Archives for October 2011

“Did I just Tweet my account number?”

As if financial institutions don’t already have enough to do to keep up with developments in social media! They must clearly outline company policy to employees concerning what should and should not be posted, inform agents of the regulatory do’s and don’ts, and continually scan the internet to respond to comments about their brand. Now, it is clear that they must also guide customers about the appropriate and inappropriate use of social networking when dealing with fiduciary transactions.

As usage grows, requests to employ social tools as the main communication tool between customers and their financial providers will also increase. For example, Bank of America now offers a Twitter feed to their customers as a first point of contact. Customers tweet their inquiries, complaints, solutions, etc. and these are transferred to the BOA customer resolution system at a call center. A customer service professional asked me about this recently, “How does the bank prevent customers from tweeting their account number?” My reply? “They can’t.” Last week, I was speaking with one of the largest disability insurers in the U.S. and found that their claimants are asking them to track their recovery on Facebook. To paraphrase the question received from a client: “I am keeping my family and friends updated on my progress by posting on Facebook. Can’t you just follow along?”

These are only two data points, but I suspect there are many more. Customers need their awareness raised about what information should be protected when communicating with a bank or insurer. These institutions have been dealing with privacy and confidentiality protection for decades, but usually in a context where the conversation is more controlled and private. With the broadening use of social networking for operational processes, companies must explain and remind their customers of the sensitivity of data.

I took a look at the Facebook walls of ten U.S. financial institutions and noted that there was no mention of do’s and don’ts or reminders to safeguard information on these front pages. There were plenty of contests I could enter, and a few postings on positive service experiences, but no tips on how to keep financial data safe. There were mentions of confidentiality and privacy on some Info and Guideline pages, but these are the domains of attorneys and dedicated research analysts – not likely where John/Jane Q. Customer is going be.

As social sites become more “operational” in nature, highlighting this issue in high profile places such as the main wall will be necessary, but not sufficient to protect customers from themselves. Look for leading companies to aggressively coach their customers and prospects on how best to use social tools when posting/tweeting/blogging on the same valuable real estate that they now reserve for marketing messages.

(Thanks to Jacob Jegher for an assist on this post.)

Latin American Markets Are Hot for a Reason

Let me tell you this: I love Latin America!

Latin America is often viewed as a travel destination, with good reason. Just consider its amazing beauty, from Antarctica to Mexican Los Cabos. Its history, from the time of the Mayas, Incas, and natives to modern days. It has many locations that provide unique views of history, such as Machu Pichu and Camino del Inca in Peru; Tikal and Antigua in Guatemala; even in thriving Mexico City, where at one corner from “El Zocalo” you can see how civilization evolved with the clash of three cultures. Did I mention tasty wine and food and gorgeous beaches?

But another aspect of Latin America is bringing visitors: the thriving economy. There are some exciting things going on in Latin American business, and insurance is no exception.

In the not-too-distant past, Latin America was an afterthought for many global businesses. This was a rational approach, given the constant economic turmoil, weak democratic governments, and closed economies. But things have changed. Since the early ’80s democracies have become more mature. Economies have opened, and countries have invested in infrastructure. An increasingly skilled labor pool has increased Latin America’s export value.

Consider Brazil, the dominant economy in Latin America. Since 1939, reinsurance in Brazil had been solely the domain of the government, via the Brazilian Institute of Reinsurance (IRB Brazil Re). On January 15, 2007, Complementary Law 126 eliminated the state monopoly. Also, not too many years ago, Brazil had a strict policy toward importing IT, which resulted in most technology being produced locally, both parts and labor. Today in Brazil (or any other Latin American country), you can find most of the new electronic gadgets and technology available in the rest of the world.

In the last few years Brazil and Peru have been awarded an Investment Grade note, attracting a significant inflow of money to their economies.

Brazil and the group of countries from emerging markets known as BRIC (Brazil, Russia, India, and China) have experienced phenomenal growth since 2002. Brazil drives most of the growth experienced by its partners in Mercosur (the economic treaty that groups most of the South American countries). BRIC countries are also important customers for most of the relevant countries in Latin America.

What we are seeing is that Latin America is experiencing more favorable international commerce than the industrialized world, which is experiencing very low growth rates.

Growth expected for the Latin American region in 2011 is 4.5%; the world rate will be 3.2%; and in industrialized countries, growth will only be 1.4%.

BRIC economies expect growth of 4.0%, 4.5%, 7.8%, and 9.0% respectively, helping emerging markets achieve growth of 5.8% by the end of 2011.

When you compare this growth to the 1.4% average in industrialized countries, you start to understand why many companies are looking into Latin America and emerging countries in general as a place to invest, and not just opportunistically.

To understand the impact this will have, we might want look at global share of GDP. Emerging countries had 35% of global share of GDP 10 years ago. Today they have 40%, and 10 years from now they could have 50%, equal to the developed markets.

The increase in economic activity in the region will create more opportunities for insurers because enterprises will need to protect their assets, properties, and employees. Personal wealth growth will create opportunity for insurance products related to wealth management and protection, investment, savings, and capital accumulation.

Of course there is still room for improvement to make the Latin American market even more attractive. Economies, investment policies, and money flows should be more tightly assembled and coordinated with other countries from inside and outside the region. But in general things are moving in the right direction.

At minimum, most insurers and vendors should be thinking about the potential for Latin America as an expansion market.

Count down to RDR – Are you having pre-exam jitters?

We are now in the final stages of our report on the opportunities and challenges facing the Life & Pensions industry resulting from the UK’s Retail Distribution Review (RDR – see my June blog entry ) and will publish shortly. In total, we have conducted 22 interviews from across both the industry and technology partners supporting the implementation of RDR and surveyed 5 of the top product providers to understand their level of readiness.

What is interesting to me is the seemingly low levels of confidence that some firms have in their own post-RDR business strategy and operating model. Clearly, there is still a lot of uncertainty over what the winning strategies post-RDR might look like and what this could mean for the end consumer. What is clear, however, is that the industry is taking it seriously and that there could ultimately be more than one winning strategy as the market segments further.

Even with all of the good preparatory activity underway across the industry, there is still a feeling of nervousness in the air. It reminds me of taking my exams. You’ve done your homework, you’ve focused on revising the things that you think are important (and probably aligned to what you know best in the hope that it will come up as a question), you have a clear plan in place for sitting the exam…but you haven’t yet sat the exam. Adding to the anxiety, in the case of RDR, the examining body hasn’t yet released all of the chapters in the core reference text from which to revise. Hopefully, the guidance on commission for legacy products and the time-table for cash rebates will be released by the FSA soon.

As we approach the final two months of 2011 and you work through your 2012 budgets and detailed implementation plans, why not join us together with the FSA, Focus Solutions, Altus and AT8 for an additional revision session on the 15th November 2011 at the Barber Surgeon’s Hall?

Follow this link to register Count-down to RDR – Are you ready?

1.26.12: Celent 2012 Insurance Innovation & Insight Day Featuring Celent’s Model Insurer Summit and CIO Roundtable

Celent senior analysts, Insurance Group

Admission to the event is free for Celent clients and the media, but space is limited and pre-registration by Thursday, January 19 is required. Non-clients can attend for a fee of USD $495. Please click here for more information.

Creative Disruption – The Votes Are In!

In preparation for the Creative Disruption event in Boston on November 3rd, Celent surveyed insurers to gather their views on using creative disruption to bring sustained, fundamental change to their organizations. By creative disruption, we mean implementing the initiatives that are required to fundamentally alter how insurance products are developed, implemented, and serviced.

With over 90 insurer responses, the two areas with the highest potential value for disruption are customer service experience and product design. These processes will be explored in depth at the event, as insurance IT executives present how their organizations used tools such as modern policy administration systems and agile development to deliver materially different results to their business. For more information on the event, please visit If you cannot attend, you can follow the event on Twitter at #creativedisruption.

Celent Model Insurer 2012 – Submissions being accepted

Innovation: The term innovation derives from the Latin word innovatus, which is the noun form of innovare “to renew or change” . Innovation generally refers to the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets and society. Innovation differs from invention or renovation because innovation generally signifies a substantial positive change compared to incremental changes.
Is that possible in Insurance technology? Celent thinks it is and that is why every year we recognize insurers who have effectively used new technology in areas such as policy administration, claims, distribution, or underwriting (to name a few) in an innovative and successful way. Innovation in insurance may not be as world changing as the cotton gin, the microprocessor, or the iPad, but if a technology change has a substantial and measurable change on a company’s revenues, expenses, processes or people, then it is innovation and we want to know about it.
Therefore, again this year, Celent is gathering leading real world examples of the effective usage of technology in an insurance company. These case studies are presented as “Model Insurer Components” — components of a theoretical model insurer’s IT systems and practices. These components help insurers improve performance and meet market demands. In general, they represent the way things should be done. To nominate an initiative at your company as a model insurer component, please use the following link to the submission form. Please note that vendors are welcome to assist their client insurers with their nominations. However, all nominations must include insurer contact information, and all follow-up will be done primarily with the insurer, not the vendor.
We hope to hear from you soon! Award winners will be announced at Celent’s Insurance Innovation & Insight Day in Boston in January 26, 2012.

12.8.11: Celent Insurance Webinar: Using Social Data in Claims and Underwriting

Celent Analysts Craig Beattie and Mike Fitzgerald This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$195. If you are unsure of your client status, please contact Chuck Smith at +1.617.262.3125 or Please click here for more information.

11.15.11: Celent Insurance Event: Countdown to RDR: Are You Ready?

Catherine Stagg-Macey, Senior Vice President for European Insurance and Jamie Macgregor, Senior Analyst, Insurance Group

This event is FREE for all attendees. Please click here for more information.

Action Now: Nominations for The Inaugural Asia Insurance Technology Awards Will be Closed on Friday, October 14, 2011

Celent and Asia Insurance Review are proud to announce the Inaugural Asia Insurance Technology Awards. The awards will recognize excellence and innovation in the use of technology within the insurance industry. Nominations are currently being accepted. To nominate an individual or firm, simply fill out the entry form ( and e-mail the completed form to Wenli Yuan at by October 14, 2011. Awards will be given on Wednesday, 9 November 2011 during the Seventh Annual Insurance Executive’s Summit for Strategy, Operations and Technology at Seoul, South Korea. Details please refer to Nominations will be closed on Friday, October 14, 2011. Action now!

Solvency II delayed

Getting back to December 2008, I wrote a blog post mentioning that Solvency II was under threat and that we could expect some more delays of its effective implementation. Last week the FSA in the UK announced that it is likely that the effective date of the new regulation implementation will have to be delayed by a year and enter into force certainly in January 2014. Actually this decision comes following the request from The Lloyd’s of London insurance market and the Association of British Insurers to obtain more clarity around the Solvency II implementation by FSA.

This is certainly good news for insurance companies as it gives them more time to prepare and take advantage of the Solvency II implementation not only to comply with the new regulation but also to understand the opportunities for risk management process and resources improvements and consequently make the right decision to mitigate their risks. With the change of the Solvency II roadmap I also expect from insurance companies to spend more money on preparation and change programs in order to promote a smooth transition. This delay will also allow insurers to dedicate more time to navigate the Solvency II IT vendor landscape. According to me, the Solvency II application landscape can be difficult to navigate for insurers even though some vendors have managed to bind strategic partnerships recently (acquisition of Algorithmics by IBM for instance). For more information about this market I encourage you to read the following report Celent has published last year: Solvency II IT Vendor Spectrum.

The big question mark going forward is whether the economic situation for the next two to three years will allow the regulator and insurance companies to work in a more stable environment to operate this transition.