Archives for May 2010

The Power of Three Smart People

I was talking to a CIO at the LOMA ACORD Systems Forum in Las Vegas recently. The conversation went something like this.

“What do you think of providing chat capability, so agents in the field and underwriters can interact directly in real time?”

“We’ve had that since 2004.”

“How about e-delivery of policy documents?”

“We’ve been doing that for a long time. We set agent-level preferences for who gets paper and who gets electronic copies, and our agents can update their profiles at their convenience via the portal.”

“How about faxing or emailing of correspondence and other documents?”

“CSRs can do that from their desktops, without ever printing a thing.”

These and other tidbits from our conversation suggested that the increased focus on building relationships with agents has resulted in service improvements. By paying attention to how people get things done, the industry is evolving.

But the interesting thing is that this was not a conversation with a visionary, Tier 1 carrier. I was talking to a Tier 5 carrier, with a staff of perhaps 100 people, total. And the solutions being discussed are nearly all custom builds, done on the cheap by smart, creative staff.

This story illustrates the Three Smart People theory. (Credit for articulating the theory goes to my brother Kevin, a technologist outside the insurance industry.) Three Smart People says that problems are best solved by putting three smart people in a room and turning them loose, unencumbered by layers of management and the mental constraints that companies often place on their staff. The alternative of throwing bodies at problems in proportion to their size introduces uncertainty and risk, and almost never improves solution quality. More heads are better than one, but only until you reach the count of three.

Proponents of mega projects tell me that TSP is naïve. But I think that if three smart people are not able to solve a problem, it is quite possible that the problem has not been defined at a sufficient level of granularity. Got a big problem, with sweeping implications for business processes and a host of integrated systems? Break it down into components that can be digested by groups of three people over a period of weeks, not months. Then stand back and watch your company’s evolution accelerate.

Facebook, meet the Regulators…

By whatever measure you choose, Facebook is growing up fast. The company reports 400 million active users spending 500 billion minutes per month. Over 70% of users are outside the United States. And all this in an unbelievable 6 years since the site was launched in a student dorm room.

Such sudden growth does not come without attracting considerable attention from regulators. In the US, several consumer protection agencies filed a complaint with the Federal Trade Commission and sent a letter to Congress that charges Facebook with engaging in unfair and deceptive trade practices in violation of consumer protection law. EU data protection officials have written to Facebook saying that the plans to share user’s information with outside websites is unacceptable. And here is lies the core of the problem in Facebook’s next phase of growth.

To become a viable business operation, Facebook needs to find a way of monetizing it’s core asset – which is all that data about Facebookers. There is a revenue stream from the application developers, but this will not be enough to satisfy the group of private equity backers. The company reported that it was cash-flow neutral in September 2009 but the major growth will only come from a new revenue stream. Targeted marketing is where the company will gain huge revenues, but will the regulators in the UK, EU and US ever allow them to do that? The answer to that question remains unclear but there is going to be a ugly and dirty fight.

As a backdrop to the regulator-company discussions, comes a marked anti-facebook rhetoric. The query on Google of “how do I delete my Facebook account?” (the answer is with considerable difficulty) has become a very popular query showing concern amongst consumer themselves. Riding on the wave of anti-facebook sentiment come Diaspora , a project that looks to develop an open-source social network that eliminates the midddleman, the “anti-Facebook. They raised their required capital, admittedly not much, in under a month. Another example of the backlash is a site called somewhat tongue in cheek, Websuicide which helps users delete their presence on social network sites. Facebook blocked the site in January this year and there is current threat of legal action.

For corporations such as insurers looking to leverage sites such as Facebook, these developments are worth taking on board. Celent has been encouraging insurers to look at where social networking might play a role in an overall digital marketing strategy. This is still the case – the current debate with the regulators underlines just how much of an emerging area this is. And with all emerging technologies, the sage advice is always to proceed with caution. The coming months will bring some clarity in the rules of engagement between social network sites and regulators, but it’s hard to imagine a world without Facebook. Facebook is probably here to stay – the question will be just how big their sandpit will be.

Thoughts from SapphireNow

First impressions from SapphireNow EMEA…. SAP’s key strategies highlighted in todays sessions were applications for mobile staff (mobility) and high speed analytics using in-memory databases – particularly for real-time analytics. Real time analytics of large data sets is a key challenge for UK insurers where pricing aggregators are driving increased pressure on pricing decisions – any advantage in just in time data and analytics can mean the difference between a sale and a missed opportunity or worse, taking on a bad risk. The SAP solutions around mobile in part brought about by the purchase of Sybase, seem to be about empowering a distributed work force. Mobile staff have always been a part of the insurance industry and is increasingly something that insurers and brokers alike must address in a modern age where staff are no longer “tethered to their desktops”. Where will these innovations feature the SAP Insurance product roadmap? A question that will hopefully be answered tomorrow when I speak with the SAP Insurance team. Meanwhile Sir Richard Branson and the ex-next-president (his phrase) Al Gore spoke to the attendees on a number of topics but focussed principally on the role of the business community in helping to solve the world’s most pressing problems.

6.25.10: Celent Insurance Webinar: Innovation in Insurance: Myth or Reality?

Celent senior analysts Catherine Stagg-Macey and Nicolas Michellod Guest Speaker: Xavier Boileau, Front-End Systems/Architecture Director and Innovation Leader at Generali France This event is free to attend. Celent clients and the media will have access to the webinar’s PowerPoint presentation after the event. Please click here for more information.

6.29.10: Celent Insurance Webinar: Leveraging Social Networks: An In-Depth View for Insurers

Celent senior analysts Catherine Stagg-Macey and Craig Beattie This event is free to attend. Celent clients and the media will have access to the webinar’s PowerPoint presentation after the event. Please click here for more information.

Insurance Software Deal Trends 2010: A clearer picture of the software market during the past two years

Celent’s annual North American Insurance Software Deal Trends reports will be published in late May 2010. These reports, one focused on Life/Annuity/Health and one on Property/Casualty, examine over 2000 North American insurance software deals inked in 2008 and 2009. Our analyses conclude that insurance software buying patterns over the last two years look different than prior to 2008. An in depth analysis of software buying trends and of the impact of the down economy on vendors and insurers alike provides keen insight into what happened during the Great Recession and where insurance companies are choosing to spend their IT dollars. Keep an eye out for these reports!

Producer Relationship Management (PRM)

The full year results for 2009 are in and they reflect the continued decrease in top line for both Property & Casualty and Life & Annuity insurers. In P&C, net written premiums dropped 3.7% and life premiums and annuity considerations were reduced by slightly less than 5% over 2008 levels (excluding outlier results from two companies).

This underscores the importance of distribution management. The last Celent report on the topic, Distribution Management Systems Review: A Bigger Piece of a Smaller Pie”, November, 2009, noted a convergence in vendor offerings between commission systems and recruiting/training/licensing solutions. The next step in this evolution should be to apply the considerable expertise and process built for Customer Relationship Management (CRM) to producers in an integrated approach – Producer Relationship Management (PRM).

For example, some insurers currently track and manage the “once and done” call resolution rate for policyholders. That is, how many times can the company’s service operation leverage process and automation to resolve a customer’s issue at the time of first contact? Why not apply this principle to producers who seek help from field or home office support? Keeping the production resources productive and satisfied will be increasingly important in the next months of lean growth. PRM is a lever that is just waiting to be used.