Archives for July 2011

An IT decision framework for cross-border expansion strategy

Insurers desiring to expand their activities in a new geography are always faced with the dilemma to choose between different alternatives in terms of policy administration system deployment, which in general are the following: – implementing a new system (here the build vs. buy debate enters into play), or – deploying an existing system already running in one of their entities. Of course both of these alternatives trigger specific choices for instance the buy choice will force insurers to choose between going for a best-of-breed or the package approach. But in general insurers have a good view on these alternatives and tend to identify clearly which decisions imply specific considerations around PAS vendors or IT services vendors selection. On the other hand, I think a majority of insurers forget to consider the big picture prior to making a decision between the two generic alternatives mentioned above. According to me, they just forget the primary value of IT, which consists in enabling insurers gain competitive advantages. Indeed, in many of my conversations with insurers I have noticed that the main elements taken into considerations in such a situation are internal technology issues and seldom related to the competitiveness of their business model. To me there is an important high-level analysis that needs to be performed by insurers prior to making any specific decisions around the implementation of a system when expanding abroad. This framework mixes an analysis of the target market’s competitive landscape using the Michael Porter’s five forces model and the insurance value chain as shown in the following figure: Source: Celent adapted from Michael Porter’s five forces model This model helps insurers identify key elements that will influence their decision to implement a new solution or deploy an existing solution through critical questions: Can our information system reduce the power of our business partners?: if we take the example of a UK online insurer targeting a continental European market (whose online insurance market is at an early development stage) for instance, considerations around the importance of aggregators play a crucial role. Is it strategically sound to already use a system facilitating communication with aggregators in a market where there are almost none or where aggregators are not that powerful? Can our system help us better compete versus target market rivals?: this question implies specific discussions around the benefits derived from a modern policy administration system for instance. A key related question would be whether time-to-market is as important in the target market as in the insurer’s domestic market. Getting back to the example of a UK online insurer desiring to enter the online market in a continental European country, time-to-market might not be as important as it is in the UK. Can our system contribute to reduce customer bargaining power?: are there features we can offer to our target segment of customers in the new market that would prevent them to switch to another insurer or help us acquire more easily new clients? Even though some markets are not as mature as the UK market in terms of online insurance, there are some continental European countries where consumers just like using portals and have all their communications with their insurer streamlined on a single e-platform for instance. Can our system contribute to reduce barriers to entry or increase them for potential new comers on the target market in the future?: often insurers expanding in a new geography try to replicate what has been successful in their domestic market without investigating how this success could become just more than a success but also a clear barrier for other competitors in the target market. IT has its role to play here since it is often an innovation enabler. Can our system help us compete against potential substitute products? bancassurance is an interesting example here. Banks try to sell insurance products that are marketed as investment products and insurers sell investment or saving-types of products that are marketed as insurance products. Even though product types are often the same, the perceived value from customers tend to differ. In this case, a flexible product configuration tool will be important in order to allow an insurer to create innovative products mixing different types of riders for instance in order to counter the bank offering. The interesting thing with this model is it applies to different contexts and situations and I recommend insurers to use it in the frame of brainstorming sessions and high-level strategy discussions when planning an IT alignment programme related to an expansion in a new geography.

11.3.11: Celent Insurance Event: Creative Disruption: A Core Systems Strategy Workshop in Boston, MA

Celent senior analysts, Insurance Group

Admission to the event is free for Celent clients, but space is limited and pre-registration by Thursday, October 27, 2011 is required. Non-clients can attend for a fee of USD $695 ($595 if you register by Friday, September 9). Please click here for more information.

Key European GI Policy Admin Report published

The European Insurance team has been working hard over the Spring and Summer to produce one of our key reports Policy Administration Systems for General Insurers in Europe 2011. It’s a topic of great interest to insurers wanting to replace their core underwriting system, and vendors wanting to have a view of the competitive landscape. This report uses Celent’s ABCD vendor view, which is a standard representation of a vendor marketplace designed to show at a glance the relative positions of each vendor in four categories: Advanced technology, Breadth of functionality, Customer base, and Depth of client services. The report also has the first four PAS systems XCelent Awards for Technology, Functionality, Customer Base, and Service. Since the first report in 2005, activity level has remained high among both insurers and policy administration system vendors. In the two years from January 2009 to January 2011, over 130 insurers had licensed a new policy administration system. Since 2007, the UK market has seen seven new entrants primarily from the United States. This adds to an already crowded space. And of these vendors, most (50%) are small with less than 10 clients and under $10 million in annual revenue. So the vendor market remains fragmented and challenging for the insurer buyer to navigate. Recent acquisition announcements of Accenture/Duck Creek and Sapiens and IDIT are not surprising. We can expect further consolidation in a tough market. Look out for the upcoming European PAS deal trends report which will explore this trend in more detail.

Slaying The Keyboard Dragon

That sound you hear is me, tap dancing on the grave of my iPhone keyboard. And this is not a comment on the iPhone, per se. I love my iPhone, and my Blackberry before it. But let’s just say that neither machine was friendly to my fat thumbs.

The solution? Two applications by Nuance Communications. The first, Dragon Dictation, is a tool that converts dictation to text and then places the text conveniently in your application of choice. Apps such as SMS, e-mail, and Twitter are integrated, or you can cut and paste anywhere. Once you get used to dictating, Dragon allows you to express yourself quickly and easily. Due to the length and “normalness” of my writing, my friends assume I’m on my laptop, when in reality I’m on my iPhone. Cool.

Now Nuance has done it again, with Dragon Go!, an app that extends the dictation model. This time, the target is processing typical commands on your iPhone like reviews, searches, and directions, and pointing you toward best-fit solutions. For example, you can dictate “find sushi near me,” and Dragon Go! will 1) determine that you’re looking for sushi; 2) direct you to a pre-filled Yelp! Search for reviews of local sushi restaurants, 3) provide a phone listing of appropriate restaurants; 4) provide a Google maps page where possibilities are highlighted, and driving directions are a click away; 5) set up an Open Table page in case you want to make reservations; 6) open a Wikipedia page about sushi.

If that all sounds too confusing, it’s not. The app uses a clever tabbing system to show your options, and the most likely destination is always the first one opened. Plus, the integration to the standard apps like Yelp! and Google Maps is good: you don’t have to figure out what to do with your transcribed commands because Dragon Go! does it for you.

You can also dictate a command and a target web site, if you know what you want. So saying “malwarebytes on” takes you to CNET’s mobile application, showing search results for “malwarebytes.” Currently, Dragon Go! appears to support almost 200 websites in this directed search mode.

The company says Dragon Go! uses natural language processing techniques (think IBM’s Watson supercomputer) to figure out what you’re really trying to do. I’m not sure how sophisticated this functionality really is, but for what I do on my phone, it’s plenty sophisticated. In my tests, results of dictated searches were highly relevant.

But what does this all have to do with insurance technology, you’re asking? I present it as more evidence that user experiences and tools are changing for the better, in both subtle and dramatic ways. The subtle side includes things like better integration across sites, and between channels. Plus user interfaces that are so effective that they don’t require manuals. The dramatic side is intelligent speech recognition, built into your applications. Twenty years from now will we even have keyboards on our devices? Probably, but I’m certain they won’t be the interaction tools of first resort. Whether you’re an insurer or a vendor, you need to jump on this kind of thinking to stay competitive.

Accenture announces Duck Creek Acquisition

This is a great move for Accenture and Duck Creek. And it will create real benefits for global property & casualty / general insurers. Duck Creek brings its well regarded, modern, and highly configurable policy administration and rating systems to the growing Accenture Software unit. Duck Creek will benefit from Accenture’s global global insurance client base and relationships. Accenture Software’s current portfolio of product configuration, underwriting, claims, and policy administration will be strengthened by the addition of Duck Creek’s software, as well as by Duck Creek’s strong market acceptance in the past few years. Bringing one successful organization into another always brings challenges, but both groups have good people who should be able to recognize and work through the inevitable product and organizational issues.

8.26.11: Celent Peer Networking Event: Evolving Cloud Computing & Legacy Modernization Strategies in Des Moines, IA

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

Hey Facebook and Google, why I'm Liking it and looking forward to +1ing it

Perhaps it’s because I like technology, because I was born into an age of unprecedented technological advancement, because I’m curious or simply because I’m too lazy to keep in touch with folk but I have to say I love social networks. For me they’re a tool that allow me to keep folks up to date and to keep track of what friends and acquaintances are up to. The whole thing was brought home to me recently when I was tinkering with and talking to my family about my extended family. On a whim I had a quick look in Facebook for my Mum’s cousin and found her, alive and well in Australia. A few messages on Facebook later and I discovered she’d had a few children and there were grandkids dotted around Australia and the US. The real value of Facebook came home to me when I was able to sit down with my 3 year old boy and show him the pictures distant family members had shared and show him where they lived. All this and I can keep them up to date without doing more than i do today – got to love Facebook for that fire and forget, status update to everyone feature. So why use the Facebook Like button? I think about the Facebook Like button in a similar way to Amazon’s suggest feature. Every now and again I go on Amazon and tell it things I would like to get, things I’ve purchased and even rate some of the things. This investment pays dividends in relevant suggestions from Amazon on books and other items genuinely of interest to me. Facebook Like allows me to share likes with my friends and allows Facebook to suggest things I might like, so recently it suggested a bunch of my friends like Terry Pratchett’s Facebook page (I’m a fan of the UK’s most prolific author) and I happily discovered a new book is due out shortly and some of the other activities Terry is up to. For me Tweeting, Updating, Liking, Following, Friending – it’s all about filtering the wealth of information out there to find the bits I’m interested in quicker. I make investments by creating content and sharing it – like this blog post, and for my very small effort I am typically rewarded ten fold. This appeals to the lazy efficient part of me. This is how many (though not all) of my friends are using social networks today. There are issues with all this though. Different groups of people are interested in different things – I know colleagues, ex-colleagues, friends, family, folks who live in my village, people from university, school – people interested in games, technology, mobile phones, insurance technology and wierdoes as Craig Weber described them. Oddly enough I don’t know anyone who is all of these things yet these networks treat them all the same. To some degree using Facebook for some things, Linkedin for others, twitter, skype, etc. kind of works but this presentation on a version 2 of a social network really spoke to me. Google have just announced Google+ – something I’m looking forward to trying out because of a few key features:
  • circles – group friends in different ways so you can share content but only send it to those who’ll be interested. I’m looking forward to creating the wierdoes circle
  • sparks – a feature that claims to go and find content for your interests and pull them together – awesome – why search when the relevant web content can come to me?
  • hangouts – 10-way video chat! Need I say more.
Google+ is in it’s infancy and the literature lacks some of the business focus but I’m sure Google+ will find it’s way into Google Apps for Enterprise in due course. What should an insurer take away from this? The hidden subtlety here, and the reason Google has been forced to respond to Facebook with Google+ lies in sparks, or Facebook like suggestions or Amazon suggest. Internet users are moving away from searching. Brands focussing solely on search engine optimisation will lose out, as will company’s focussed on search. In the future systems will suggest content, reviews, products, brands and insurers to customers based on their behaviour and social circles. Whilst today’s drive to get Likes and reviews seems shallow and immature, it points to a fundamental shift in the role of the Internet in driving the acquisition of new business. It’s hard to say where all this will fall but a few things are clear:
  1. Whether we like them or not facebook and social networks in various guises are here to stay
  2. Google has re-entered the social network space, even if it’s not successful (like orkut?) the new features will change other social networks
  3. Social networks and they’re features are changing the way we interact with the world, each other and with insurers. Like Google, the insurance industry will be forced to respond
For more look at our coverage of social, read why Craig Weber isn’t using Facebook and look out for more on the value of Facebook pages and the social internet for the insurance industry in future posts and research. I’m off to tweet, like, post and +1 this blog post.