Archives for December 2009

2010 Celent Insurance CIO Surveys

It is at this time of the year that Celent conducts its famous surveys providing useful insights about insurers preoccupations, priorities and plans for the coming year. This year we have decided to apply the same usual method for the United States market. In other words, our readers will be able to access our famous US insurance CIO survey report in late January. On the European front, we have decided to get a more focused look at two countries. Indeed, Celent is currently conducting interviews with CIOs in United Kingdom and in France and we will publish a specific report for each country. I am personally dealing with France and so far, the main concerns of French CIOs are the following:
  • Distribution: French CIOs understand that the distribution landscape is changing fast. They have all listed distribution as one of their priorities for 2010 and most of them intend to launch IT initiatives to take advantage of the growing importance of online insurance notably.
  • Regulation: the Solvency II regulation framework affects directly insurers IT investment priorities. As the results of the quantitative impact study 4 launched by the CEIOPS in 2008 tend to demonstrate, there is a growing interest by French insurers in understanding what are the impacts of the new set of prudential regulation not only on their solvency ratios but also on their ability to comply with the other elements of the regulation. Some insurers have already invested in new IT systems for instance capital modeling tools but some others still need to understand what they have to start with and what they need to focus on to be ready in 2012.
  • Improvement of core processes and cost reduction. Even though most of the CIOs interviewed so far clearly mentioned they had not really implemented drastic measures (layoff program, IT investments cancellation, etc.) following the financial crisis and the economic downturn, improvement of core processes leading to cost reduction via a smarter use of IT resources represents a priority for 2010.
Celent pays full attention to insurance and IT trends and having the chance to discuss directly with key players on specific markets makes our job interesting. I hope our clients and readers feel our passion for our research and the insurance industry when they read our reports. I wish to all of you a happy Christmas and a successful new year.

The Limited Life of Mobile Applications

The Mobile App Prediction: Since I’m frequently asked about mobile device use in the insurance industry, I’d like to restate a prediction I’ve been making for a few years: Custom, downloadable applications for smart phones will become less important or unnecessary. Having told many people this, it’s been a bit of a tough time for my analyst ego. The rise of the Apple iPhone and its widely touted app store has brought an explosion of downloadable mobile applications. With several other devices and mobile platforms attempting to mimic Apple’s success, it looks like the importance of custom, downloadable applications for mobile phones will only be increasing. The Desktop App Evolution: Compare mobile applications to desktop computers. Before high-speed internet access was widely available in North America, most applications (both business and consumer) were installed on the computer, either via download or via disk. IT organizations at insurers spent a great deal of their time distributing and installing enterprise software on each user’s machine. As internet connections became more ubiquitous and–just as importantly–web browsers became more flexible and powerful, these installed applications were replaced by web-based interfaces. Installed desktop applications included just about all business activities but also most consumer tasks: personal banking, weather updates, stock trading, and personal e-mail, just to name a few examples. These are all activities that are primarily done through a web browser today. Some users complained that the shift from desktop application to web-based interface resulted in a loss of usability or functionality. But the appeal of a platform so easily distributable, upgradable, and maintainable was worth the tradeoff, and as Web 2.0 technologies have matured, web-based applications have surpassed many desktop equivalents in terms of ease of use. A Similar Mobile Path: It was my belief that mobile applications were following a similar path to desktop applications. Just a few years ago, businesses that required mobile use were not only designing custom applications for mobile devices, they were designing entire, single-purpose mobile devices (whether gathering paramed surveys or managing a warehouse floor). These devices became more generalized and business could focus on the applications rather than the entire physical unit. And as mobile phones became smart phones, the devices themselves became cheaper, multi-purpose platforms. The next logical step would be to generalize the distribution mechanism itself. Instead of requiring a downloaded application onto the phone, I expected this to be replaced by the mobile web. Mobile web applications will be easier to upgrade and maintain and can be the based on the same web applications used on a desktop computer (except, perhaps, with a scaled-back interface). When I first saw an iPhone browsing fully rendered web pages I thought my prediction had come true. Is my prediction wrong? Instead, the iPhone App Store explosion occurred and we entered the golden age of downloadable mobile applications. The very device that I thought was going to prove that downloadable applications were unnecessary proved the opposite. But I don’t think this means I’m wrong. I just think we need more time. Soon, mobile browsing will become more flexible and powerful, just like it did on desktop computers. Technologies like “Flash Lite” will bring interactive and usable interfaces to the phone browser. The trade-off between features and ease-of-distribution will shrink. And instead of worrying about maintaining new channels, insurers will be able to focus on their existing platforms with web-based interfaces. Some applications will always remain downloaded on the device, just like some applications remain installed on desktop computers. But–especially when companies are distributing applications to all of their employees or customers–the clear answer is a robust, functional, mobile web. I think that the few insurers who have released mobile applications have done a great job demonstrating an aggressive and modern approach to technology. But, eventually, every insurer who has invested in a web-based channel will be taking full advantage of every mobile device.

Next Steps in Federal Regulation of Insurance Taken Today

Today, the U.S. House of Representatives passed The Wall Street Reform and Consumer Protection Act (H.R. 4173) that creates a Federal Insurance Office. Title VI of the Act, outlines three specific objectives of the new group: 1. provide a source of industry expertise in the federal government, 2. represent the U.S. in international insurance issues, and 3. promote stability in the financial system through greater knowledge at the federal level. The act also deals with the regulation of systemic risk. It establishes an emergency fund, funded by major financial companies (over $50 billion in assets), which would be tapped if needed.
What does this mean for insurers? For the largest companies, increased costs from the additional assessments. For all insurers, it will require additional work to comply with the new information requests. Practical steps that can be taken now to prepare for these inevitable requests are available in the Celent Boardroom Series: US Federal Regulation of Insurance: Are We Ready?, posted on the main Celent website.
The bill now goes to the Senate for debate. I can give you 180 billion reasons why the insurance-related parts will pass.

1.14.10: Celent Insurance Webinar: What’s Next for Insurance Solvency Regulation and Technology in the US?

Celent senior analyst Donald Light This event is free to Celent clients and the media. Non-clients can attend for a fee of USD $249. Celent will contact non-clients after they register for credit card information. Please click here for more information.

Finetuning Customer Portals – Lessons from A Christmas Scrooge

The commercial craziness that is the run up to Christmas has kicked off here in Britain with the checkout tills are humming from Oxford street to Covent Garden in London. But if you listen carefully, you should also be able to hear the whirrings of transactions in the darkness of cyberspace. The English have embraced on-line shopping, and there are estimates that we will buy 15% of our Christmas goodies on-line this year.

I’m a great example of someone who uses the Internet for work and play. As if being wedded to the laptop for more hours of the day than necessary isn’t enough, I choose to shop on-line as well. And for the most part, I love it. As an industrious cyber-shopper and pedant, I pride myself in spotting website shortcomings.

What surprises me is just how many sites with shortcomings I’ve stumbled across in this last week. Have Santa’s little helpers gone on strike ahead of the rush to Christmas or is this poor planning on part of IT and operations? Here’s a few examples:-

  • A hotel booking website which couldn’t successfully take a booking via credit card – no surprise, I choose another hotel.
  • Two retail sites that send tracker notification emails without the tracker ids – annoyance factor that grates at their brand.
  • A mobile phone site requiring me to re-key all details when I move to another section – more brand erosion.
  • A retail site who’s “shopping basket” had a memory limit of 5 minutes.

Some of these shortcomings contribute to the annoyance factor. It’s like going into a brick-and-mortar store, and they don’t have the item on the shelf. You can’t sell what you don’t have in store. So you take your pounds elsewhere, and the company never knows they even lost your business.

Business should be smarter about their on-line stores. You don’t leave your high-street store unattended, or without stock? You should pay similar attention to detail in your on-line offering. The direct channel will become an increasingly important in the future, for retailers, and insurers alike. Relative to retail, insurers have been a little slow at embracing on-line commerce, but should remember that they get measured along the same factors as an on-line retail store. After all, that’s what the consumer knows.

The English are happy to buy insurance on-line, particularly motor. We have some of the better websites in Europe for doing exactly that. And there is plenty of activity. Through an aggregator site, one insurer gets 250,000 quotes between 8pm and 9pm on Monday’s – apparently, this is the time consumers look to shop for insurance. You couldn’t make it up!

The key take-away here is the importance of having a solid customer portal that behaves in the manner a customer expects. This requires continued investment to reflect changing customer behaviour, and to leverage new technologies. In conversations, we see this as one of the key areas for IT investment in 2010. (We will be writing more on the topic of B2C in insurance in January). Owning the distribution space remains an important objective for insurers looking for growth in the coming year.

The Island of Misfit Toys

The holiday TV classic, Rudolph the Red Nosed Reindeer, was on last night. I watched the whole show with some delight, as it brought me back to a more innocent time. The 60s sensibility of the production is funny now, and a bit jarring. When Rudolph’s dad told Rudolph’s mom that she can’t go looking for Rudolph “because this is man’s work!” I laughed out loud. I don’t think that line would make it past the editors today.

But there are more enduring themes in this production that are as true today as the day they were written. One of my favorites is the Island of Misfit Toys. For those of you who need a reminder, the Island is a gathering spot for mismatched toys that no one wants. For example, there is a train with square wheels. There is a dolly that cries. There is a bird that swims in a fishbowl. And there is a Jack-in-the-Box named… Charlie.

Over my career as a consultant, in conversations I’ve often imitated Charlie’s plaintive line, in his cracking voice: “Nobody wants a Charlie-in-the-Box!” It’s a catch-all phrase that reminds me that some things are just…not…quite…right.

In our day to day work, we all recognize these things readily. Systems that don’t do what we want them to. Processes that are head scratchers. People that don’t seem to fit in the roles that they’ve been given. But once you learn to live with a Charlie-in-the-Box, you can almost forget the obvious. You begin to have some misplaced affection for those hapless systems, processes, and people. They’re not very good, but they’re yours. And that’s why they persist.

In Rudolph’s day, it was important to have a happy ending. So the show ends with Santa going to the Island, picking up the Misfit Toys, and finding children who are happy to give those sad toys homes. Awwwwww! But in the real world, our job is to recognize when our affection for systems, processes, and people is misplaced. Our options include repairing or replacing our misfit toys, and that is the only happy ending we should entertain.

12.07.09: Celent Research Webinar: Trends in Anti-Money Laundering 2009

Celent senior analyst Neil Katkov

This event is free to Celent clients and the media. Non-clients can attend for a fee of USD $249. Celent will contact non-clients after they register for credit card information.

Please click here for more information.