Archives for March 2011

5.19.11: Celent Insurance in France: The CIO Perspective and Adoption of Social Media by French Insurers in Paris, France

Celent senior analysts, Insurance Group

Admission to the event is free, but seating is limited. Please register as soon as possible to guarantee your space. Please click here for more information.

5.4.11: Celent Insurance Webinar: So What If There Is An App?: Consumer-Focused Life Insurance Apps for Mobile Phones

Karen Monks and Benjamin Moreland, Analysts, Insurance 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.

Some insurance companies in China have started to invest in retirement communities

Insurance companies in China apply different business model in regard to retirement business. Some insurance companies focus on individual annuity, some are extending retirement business horizontally, selling corporate annuity, group pension, and individual annuity; and some companies are extending retirement business vertically, such as enter into retirement apartment business. In China, reverse mortgages face cultural opposition and will not be popular in the next five years. The main reasons are:
  • Old people want to leave their apartments to their children after death.
  • There is no legacy tax in China.
The target market for reverse mortgages is people who have more than one apartment or no child. There is no insurance company or bank that provides this kind of business yet.
  • The possibility of apartment prices going down is the main factor that worries financial institutions.
  • Banks do not have sufficient data for life expectancy.
  • Regulations are not complete: China land usage is limited to 70 years. If it is not renewed or does not get approval, then theoretically the land reverts to the state.
So the more acceptable method for old people is to sell their apartment and move to a cheaper one. Another way is living in retirement apartments and renting their own apartments out to provide income and cover the cost. The problem is that retirement apartment facilities are not good as of yet. For this reason, some insurance companies are extending retirement business value chain, have started to invest in retirement communities. For example, Taikang Life is building a retirement community in a suburb of Beijing. Union Life is building a retirement healthcare community in a suburb of Wuhan. For more, see Celent new report Pensions in China, Hong Kong and Singapore: Opportunities for Insurers.

Mirror, Mirror – How Fair Are My Business Analysis Competencies?

The identification, communication and management of business requirements is a critical skill set in any company pursuing significant change. In order to determine the state of the business analysis function in the financial services industry, Celent teamed with the International Institute of Business Analysis (IIBA) to survey banks and insurance firms and take a snapshot of current performance in key business analysis skill areas. The survey was designed to hold a mirror up to the industry and reflect its perception of its performance. These are reviewed in a recently published report – Business Analysis Competencies: Mirror, Mirror: A Self-assessment by Banks and Insurers.

The data confirms what many people say in discussion on this topic – that skill development in business analysis is often insufficient to maintain sustained performance at sufficient levels. Very few companies rate their performance in any business analysis area as a strength. The highest rating was for the elicitation skill in banks and this level was assigned by only 21% of the banking participants. The study also collected opinions on which BA competencies are most critical to successful implementations. The good news for insurers is that both Life/annuities/health and P&C insurers report a close match between their highest ranked importance areas (elicitation and requirements analysis, respectively) and their performance. That is, delivery in these areas is ranked at or above average, indicating that investments that have been made are beginning to pay off and deliver benefits.

Many financial services companies are updating automation systems and continuing to improve business processes. For organizations that are modernizing their platforms, an expected benefit is to reduce the dependency on IT and move maintenance and some development into business analyst areas. Many software vendors are producing products which are designed to be configured, not programmed. This is intended to increase flexibility and speed in system development and maintenance. Neither group will realize its goals without solid business analysis skills. The Celent/IIBA survey identifies the specific gaps in business analysis skills in banks and insurance companies. Celent encourages financial services firms to use the results of this survey to examine their current approach to business analysis, place their bets on which areas are most important, and invest in skill improvement.

What does the post-PC era mean for the insurance industry?

Apple announced the new iPad 2 recently and proclaimed the start of the post-PC era. This is part cunning marketing ploy and part an insightful view on today’s average consumer. There was a time when people were screaming for more speed, more memory, more power – but frankly those screams now sit only with an elite few with special requirements. Today the machines are fast enough for most, having access to information, the right applications and an ever easier to use interface are most important. Increasingly computing tasks are no longer being done on desktop machines, even full size laptops are losing ground. Today many common computing tasks are being done on mobile computing platforms. Storage of large files and compute-heavy tasks are moving to unseen, hosted servers or cloud infrastructure. The man on the street consumes these services, using whatever device is closest at hand and most appropriate to the task. Increasingly, staff entering insurance companies and consumers of insurance will follow this trend. There will be no patience for slow software, no perseverance for software that isn’t easy to use and an expectation that they can interact with the insurer in a way that works for them. It may be some comfort to CIOs that in this new era, the best software and experience will not require an arms race upgrading to the best hardware available every two years. For insurers and vendors of insurance software this announcement fore-warns of a raising of the bar, of expectations of insurance software in the future that allows agents, producers, underwriters and consumers of insurance to use their device of choice and still find an intuitive and easy experience. For more information on our views on mobile and apps have a look our report E-Business Strategies for a New Mobile World and our reports on Apps.

3.25.11: Celent Insurance Peer Networking Event: Service Innovation and Tomorrow’s Insurer: Approaches to Rethinking the Systems that Support Current Service Models

Celent senior analysts, Insurance Group Alok Mehta, Allstate Insurance Boris Nitkovich, Allianz Registration is open to INSURANCE CARRIERS ONLY and is free, but space is limited. Please click here for more information.

Prediction meets Reality

In the frame of our first report about the French insurance market published in the beginning of 2008, we warned that the French government deficit and debt levels could represent a threat for the country’s economy. This was well before the financial crisis hit the European continent and its impacts on public spending. Now the problem has worsened, and even though France is still not directly fingered – as is the case for Portugal, Spain, and Italy following the Greek and Irish governments’ debt crises – the situation remains alarming.

We recently asked French insurers CIOs to tell us their feeling about their industry’s near future and more importantly whether they felt some macro-economic factors were impacting their business and growth prospect in the mid to long-term. Some of them mentioned that the French government was in serious need for more financial resources and would try sooner or later to tap savings accumulated by the French population.

It is well known in France that the government is currently analyzing different alternatives to change the current tax system. It’s been publicly announced last week that the tax shield (law stipulating that no taxpayer pays more than half their income in taxes) implemented by Nicolas Sarkozy after his election as president will be abolished. Taking into consideration the current public debt of the country a reform of the tax system is a priority that everybody should understand. Among the different alternatives currently evaluated by the government, there is the willingness to increase taxes wealth accumulated through life insurance products and retirement savings.

Our CIOs were right and the decision to tap savings accumulated by French citizens is going to impact the French life insurance industry in the coming years…

Improving Business Analysis from the Bottom Up

As part of research effort into building business analysis skills, I was talking with a manager of a business analyst department in a major U.S. bank this week. He described their approach to improving requirements collection. It struck me as an effective and practical method that I want to pass along.

Many of the models for building business analysis skills are top-down initiatives, planned and executed as part of a wider improvement program. These are often driven from a learning and development department or a special training area within the IT organization (see the Celent Report Building a Better Business Analyst – Transforming the Enterprise). This bank’s approach was more “bottom-up” and grew out of a focus on their software testing process. They improved the rigor of their business requirements documentation through automating their test scripting, planning and test case development process. As part of their revised methodology, it is now necessary for business analysts to gather requirements in a structured manner that can be automatically uploaded into their test automation software. These then generate test scripts, plans and cases. This yields increased consistency, control and structure to what previously was a very ad hoc process.

This practical development approach is valuable in that it delivers skill and process enhancements as part of the day-to-day activities of software development. For those looking for a different strategy for improving requirements gathering, getting there through automated testing may help. For those that have also taken this same approach, I would be interested in knowing what the results have been.

Risk based pricing no more… European Court over-rule essence of insurance

As a worker bee in the insurance industry, I’ve heard all the arguments about insurance companies getting the better of consumers through outrageous pricing. Usually, after a calm conversation about pooling risk, and risk based pricing, and assuming they are still awake, they start to understand. They see why a 19 year old male driver should be priced higher than his 18 year old sister. They see why annuities cost men less than women. So it has come as a great shock to all of us in European insurance that the European Court of Justice ruled this week that gender can now longer be a factor in pricing. The ruling was made as pricing differentials based on gender are deemed discriminatory. This action will have impact in several areas. There are insurers that are focused on women, such as Sheila’s Wheels in the UK. What is the future for a company with such targeted segmentation? What is likely to happen is we will see rate rises in certain age segments. Industry observers have suggested that female drivers will see hikes in their premiums of up to 30%. So the law that sets out to ensure equality, in fact results punishing the statistically less risky drivers. It is very dangerous to start undermining the essence of risk-based pricing. If the ECJ can rule against gender in risk pricing, then what’s to stop them taking the same view point on age? By some perhaps unintended quirk in timing, the ruling comes into forces at the end of 2012, at the same time as SolvencyII. We have several months to ponder the full impact, and hope the age doesn’t become the next factor in political correctness.