Archives for October 2010

11.3.10: Celent Research Webinar: Celent’s XCelent Awards

Bart Narter, Senior Vice President, Celent’s Banking Group

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.

Is the death of the Insurance CIO possibly around the corner?

It was during a conversation over a year ago someone raised the possibility of the “best-before-date” of a CIO. He made the point that in 10 years time, IT would be a commoditised service consumed as and when it suited the business. He was really pushing the envelope – he meant all of IT from infrastructure services through to core insurance applications. I nodded sagely, as analysts do, and agreed with him in the principle but not on the time frame. 10 years… surely not.

The conversation was with a UK CIO of a mid-sized P&C operation and it’s been replaying on my mind recently. Against the backdrop of increasingly meaningful conversations about cloud, the idea of an IT organisation being commoditised to the point of removing the necessity of a IT management structure suddenly seems real.

There are two interesting case studies. Firstly, the UK Royal Mail moved from an internally managed mail system for 37,000 users, to an external public cloud by moving all the users to the Microsoft cloud. That’s a significant and meaningful change in strategy for a large organisation such as Royal Mail. The CIO said it was driven mostly by a need for agility rather than cost-savings. The Royal Mail had decided to focus on delivering parcels and letters, and let an external supplier deliver internal email via the cloud.

The second is an insurance specific test case. A UK insurer is testing a policy administration system in the cloud. This in itself is significant – this is a large insurer testing out the idea of a core system in the public cloud. It’s still under test but the insurer is excited about what this can mean for their agility in IT delivery.

With the growth of traditional sourcing models, it’s easy to accept that infrastructure could be moved from a private cloud with a traditional hosting company into a public cloud. What’s much harder to get agreement on is a vision of the world where core systems live in a public cloud. And there is good reason for this. Regulators, customers and insurers alike will have concerns over security and data privacy. There will be concerns about being tied to a large cloud provider with little interest in commercial issues. There will be (and have been in the cases above) some hand wringing over the gap in SLA’s delivered in the cloud versus what traditional sourcing models might offer.

The examples suggest an inexorable move towards the commoditisation of IT. It may well be too early to talk of the death of the CIO, but there is little doubt that the responsibilities of a CIO could shift towards supplier management as cloud offerings mature and become a viable solution to new outsourcing models.

The Good and the Bad of Today's "New Normals"

I’m enamored of Donald Light’s recent report about the “New Normal” for insurers. (For the summary, click here.) It does a nice job showing how the lukewarm economy is impacting insurers, and should be reflected in their IT strategies. It’s a sobering picture, in many ways.

But for those of you who make a living in some part of the insurance industry, all is not lost. There are other new normal factors in play that should help to balance out the doom and gloom scenarios being driven by the economy. For example:

We’re really getting somewhere with this Internet thing. The wry tone behind that lead stems from the fact that it has clearly taken us longer to embrace the Internet than it should have. On the other hand, every insurer I talk to now reflects Web-driven customer behaviors in their strategies. This was inevitable, because people of all ages are now Web consumers. But it also produces some efficiency opportunities, like replacing paper with emails and text messages. And replacing snail mailing of forms with guided Web sessions that create clean streams of data. This is good news for insurers, and getting better.

As consumers, we’re pretty darn reachable. I just got an email from my mother-in-law (she’s a well-intentioned email forwarder, and an example of my previous point) saying that my cell phone number is about to become fair game for telemarketers. As dreadful as that sounds, it reminds me that I can now have trusted, known providers reach out to me virtually anywhere I am, 24/7. If my auto insurer calls me, it could well be that I forgot to pay my bill, and I will be grateful. But if they want to deliver a clever product pitch at the same time, I just might say yes. Good for me, good for my insurer.

Coffee brings us together, despite the calories and the cost. I probably drink too much coffee. But I totally buy into the thinking that a simple pleasure now and then is a good thing. So imagine my surprise when I pulled into an oddly orange coffee shop in Chicago and discovered that it was a front for…ING Direct? Now, I did not buy insurance from ING that day, even though the caffeine (and a biscotti) put me in a good mood. But there were lots of people there, and someone probably did. Or will because they snagged some info while they were there. The point is that new business models are emerging, in perfect sync with changes in consumer behavior. Coffee and free wi-fi are influential, and smart insurers will leverage that fact.

So next time you’re relaxing in a cyber café, have a latte, fire up your laptop, and check out Donald’s report if you can. It’s important and interesting reading. But remember that you’re part of a number of new normals, and some of them are very good for our industry.

When did software turn into Apps?

The rise of the App store and the many copies have demonstrated that there was clearly a gap in the market, but a gap in the market for what? There have been attempts at software stores similar to the app store before, Microsoft’s Store and Direct2Drive are examples of online software stores that allow the download of software. The key difference with the App store comes from three key features. Firstly the App Store and recent clones integrate a payment scheme that doesn’t require the buyer to hand over payment details. In the case of the App Store this is payment via your iTunes account, with the Android Market through Google Checkout and Research In Motion’s Blackberry App World seeks payment through the mobile phone carrier. In the case of the new Windows Phone 7 platform money is taken through an online “Zune” account. In this age of increased security concerns on the part of consumers and PCI DSS requirements on organisations and software makers – this is a key advantage to the app store. Secondly the Apps are small. In fact small is considered better by users of these markets. In a world where instant gratification is king, Apps win over heavy software downloads. In mobile environments application software is now typically downloaded direct to the device over Wi-Fi or 3G networks. Most apps are less than 10 megabytes in size, with a typical App less than 2 megabytes. Consumers no longer expect software to do everything, rather it performs a focussed, useful function well. Mobile phones are in essence a set of applications that together meet the full requirements of the consumer, although there may be multiple vendors involved and a dizzying array of apps. The final piece of the puzzle lies outside the apps and the store that sells them. Historically it has always been difficult to buy software that is guaranteed to work as it is expected. It used to be, 20 years ago, that certain word processing software only worked with certain printers. Things have improved significantly since those days but most consumers would agree purchasing or finding software for your laptop or desktop machine is a much more worrying activity than it should be. Apples system software for the iPhone, iOS, and Google’s Android platform solve these issues. There is a well defined, secure API which the Apps must adhere to. The Apps inform users of the types of activities they will undertake – before installation. The spectre of viruses and software that performs malicious activities is protected against and software can always be completely uninstalled. Perhaps most importantly though, the apps work. So, consumers can now find free and paid for software, that meets a well defined specific need and is guaranteed to work. Not only that but they don’t need to share their payment details with all the developers in order to get access to these. As a result consumers have flocked to this new way to access software, and developers have followed them. This has a number of key implications for Insurers.
  • Consumers would never have previously bought software from an insurance company where as it is almost expected that they are able to today, although most insurers offer such software for free.
  • Staff will become less tolerant of software that doesn’t work or is slow. Software that is always on, works, is functional and responsive is the new normal.
  • Staff will be accustomed to software that is sold from different vendors but that works together, perhaps laying the ground for a different kind of technology environment where staff can pick and choose software from a known list to meet their needs.
For vendors then the obvious product strategy question is clear – when will you be getting Apps? Actually this is two questions. The first is asking when your platform will have an app for iPhone, Blackberry or Android. The second is when will third party developers be able to package apps for your platform in the same way – or in a manner similar to Facebook and Salesforce. The world of software has changed forever, insurers and vendors will need to change too.

11.1-2.10: Celent Research Webinar: Financial Links Between China and Taiwan

Celent analyst Hua Zhang 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.

Social Networking, Meet Underwriting

Our esteemed social networking guru, Craig Beattie, circulated a blog posting that he found at

It describes an internet company, Social Intelligence that monitors social networks to help companies with hiring decisions. Their data mining tool collects information from the major sites looking for behavior-based information about job applicants and summarizes what is found in a report. It uses only publically shared data and includes a review by humans to eliminate any “false positives”. There is also a service for continual monitoring of existing employees. According to the blog posting, the company makes the point that with the emergence of social networks, shareholders will expect companies to use such services to evaluate new and existing hires and reduce the liability of the company from lawsuits, damage to reputation, etc.

Celent has not reviewed this company or its solution. However, in discussing what this approach might mean from an insurance perspective, several questions arose. Will such monitoring be considered a mainstream risk management technique one day? Would an insured using such a tool be rated a lower risk than one that does not? Should the shareholders of an insurance company reasonably expect the underwriting process to include the monitoring of social networking sites, especially for the general liability, disability and workers compensation lines of business? In the past, such data mining has been blocked by regulators based on privacy issues, but if all this information is willingly made public will those objections still be valid? Social networking, meet underwriting.