Choosing a New Claims System?

Karlyn Carnahan

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Dec 18th, 2014

Few carriers are doing nothing when it comes to claims. Year after year, we continue to see significant activity as carriers replace or enhance their claims solutions. The reasons for such activity are plentiful. Claims systems are aging which means that they are expensive to maintain. Older systems generally are much less flexible than modern systems with robust configuration environments. Business rules are regularly embedded in code, which reduces a carrier’s agility in making changes rapidly. They often are decoupled from policy or customer systems so accessing and aggregating data across these systems can be difficult. They were initially designed to focus on managing the financial aspects of claims not the customer service aspects of claims. It’s also getting harder to find resources that can or want to work on older technology.

Meanwhile, carriers replacing core claims admin systems are trying to achieve multiple goals. Insurers’ corporate objectives fall into three broad categories:

  • Getting bigger by growing the top line. A policyholder who feels that a claim was handled quickly and fairly is a policyholder who is much more likely to renew.
  • Getting leaner through higher productivity and expense control. When specific tasks (such as accessing external data or generating forms and correspondence) are automated, an adjuster’s time is focused on the remaining tasks and decisions.
  • Getting smarter by adjusting claims more accurately. Through workflow and rules, a new core claims system gives claims adjusters much improved tools to make the right decisions and take the right actions.

Selecting and implementing a new core claim system can contribute to the achievement of all three corporate objectives.

Donald Light and I have just published a report that profiles the available claims solutions in North America. The report provides an overview of the different basic, advanced and technical features a carrier can evaluate. It also provides detailed profiles of the different vendors. Some of the vendors qualified for a more in depth profile that includes customer reference checks and our opinion of the solution.

If you’re thinking about beginning a claims replacement, check out the report here.

It’s a great place to start your research process. Then give us a call. We will be happy to chat in more detail about any of the solutions and help you as you move through your selection process.

 

Majesco Is Moving Fast

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Dec 15th, 2014

Majesco (formerly MajescoMastek) is bulking up fast. On December 12 it acquired Agile Technologies business; and on December 14 it announced a merger with Cover-All. The resulting entity will have revenue greater than $100 million; and more than 150 insurance customers globally.

Scale has always been a plus in the insurance software business. It speaks to a demonstrated ability to create and maintain insurer relationships. Technology firms with more customers have broader and deeper IP; and more resources to invest in getting better.

That said, size alone is no guarantee of success. Smarts and agility and foresight are not correlated with size.

Majesco has moved quickly to create a big player with impressive resources. Now comes the harder, but necessary, work of integration, vision, and creating value for current and future customers.

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Board Member to Insurers: “Don’t get Uberized”

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Dec 11th, 2014

At the National Underwriter Executive Conference last week, a member of the Board of Directors at one of the largest life insurers in the world warned insurers: “Don’t let what happened to the taxi industry happen to us. Taxis thought regulation would protect them and you see where that got them. We can’t allow ourselves to be Uberized.”

Beyond the fact that this was the first time I have heard the verb form of Uber (remember when Google was just a noun?), the statement represents a valuable summary of the disruptive threat for our industry. The public expression of this possibility by such a highly visible leader is another in a number of recent signals that insurance innovation is gaining real traction.

A recent Celent survey provides the datapoint that innovation practitioners expect the probability of disruption to rise in 2015:

 

Disruption chart

Note that no one responded that the threat would decrease.

However, recent events demonstrate that the Uber effect is also an opportunity for insurers — the high level of trust that the industry has earned over the past 150 years. An Uber driver in India has been charged with assaulting a female passenger, reminding us of the dark side of the sharing economy.

I am not suggesting that this is a reason for insurers to become complacent, or think that the need to invest in experimentation and to reward risk taking has lessened. Rather, I trust that our industry will heed the threat expressed by one of its most prominent leaders and leverage the positive relationships it has established with its consumers to deliver new solutions which increase its value proposition.

The Lion and the Mouse: Start-ups Pitch to Top Insurer

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Dec 8th, 2014

One of the common behaviors of successful innovative companies is establishing creative partnership arrangements. These relationships are not traditional supplier/buyer arrangements (zero sum games) but are mutual agreements that combine deep subject matter expertise and new technical capabilities to produce unique and valuable solutions.

I witnessed an event this past week that demonstrated partnership-building in full force. Eight start-up companies pitched their solutions to one of the largest insurers in the world. It was inspiring to see the interplay between the very different perspectives, and encouraging to watch the participants struggle, and most times overcome, hugely different communication styles. It reminded me of the Aesop fable about the lion and the mouse, the moral of which is that size is not an indication of value.

Each presentation followed the same general structure. The founder / CEO / CTO of the start up reviewed the key functions and value propositions of their solutions. In most cases, about half way through, the audience members from the insurer would begin to ask what I call use case questions. “Does this mean we could use your solution to do ABC?” and “We have a problem with doing XYZ. How would your system approach this?” I was struck by how natural it was for the subject matter experts to quickly apply the technical information to their current challenges and how easily they could imagine future capabilities.

I think that there were several reasons for the success of the session. First, this insurer’s innovation team has been in place for multiple years. Over this time, I know they have worked hard to engage with the “innovation evangelists” in the organization. This meeting included the right “curious minds” and was a manifestation of their advance work.

Another reason is that the facilitating company which selected the start-ups chose carefully and coached the participants regarding presentation messaging and delivery. There was just enough tech talk and a good amount of insurance-specific application examples.

Finally, I think the immediate translation into use cases signalled pent-up demand from the insurer. Their attendees obviously have already been thinking in specific terms about how technology can help them better run their businesses. This forum provided them an outlet for expression of those thoughts.

The session was a well-planned and well-executed example of innovation execution – the type of activity that Celent calls Deliberate Innovation. Kudos to all involved for demonstrating how to operate in a market of exciting possibilities!

Engaging the NAIC on Emerging Insurance Technologies

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Nov 24th, 2014

“If the regulators aren’t with you, expect insurance innovation to take longer and cost more.” This comment surfaces repeatedly in Celent’s research. We believe this is true and have seen this occur in the past (credit scoring, predictive analytics, telematics). In order to address this issue, we at Celent have begun to proactively engage regulators around emerging technology topics.

Last week, I presented at the fall annual meeting of the National Association of Insurance Commissioners. Addressing the Property & Casualty Committee, the topic was “Emerging Technologies and Their Potential to Impact the Insurance Industry”.
I observed that regulators are eager to receive information about this topic. This is understandable, as budget constraints make it very difficult to divert resources from the day-to-day crush of filing and approvals to concentrate on the future. However, mentioned in the session, it does the industry absolutely no good if the first time a regulator learns about a new technology is in a new filing!
Celent is tracking several technologies with the promise to change insurance proposition in important, fundamental ways. For example, digital capabilities allow customer engagement to shift from periodic (only at time of renewal or a claim) to continuous (daily lifestyle suggestions). Another trend we see is a movement from “pay as you rate” to “pay how you use”. The introduction of telematics in the Auto line is the best example of this.
Several case studies from around the world were used to illustrate how, in other regulatory environments, technology is being applied to insurance. The digital customer experience platform built by Tokio Marine was shown as an example of continuous customer engagement. AXA’s use of public and private data sources to change the FNOL reporting process was offered as a case of a transition from reactive to proactive claims management.
Celent will continue to be involved in briefing regulators on these issues. We encourage insurance technology providers to do the same. We are all on this journey together and will get their faster and more effectively if we communicate actively.

What if someone Kickstarted an insurance company

Tom Scales

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Nov 10th, 2014

As analysts in the insurance industry, Celent spends considerable time and effort considering new and improved ways to do business. Much of this emphasis is on technology and where our customers, and the industry, are in their efforts to improve and what still needs to be done.

Our industry is evolving and implementing new innovations, particularly focusing on the customer experience, including the web and mobile. Many, if not most, companies are hampered by aging technology in their back-end systems. This is certainly true in the P&C and Health industries and particularly true in the Life industry. Life insurance is inherently a contract that extends over a significant period of time. Therefore, many insurers are using systems that are 20, 30 or even 40 years old. Let’s assume that a system installed in the 1960s does not play well in an Internet connected world.

So the question for this post is about disruption. While Kickstarter or other crowdfunding methods are unlikely, it is interesting to think about how an insurance company would be formed and implemented if it was a new company formed today.

What would we need to start this mythical company?

1) Would you need any employees?

This is the first fundamental question. Many insurers are large employers with a significant investment in people and facilities. If you were starting from scratch, would you hire industry veterans, trying new employees and open up a big office?

Possibly not. Once you have capital, virtually every other function could be outsourced. There are solid Sales and Marketing companies with licensed agents to service both web applications and call centers. Reputable Third Party Administrators exist that can handle every operations functions. Good actuarial firms can be contracted to design the product. Reinsurers can not only take risk, but in many cases provide Underwriting guidelines (and technology). Financial management requires a solid accounting firm. The list goes on, but it is an intriguing question.

Building a virtual company has never been easier.

2) Would you need any agents?

Again, possibly not. Starting from scratch, the company could be entirely on-line, backed up by a call center. As mentioned above, there are many companies that can provide this service. Of course, they’re still agents, just not the traditional independent or captive that sells locally.

3) What about capital?

This might be the biggest barrier for entry. Money isn’t as available as it once was and, notwithstanding the title of the post, crowd funding isn’t designed to raise the amount of money required for an insurer.

The purpose of this post is not to suggest that the reader run out and start a company, although let us know if you do. It is more for the existing insurers that are not able to be as nimble and change with the marketplace as quickly as they might need. Even the largest brick and mortar insurer can innovate.

There are companies, large and small, in our industry that are truly innovating. If this post intrigued you, or even if it didn’t, but you do not have any formal innovation process, then perhaps you should. Your competitors are staffing dedicated innovation labs to stretch themselves, and the industry. They’re trying new things and failing fast.

What new idea will be born in your company today?

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For Halloween: The Tricks to Get Innovation Treats

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Oct 29th, 2014

Innovation is not witchcraft but, when done successfully, there is a touch of magic. The magic happens when innovation becomes “part of the way we do things around here” (read: corporate culture). When people across the firm approach their jobs constantly through the lens of “how do I change my job so that I deliver more value to my customers?”, magic can happen.

We discussed this in a webinar this week (Innovation in Insurance: Differences across Continents). The point was made that there are specific actions (tricks!) that prepare a corporate environment for magic. Specifically:

  • Establish a common language around innovation; what is it? what is it not?
  • Revise reward systems, especially around encouraging “fail fast” behaviors
  • Develop a communication plan around innovation – leverage Corporate Communication expertise to sustain a messaging effort around innovation
  • Tune existing governance structures to handle innovation initiatives differently than run-the-business projects

The message coming through in Celent research is that innovation is more process, sweat, and political capital than black art. So, try these tricks in your organization so that you (and your customers and teammates) can enjoy some innovation treats!

A Prototype of the Successful Innovation Leader

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Oct 21st, 2014

Innovation is all about building prototypes, making them fail, adjusting them, and moving on quickly. So, what is the prototype for the successful senior innovation leader? How can this profile be used to make better selections when hiring for these critical positions?

Continuing the Celent innovation research theme of how to make innovation work, we asked attendees at two innovation conferences to rank the critical success factors needed in senior innovation leadership positions. The purpose of this research effort was to assist with the “how” of choosing a successful innovation leader.
There were four areas in the on-line survey:
1. Technical business skills
2. Leadership qualities
3. Personal attributes
4. Previous job experience.

Ninety-one innovation professionals responded, 30% from financial services firms. Note that this is a very specialized respondent pool. These are the opinions of innovation practitioners about key success factors reflecting their experiences. Their outlook has been shaped by their own efforts which undoubtedly included both successes and failures. (The full report is available for download for Celent subscribers at http://celent.com/reports/leading-innovation-keys-success.)

The top items in each area are displayed below.

leader skills

The innovation conference attendees made some important observations about these results. First, the top ranking in the Technical business skills area was assigned to strategic planning. Innovation practitioners clearly value the cerebral activities such as reading the external environment, identifying patterns, and matching this analysis with company capabilities to determine a plan of action. In two other areas, Leadership qualities and Personal attributes, however, the more extroverted activities of vision and inspiration rose to the top. It is often difficult to find one person with such a broad range of skills and attributes. However, the conclusion based on the opinions of these innovation veterans is that the process should include an evaluation of candidates’ capabilities in both of these “head and heart” areas.

A second observation dealt with Previous job experience. Previous innovation leadership experience was ranked higher than start-up and operations management experience. Practitioners place high value on the practical wisdom about innovation which is learned “on the job”. Celent expects that the number of financial services companies implementing innovation programs will increase in the near term and, consequently, the value of professionals with successful, previous senior level innovation experience will also grow. Pay levels, work environment and other incentives must be calibrated accordingly.

How can these results be used in innovation programs? For individual leaders, this can be used as an input into their personal development plan. As an example, if they are strong in strategic planning, but weak in inspirational leadership, coaching activities may be worthwhile. In organizations with established core innovation teams, this can be used to evaluate the strengths and weaknesses of the entire group. For example, in situations where a leader lacks a critical attribute, the team may be able to compensate with increased contribution from other members. Finally, these results can be shared with a H.R. department to develop a data-driven selection process for senior innovation leaders.

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FYI — Topics such as innovation leadership development are discussed at our Innovation Roundtables. The next session is scheduled for November 20 in New York City. Senior innovation leaders from Banks, Insurers, and Security Firms are invited to join us. The registration details can be found here: https://www.regonline.com/builder/site/Default.aspx?EventID=1623753

 

How to Innovate in Financial Services Companies

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Oct 16th, 2014

‘Tis the season for vendor conferences and this year innovation is the hot topic. Many speakers are making a strong case for why financial services firms need to innovate – customer expectations being shaped by conveniences such as the Amazon One-Click, demographic changes bringing the millenials into the consumer age, opportunities emerging in predictive analytics, customer service capabilities using location sensing technologies, etc.

In some of the presentations there is even some recognition that innovating in existing (read legacy) businesses is much harder than in start-ups and greenfield operations. But, I have noticed that beyond the major themes, there is not much information about how established financial services companies innovate successfully – lots of why, but not much of how.

But, the “how” is of critical importance to innovators. Celent knows this because we asked. In order to build the agenda for four of our Innovation Roundtables, we asked the registrants to choose the topics they wanted to discuss from a list of 27 items. Thirty-four people voted, reflecting a very specialized respondent pool. These are all professionals who are charged with driving innovation in financial services companies. Their top ten areas are displayed below.

tis the season grphic

In looking at the data, over half of the items fall in the broad category of leadership / culture. Process is the second most frequent group and, interestingly, technology figures only once (in the category dealing with social technologies for innovation). This prioritization held up in the amount of time spent in discussion during the face to face sessions. The conclusion is that tech can be bought, but leadership has to be built!

But, getting back to the how, given that culture and leadership is so important, how does a company choose leaders which can successfully deliver innovation? What technical business skills, personal attributes, previous job experiences are critical in an innovation leader? Celent has also surveyed innovation practitioners about this and I will blog about these results next week.

By the way, our next Innovation Roundtable is scheduled for November 20 in New York City. Senior innovation leaders from Banks, Insurers, and Security Firms are invited to join us. The registration details can be found here: https://www.regonline.com/builder/site/Default.aspx?EventID=1623753

 

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From Her to Watson, and What’s Next?

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Oct 9th, 2014

Her is a 2013 American science fiction romantic comedy-drama film written, directed, and produced by Spike Jonze. The film follows Theodore Twombly (Joaquin Phoenix), a man who develops a relationship with Samantha (Scarlett Johansson), an intelligent computer operating system personified through a female voice. Jonze conceived the idea in the early 2000s after reading an article about Cleverbot, a web application that uses an artificial intelligence algorithm to have conversations with humans.

I spent an entire day with Watson last Tuesday along with my colleague Dan Latimore (should read his blog about it! http://bankingblog.celent.com/2014/10/08/spending-a-day-with-ibms-watson/) and I could not avoid the resemblance, though IBM’s Watson is much more focused on the business side of the machine/human interaction and collaboration.

Watson is a learning system that scales human expertise by extending our abilities to perceive, reason, and relate:

  • Perceiving: Watson understands the world as we do; it interprets sensory input beyond traditional data. Understands natural language; reads manuals, social data, blogs, consumer reviews, etc.
  • Reasoning: Watson thinks through complex problems; it deepens our analysis and inspires creativity. Makes inferences, evaluates pros and cons, and finds relationships between terms and concepts
  • Relating: Watson understands how we communicate, and personalizes its interactions with each of us. Responds in natural language, personalizes the interaction and provides reasons
  • Learning: Watson learns from every interaction, scaling our ability to build experience. Trains with experts and improves with feedback.

Imagine that you can take your best employee, your best agent, your best underwriter, your best adviser, your best risk manager and teach Watson, so it could be then supporting any other employee, business partner or even a customer,  24/7 across your organization. It is the most closer to cloning I have seen lately, without the moral dilemmas.  What if, based in its huge computing capacity and the ability to crunch and interpret TB of data in a very short time-frame it could provide you with more hypothesis and evidence than any human being you can hire? Imagine how accuracy and timeliness could save lives, assess risks better, lower your costs, provide a better understanding of what is going on, even under different circumstances. Watson’s aim is to become the best adviser to your employees, customers and partners while doing their job by leveraging the power and strength of search, analytic and cognitive capabilities.

There is a real opportunity here to:

  • Amplify human cognitive strengths
  • Enable a deeper level of reasoning
  • Make decision trade-offs with higher levels of confidence
  • Democratize experience and knowledge within your organization and value chain

Financial institutions around the world are already working with IBM to make Watson smarter, covering more use cases and more languages. IBM has already made available and continues to work on content and APIs business ready on the cloud to make it easier for its ecosystem and clients to embed Watson services in their applications. IBM is already working on having Watson available for Japanese, Spanish and Brazilian Portuguese natural language interaction, and we should be hearing soon some news regarding the 1st Watson Client Experience Center in Latin America, replicating the one IBM has just inaugurated in New York’s Silicon Alley. IBM plans to open these centers in Melbourne, Sao Paulo, Dublin, London and Singapore.

IBM’s Watson has already come up with a book of recipes and while I think it is true that the best way to a man’s heart is through his stomach, I don’t expect to fall in love with an avatar powered by Watson as in Jonze’s Her (I am happily married, thank you). I would like though to see soon how it helps me decide what are the best investments given my risk aversion profile or which is the best type of insurance (and coverages) I need given my needs and concerns. I would certainly love to see how underwriting capabilities improve and processes become more accurate and efficient, hopefully expecting better results for me, for the financial services institutions and why not expect to see some savings passed along to consumers?

Today Watson is here; what’s next?

 

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