of reasons. We’re a long way from wondering if security issues can be “solved”. In the future, it is not likely that “running a corporate data center effectively” will be one of the IT skill sets that will create competitive differentiation for insurance carriers. Yet another example of the future already being here…but not evenly distributed.