Continuing the series on end user involvement in system changes, we asked reference accounts how involved business staff is in maintaining billing systems. As shown in the graph below, a great majority of them only barely or moderately have moved these activities into business areas. In conversation with vendors and insurers, most often these tasks involve creating and modifying bill plans. Note that our research does not ask how much an insurer wants to move to the business areas. In the case of billing and financial transactions, and unlike policy and rating administration, this relatively low level may be desired for control reasons.
One of the phrases I often hear just before a business takes a step forward in efficiency or innovation is “Why are you doing that like that?”. The phrase can be uttered by an expert in an application sitting next to a novice and leads to a greater understanding in the novice and hopefully updated operational guides.
Another valuable time this phrase is uttered is when the designer, architect or business analyst is sat with a novice. In this case it teaches the professionals specifying the system that something that is obvious to them is not always obvious to someone just learning the system.
Finally the times when I’ve heard this phrase and seen the greatest positive impact in the shortest time is when the builder of the application sits next to the person who’s livelihood depends on using the application effectively. This is the time when “why are you doing that like that?” can yield insights into how the application is really used. Such insights can demonstrate how certain shortcuts can fool the commission system for instance, how a feature actually gets in the way of efficient use of the application or even demonstrate that the way customers interact with the organisation is just not what was expected. The response from those who built the application when faced with this is often swift and full of energy. Sometimes they simply know a better way through the system and that can lead to massive savings. Failing that they invariably can think of a shortlist of 5 quick fixes that would make the whole interaction more efficient.
In many mid to large size organisations these days the folks on the front line talking to customers are often in a very different part of the organisation to the folks who built their applications - sometimes the only common manager is the CEO. Despite these differences and hurdles - regularly getting someone who supports and maintains your key applications to sit and watch an expert user will frequently yield greater efficiencies for the organisation and greater understanding in both parties.
Actively seek to create moments where one member of your organisation asks another, “Why are you doing that like that?”
IT Service vendors play an important role in the insurance industry. In a world where the internet makes it easy to have customer service representatives half way across the world or developers in remote locations, insurance companies like many other 21st century organizations look to vendors to meet their IT needs in lieu of hiring people or buying systems and hardware. IT Services vendors provide expertise to insurers in areas such as writing, modifying, testing, and supporting software. The vendors help plan and design computer systems that integrate hardware, software, and communication technologies. This is especially important with the frequency of mergers and acquisitions. IT Service vendors provide on-site management and operations of insurers’ computer systems and/or data processing facilities. They provide outsourcing of key processes and they give professional and technical computer-related advice. Celent’s forthcoming report about ITS vendors provides a detailed spectrum of over thirty IT Service vendors in North America. The report profiles each vendor in relation to the services it provides, the skill sets of their insurance vertical staff, details of their client base, and customer feedback related to the services provided. Celent has other regional reports in the pipeline.
There are several reasons why an insurer may look to an IT Service vendor for their offerings. Many insurers, when facing shrinking margins, look to an IT Service vendor to improve the efficiency of their operations. ITS vendors help insurers pursue strategic agility. ITS vendors enable insurers of any size to tap into a global labor pool to find the skills they need at potentially competitive rates. Celent’s recent blog post http://insuranceblog.celent.com/2010/02/hardware-outsourcing-vs-people-outsourcing/ highlights several of the business drivers for outsourcing. For whatever reason they choose to buy IT Services, insurers have key reasons why they choose one vendor over another.
Over the years, service offerings have evolved from the labor arbitrage offering to that of a possible partnership. Feedback to Celent in CIO discussions and responses from clients in Celent’s ITS vendor survey shows that the factors related to choosing an ITS vendor are not merely based on price, although price is still a big factor. Based on the Celent survey of ITS vendor clients for the North American ITS Vendor Spectrum Report, clients want a vendor to be responsive to their needs and to really know their business. And overwhelmingly, almost 80% of the clients were looking for long term partnership potential.
When it comes to knowing the client’s business, for the most part, IT Service vendors are meeting the needs of their clients. Nearly 60% of the respondents said that the vendor either knows the client’s business very well or as well or better than the client. The flip side is that almost 40% do not do a very good job of learning the business of the client, or at least to the satisfaction of the client.
What does this mean to the IT Services vendor? Get to know your client, its needs, its business, and its people. Make sure your proposition matches their requirements, and evolves alongside the client’s changing needs. Those clients that were most happy with their IT Service vendor felt they had a true partnership with the vendor. Those that were less happy felt that the knowledge of the IT Services vendor should be greater than the client’s and the vendor should be flexible and willing to going beyond what has been done before. The IT Services vendor should have knowledge of best practices and use the experience they gained from other implementations or projects to improve their project’s outcomes. As this feedback demonstrates, insurers are looking for partners in their delivery of IT, not just low cost services.
Look for more on this topic in Celent’s upcoming North American ITS Vendor Spectrum Report.
The topic of customer loyalty made an unsurprising appearance at recent conference of UK senior marketing executives. In several conversations, and breakout groups, the executives mused how different business might look in the UK if the consumer wasn’t very unloyal. Growth is an important factor for UK in 2010, and the aspiration for lower customer churn is not surprising.
So how did we get to a point where most consumers know it’s better to change insurer every year? Well, the consumer has learnt that loyalty is usually rewarded with a hike in their premium. I’ve experienced this first hand, finding out with some on-line research that my same insurer would take me back as a “new customer” at a lower rate than their renewal offer to me.
The internet has democratized the renewal process. Given some time, access to the internet, the consumer can check across the market, with the use of one or two aggregator websites. And they do use more than one – research suggests most use 2.8 – 3 aggregator websites to find the best price. This is an extraordinary investment in time to get a better deal. It also highlights the very “grudge” nature of an insurance purchase.
The aggregators appear to have caused the insurers to jump into the dire race of competing purely on price. Whilst many aggregators defend their position of being able to offer comparisons in more areas than price, my straw poll of friends shows that they look for a recognised brand in the top 5 i.e. cheapest.
The visual comes to mind of the cartoon sheep/dog/coyote racing over the edge of the cliff, taking a few seconds to realize where they are, and looking down at the vast blue space beneath them. It strikes me that’s where UK insurers are today – realizing they have run out of cliff and it’s an awful long way down to the dark blue sea.
These sentiments were re-iterated at the marketing conference. “This has to end,” said one Chief marketing officer, “it’s just not sustainable.” A US colleague told an amazed audience how her insurer had covered the whole family (motor, house and term life) since she was in college. They now insurer her college-aged daughter, and offer her a discount because she get’s good grades (proven link between claim propensity and grades apparently!). The family was a real fan of this large insurer.
There were no shortage of good ideas to encourage and reward customer loyalty. But the clear risk that remained unanswered was that any insurer taking a line contrary to the market was likely to be punished by the consumer in the short term. In the medium to long-term, lower customer churn would be better for their profitability, but a listed company performing to quarterly and annual reports can be very limited to any long-term plays such as this.
I hope the UK insurers crack this tricky problem. If for no other reason, then I find it tedious investing 2-3 hours a year looking for a new insurer. And the larger message to other markets who are moving steadily towards the low-cost producer model :- watch your feet, you may find yourself running out of runway before you know, and it’s very painful to claw your way back.
One of the benefits of investing in modern, configurable software that is often sought is the ability to move creation and maintenance of systems to the business areas. The premise is that transferring these functions to users will increase quality and reduce costs. In Celent’s discussions with insurers and observations, this is often a goal which is more aspiration than realization.
Our research has begun to quantify the extent to which functions are transferring within various solutions. For example, the graph below details the responses from U.S. insurers using a stand alone rating engine when asked what percentage of work is being performed in their business areas:
Surprisingly, create/change workflow rules are performed more often than change rates. This reflects the expansion of stand alone raters beyond simple arithmetic calculators that was reviewed in the Celent report Future-Proof: Considerations in Choosing Rating Solution Platforms. Not surprisingly, deployment to production is often held in the IT area. For more details, reference the report: US Property/Casualty Rating Systems: ABCD Vendor View, 2009)
We are continuing to collect such data across different software platforms in order to quantify the “promise” of end user maintenance.
Is it true that you can never have too much of a good thing? That’s my take when it comes to staffing the Celent insurance team. I’m pleased to introduce three new team members who will make our strong team even stronger.
Craig Beattie joins us as an analyst in the London office. Prior to joining Celent, Craig was an Applications Architect with Royal Bank of Scotland, working extensively with RBS Insurance. He held roles in strategy and architecture during mergers within the division and consulted on a number of internal divestment opportunities.
Karen Monks is a North American analyst with 12 years of financial services consulting experience. Previously, she worked for a Celent competitor in the analyst space, John Hancock Financial Services, and Coopers & Lybrand. She also completed General Electric’s Financial Management Program.
Finally, Jim Pelis joins the team as an account manager, based in the Boston office. Jim most recently worked for Datamonitor, and he has experience from Collective Next, IANS, and Forrester.
I’m excited to have you meet Craig, Karen, and Jim because I’m confident that they will carry on the Celent tradition of delivering value for our clients.
Just before the Google Buzz announcement (and associated bad press) Google announced a change to its core search product. This is a potentially huge change and a pointer to Google’s broader strategy. Given the annual budgets aligned to SEO (Search Engine Optimisation) for Insurers, IT Vendors and brokers alike, this change deserves a closer look.
Social search was originally announced last year as an experiment and then released as part of the core search product this year. In brief, social search uses a persons connections to personalise the search results. So for instance, if you search for Car Insurance and your friend Bob has something to say about Car Insurance on a blog or Twitter - then you will see a link to that in your search results along with a summary. For example in my Twitter feed I follow Aleksandr Orlov - the meerkat character used in comparethemarket.com’s advertising campaign. In my search results for Car Insurance I see an update from Aleksandr suggesting I go to comparethemarket.com. In effect free advertising for that brand. Of course if one of my friends has had a bad experience with a particular insurer the details of that will be visible to me in the search results too, and I would likely get in touch with them as a result to understand the issue.
It becomes clear where Buzz fits in with Google’s strategy - Buzz is less about creating a new Twitter or Facebook, but more about getting users of Google’s products and particularly the search product to provide more, rich information about their own content and their network of friends.
Why is Google introducing this change? The Guardian newspaper in the UK recently reported that more twice the number of people were coming to news organisations web sites from sites like Facebook and Twitter than from Google News. This demonstrates a huge shift in the way people are interacting with the Internet. In the last decade people went to a portal or plain search engine web site and keyed in what they’re look for. In this decade people are being fed relevant links from their network of contacts. This again places Buzz as a core part of Googles strategy to remain relevant on the Internet.
What does this mean for insurance? Simply, the automation of word of mouth. It means that the various social network sites will become increasingly important. Many Insurers are already investing time in a Twitter and Facebook presence and must continue to do so. Not only will Twitter updates and Facebook updates appear in front of people when they use those websites but increasingly these updates will appear in search results. Positive comments about the company should be repeated and lauded. Negative updates from customers will appear in their friends search results, responding directly to criticism where possible and stating your brands position will become increasingly important. Of course, you could take this approach and ask your customers to ask their friends about your product.
Look out for Celent’s upcoming report on Digital Marketing. Feel free to add your comments below too.
After several complaints from readers that it was difficult or impossible to comment on the Celent blog, we’ve embraced a social web approach and have opened the comments up to everyone. Comments can be posted without a WordPress account, though they will be moderated by the Celent analyst team and may not appear on the site immediately. We invite you to share your thoughts and join the discussion.
I recently reviewed an IT project that had been submitted for an award, only to learn that between the time of the submission and the time of the judging, the IT project in question had been “retired.” The context forced me to ask whether such a project could still be considered award-worthy, but the more general question is whether a retired system can be called a success.
Some IT projects are destined for retirement the day they are conceived. They are the temporary measures put in place to achieve a certain minimum level of functionality “until.” Until the entire core system is replaced. Until a vendor offering provides the function in their next upgrade. Until the technology available in the marketplace can duplicate this custom code. Until someone comes up with a better/cheaper/faster way of doing it.
These projects live short, meaningful lives. They go into production quickly, do their job, and then gracefully make an exit six months, a year, or two years later when the permanent solution is ready. Such projects include things like a custom agent portal that is eventually eclipsed by a full policy administration replacement. Or a simple rating calculator that is maintained outside the legacy system and used solely to provide real-time quotes to agents until the legacy system has been modernized. Or hard-wired integration between a billing and claims solution maintained while both systems are being upgraded.
These projects are a success not despite the fact that they are eventually retired, but because they are eventually retired. They have done their job and helped the organization advance to the next stage. In fact, the true disaster is when a tech initiative that was always meant to be a temporary solution evolves into a critical system that lives for ten years, cobbled together like Frankenstein’s IT, preventing the company from moving on to a better, more modern solution. This happens more often than we’d like, and so even projects with short lifespans need to be taken seriously.
The truth is ALL technology is temporary technology. Every system will eventually be replaced by the next system. And any system–no matter how modern and “permanent” it is upon implementation–will become legacy technology if it is not constantly kept up to date.
We can learn from these temporary IT projects. Smart organizations approach such initiatives warily, making sure that it will be easy to turn them off when it is time to move on. So should be the case with every project. Smart organizations consider how employees will be impacted when a temporary IT project is no longer available. So should be the case with every project. Smart organizations have a next step in mind when they start a temporary IT project. So should be the case with every project.
If insurers treat every IT initiative like it is a temporary one then insurers will be less likely to end up with irreplaceable legacy systems. Part of IT planning, even for major systems that have long life spans, is to consider how the system will be kept up-to-date and how it will eventually be retired.
Google tends to get a lot of press simply because it’s Google, although it’s fair to say Google has got a few things wrong with some of its products – anyone remember Orkut, or all the hype around Google Wave? One thing is certain Google have got a lot right about its launch of Google Buzz. This may be particularly interesting as some insurers and financial advice web sites move to create their own social networks. Let’s examine first what Google got right and then what we can learn from where they went wrong.
Firstly, and I think this is key, Google leveraged an existing network. Google Buzz is built on Google Mail. This immediately gives a population of customers. In addition this product already has many of the customer’s frequently contacted friends. This means there’s little set up involved and the network has been swiftly established.
Secondly Buzz leverages existing assets and relationships. It’s linked to Flickr, YouTube, Google Reader, Google Maps and others. This means that customers can continue using existing and familiar tools and gain extra value from Buzz.
Thirdly Buzz came out with a programming interface to allow third parties to start integrating. It also leveraged existing networks and APIs allow it integrate with the customers other applications very quickly.
Lastly, Google have been very quick to respond not just with words but meaningful change to the product, even though it is only a week old at the time of writing. In an interview, Google have described having a War Room set up with developers and product owners listening to customers in real time, and making key decisions about whether to and how to change the product.
However, Google have got two things wrong.
The very public and ill-thought through impact on privacy has been the key concern. Customers could easily and accidently disclose information about who they frequently emailed and contacted – information previously private. This is of concern to cheating partners and political activists alike. Google have already done much to address this concern and what was an own goal is now being applauded as a swift response by advocates. We’ve learned today that the privacy issue has sparked some class action lawsuits in the US.
The second thing that could have gone better is the programming interface – which is currently read only. I would expect a further increase in adoption once tool authors can create updates to Buzz directly and for me constitutes a huge opportunity missed.
What does this mean in financial services? Some simple guidelines:
- Leverage existing assets – both information you have and public information. Google have asked their customers to volunteer their twitter ID. This information provides Google with an already public list of their customer’s friends. Unless you have a key unique selling point, consider leveraging existing networks rather than building your own – for example Twitter or Facebook.
- Link your network to support the free public feeds from Flickr, Twitter, etc.
- There are successful social networks that operate without a programming interface. Very few companies have offered open programming interfaces with insurance or financial data – wesabe.com is one such example offering read only transaction data.
In other domains allowing third party developers and tools vendors to build applications for a website has sped up adoption. Limiting an API to posting updates, managing communication and friends should have the same effect. - On launch, set up a War Room. Most of the feedback will arrive in the applications infancy and its survival depends on identifying the issues and opportunities, prioritising these and visibly acting on them.
- Finally – get the security and privacy right. The two go hand in hand. Getting it a bit wrong and fixing it quickly as Google have can earn you forgiveness, but customers will likely expect more from financial services organisations.