About Chuck Johnston

Re-Grouping on Group Insurance

Re-Grouping on Group Insurance
  On Friday December 13, Guardian Life hosted a Celent Peer Networking Event focused on the Group and Voluntary Insurance market. This is the second in what has become a recurring forum on the IT and business issues insurers need to address in the evolving benefits space. The discussion was focused on the areas one might expect including the state of the market, data standards, exchanges, and enrollment and billing systems.   Key points and questions from the discussion included:
  • A discussion led by Celent around developing a capability/maturity model for the Group and Voluntary space to help ‘set the bar’ for process and technology investments. This was based on a model Oliver Wyman (Celent’s parent company) has developed as part of their Health and Life Sciences practice.
  • Guardian’s Group Insurance CIO  presented on their efforts to develop a Group/Voluntary insurance billing solution that intelligently handles multi-product, multi-system billing schemes in conjunction with existing administration systems.  Interesting discussion that highlighted that few billing vendors get the Group/Voluntary space.
  • Unum’s CIO presented on their drive to promote/develop a data interchange standard for the Group space in partnership with other insurers, starting with Guardian. While there are standards that are helpful in moving data around specific products such as ACORD and HIPPA, there is no overarching standard around ancillary benefits that enables plan and product level data exchange in a consistent and effective manner. The insurers at the table agreed to consider working with their peers to accelerate a standards process through ACORD.
  • Next was a roundtable discussion on the impact of the various types of exchanges on the market and the growing recognition that exchanges themselves are simply a tool that will be used by government, direct insurers, and broker/consultants to further multiple distribution models. The topic then turned to enrollment systems and the need to work with multiple providers of enrollment data including but not limited to the carriers own enrollment system.
  • Craig Weber, CEO of Celent then wrapped up the day with a discussion around driving innovation in the group/voluntary insurance space, citing examples of transformative business models in adjacent spaces, which sparked a lively conversation on the future of employee benefits.
  Celent will continue to host the Group/Voluntary Peer Networking at the request of our customers, continuing our focus on this rapidly changing insurance sector. For those insurance carriers that are interested in the Group space, I hope you will join us by reaching out to Chuck Smith csmith@celent.com.

Healthcare.gov: Centralized chaos vs. States right of way?

Healthcare.gov: Centralized chaos vs. States right of way?
It’s not surprising that consumers wonder why we can’t trust in an Apple or Google to deal with the technical intricacies of the US public health exchange, as my colleague Donald Light points out in the previous blog post. I also agree with him that they are not necessarily the best choices for high transaction throughput regulated systems, but do set a higher standard for consumer service than our government. What I find fascinating is that we (the American people), had any expectation that the federal government could be successful. Celent did a survey of consumer expectation of services for various vertical industries including government and the findings show consumers felt that the only industry that had a poorer potential to provide on-line service than insurance was…government. This reflects well on insurer’s pleas to be allowed to circumvent the healthcare.gov site and get direct access to subsidy data to enable direct enrollment on insurer’s web portals. Of course, that does take the competitive, free market aspect of the exchanges out of the equation, creating a huge advantage for larger carriers with strong brand and consumer mindshare.  However, people would have insurance coverage. The federal public health exchange is a frightening intersection of a regulation-driven, massive one-time usage spike; tied to a complex process and IT project requiring huge scalability, under tight timeframes and limited supervision. Arguably, the better approach was the federally funded, state exchange that reduced both scalability issues and complexity for this initiative. The 12 state exchanges (soon to be 15) that are currently enrolling citizens have their issues but nothing on the scale we see with healthcare.gov. Also, the 15 or so private independent exchanges run by commercial brokers are enrolling customers as well. Thinking like a risk manager instead of a politician, perhaps distributed deployment at the state level should not be an option but a requirement, mirroring the US state-based insurance regulatory model. This would meet the needs of the consumer in creating a neutral exchange that would enable transparent price competition, reduce the size and complexity of any one exchange, and allow the federal government to declare victory and move on to help somewhere else. Please.    

Life Insurance Sales Illustrations: Same as it ever was

Life Insurance Sales Illustrations: Same as it ever was
Blog Soundtrack:  “Once in a Lifetime” – Talking Heads A recent project caused me to revisit the business process->capability->requirement model for life insurance sales illustration systems. This is a topic dear to my heart since my first insurance job focused on sales illustration, agent enablement and new business for a life insurer at a time when US life sales illustrations may have reached peak complexity. It was the mid-1980s, interest rates were high, TAMRA(7702) had yet to be passed and new life insurance products had internal code names like “Tax Dodge”.  It was a great time to learn life insurance product mechanics, alternative distribution strategies and financial planning scenarios. Today’s insurance sales environment is certainly much tougher and one would think if anything the tools used to sell insurance would be much more powerful and finally honed, but I find that the critical capabilities for sales illustrations have not changed greatly over the last 30 years. There are certainly more caveats as no government-regulated industry disclaims less over time, there are more customer suitability rules but the underlying suitability requirements have not evolved greatly and if anything the “solves and scenarios” used by producers are less complex than before. Most of the new capabilities seen today are around mobility, focusing on tablets and smartphones, better graphics, and greater integration into the overall sales process. The most “innovative” concept talked about in the industry today is centralization of calculations through shared product configuration engines to enable a single implementation of product from sales to policy administration. This is actually more of a process improvement based on the Celent Innovation model and is  only practical if a carrier is willing to buy an end-to-end solution from a single vendor and be willing to do illustrations in connected mode. This last requirement is problematic as producers are pushing for mobility solutions that can work in no/low signal areas as well as the local Starbucks.   Why hasn’t the industry bar for sales illustration capabilities continued to rise over time? We can’t blame our technology vendors since they are generally more than capable of meeting new requirements in other application areas, if the market demands them. The problem lies within that demand, as the insurer’s approach to the individual life insurance market has not evolved. Celent believes that distribution paralysis and the continued belief that consumers must be heavily persuaded to invest in life insurance before they will buy, has stifled innovation in life insurance distribution which then depresses the market for innovative technology in the space. eApplication probably has the most traction in transforming life insurance new business today, even though the concept has been in existence for many years. So are we doomed to illustration mediocrity? No. Celent believes that the insurance industry is on the cusp of significant distribution change driven by connectivity/mobility, big data, changing consumer demographics and the dynamics of financial planning that will require innovation in life insurance illustrations around complex scenario planning, on-plan financial tracking and real time information requirements that will require greater “solve” capability and data integration than before. And I suspect many of the sales illustration vendors look forward to a more dynamic and competitive market where they differntiate through thought leadership in distribution transformation. “Letting the days go by/let the water hold me down…Same as it ever was…” Credits – Chris Frantz, David Byrne et. al.  

Insurance Trade Show Musings: “Miles to go before I innovate…”

Insurance Trade Show Musings: “Miles to go before I innovate…”
I am back from the whirlwind of insurance technology trade shows and vendors meetings that happen this time every year, sitting in my office after getting re-acquainted with family and pets.  Every year at these shows there is a key word or phrase that rises above the noise and this year I heard “Innovation”. There were great discussions around Big Data, Social Media, Mobile and Location-based technology and of course Customer Experience, but the common denominator was insurers using these capabilities  to be more innovative. I spoke with many consulting and system integration firms that have created frameworks, methodologies, benchmarks, ideation processes and case studies to help insurers become innovative. The focus was almost always on marshaling the capabilities mentioned above to create a sea change within their business and market. (Full disclosure: Celent has an insurance innovation offering designed to align IT projects and emerging technologies with insurers innovation goals.) It would seem innovation should be easy for insurers with all of these great capabilities, processes and good advice, but as seen in our recent CIO survey (2013 North America Insurance CIO Survey: Pressures, Priorities—and Innovation), insurers are struggling with an effective approach to innovation. It truly seems like a long road, cold road to insurance innovation. I believe the problem lies with that great oxymoron, Common Wisdom. Here are three of examples of Common Wisdom from the shows that stand out as blocking innovation.
  1. “Life insurance is still bought, not sold and needs an agent”
  2. “Big data can wait. I need to get internal data fixed first”
  3. “Life and annuity insurers don’t need a mobile platform. Transaction volumes are too low.”
Each statement seems reasonable. Each statement has plenty of industry insiders nodding in agreement. Each statement is wrong. Here’s why: 1) “Life insurance is still bought, not sold and needs an agent” Life insurance is a natural part of any person’s financial planning process. As Millennials (the segment insurers need to capture) become more focused on financial planning and retirement, life insurance will fill that gap younger people always have at the beginning of their investment life-cycle. In financial services like other product categories, Consumers are becoming more inclined to do research and buy direct in many product categories as long as transparency and simplicity are part of the buying experience. For insurance and wealth management  it’s about end life goals, not the details of the insurance product. Personal lines P&C figured this out long ago, it’s not about the insurance, it’s about buying the car/house/boat.  Insurers need to increasingly position their products as part of the consumer experience, not the product experience, invest in simplification in depth to ease the buying process, and life insurance will be bought as part of the package. 2) “Big data can wait. I need to get internal data fixed first” If getting internal data fixed is the gating factor to doing a Big Data project, don’t bother to order those petabytes of storage, ever. Insurers have been doing data management and cleansing projects for decades and the state of industry data has gotten better but is far from “fixed”. In insurance, Big Data will include external data which in many cases will have better veracity and accuracy then internal data, actually creating a more accurate picture of the customer. Even social data, which naturally has inconsistency and veracity issues often has a more timely view of the customer and insurance ecosystem than internal data.  Remember the more data you are processing, the greater potential for cross reference and use of statistical tools to actually increase overall accuracy. No reason not to start now except inertia and Common Wisdom as an excuse. 3) “Life and annuity insurers don’t need a mobile platform. Transaction volumes are too low.” While it is true that most people will not stop on the street corner in Manhattan to make a beneficiary change (maybe if you just avoided a mugging?), it is critically important for life insurers to participate in the mobile experience. Most life insurers consider themselves an important part of the wealth management industry and the wealth management industry is focusing more and more on having a mobile presence. This was recently documented in the Limra study “DC Plan Providers Go Mobile” where defined contribution players are very focused on a mobile platform not because there was a need for great “street corner transaction” management but because they recognize that that’s where their customer base was doing a lot of their life management including financial planning. As sales of traditional computers sag and smart-phones and tablets continue to grow as the primary electronic interaction point, insurers who don’t play in the mobile space will suffer huge brand risk. In some ways, forcing a consumer to a computer based browser to do life management work today is like forcing a bank customer to come into the branch for standard transactions. Bottom Line: I specifically picked these three examples because in each case,(online buying of life insurance without an agent SELLING, Big Data in insurance, and leveraging mobility and local context) the technology capability is available today. Insurers need to move past Common Wisdom, be willing to accept some creative disruption in their world and actually use these capabilities to create some innovative business advantage.   And the sleigh ride continues… Thanks to Robert Frost “Stopping By Woods On A Snowy Evening”

Process vs Content in the Insurance Application Space: It's the IP, silly.

Process vs Content in the Insurance Application Space: It's the IP, silly.
I was recently listening to keynotes at Pegaworld 2013 and after hearing Eric Martinez, EVP Global Claims, Operations and Systems at AIG P&C talk about his experiences in business and IT consolidation, it sparked a thought about the insurance software business in general. The average age of insurance core technology systems across the industry is quite high, arguably because of the amount of insurance specific intellectual property found in those systems. This has led to a real technology risk for those systems around flexibility, cost and ultimately, viability. They continue to hold the high ground against business process management (BPM) vendors with lightweight industry-specific frameworks as insurers did not want to re-invent the insurance IP wheel, so to speak. There are a number of new insurance core systems vendors entering the US insurance market either as startups or from overseas, creating configurable off the shelf (COTS) software based on new technology with great interfaces, easy to use configuration tools and integration with the latest trendy, cool stuff (i.e social, mobile, holographics, time travel…). The only thing they are generally light on is insurance specific, regional intellectual property and functionality, assuming customers will quickly and easily configure those insurance business rules in the vendors amazingly user friendly config tool. I am guessing  these vendors have never implemented US life insurance Reg 7702. These vendors are at great risk of losing differentiation from technology platform vendors with industry vertical process frameworks that will tend to have better rules and tools simply because their broader addressable customer base can drive larger R&D budgets. Building good COTS industry specific software is always a trade off between investing ahead of the curve to include specific regulatory and product functionality, and also meet the technology standards set by the industry to ensure usability, integration and the other benefits of modern technology. However, as my colleague Craig Beattie said to me recently “Once you meet that technology bar, forget it and worry about domain knowledge and delivery”. Bottom Line: Carriers seeking new solutions must dig deeply into the IP supplied with modern insurance software solutions to be sure they understand the commitment required by IT and the business experts to fully deploy these solutions. Insurance software application vendors must continue to walk the line between technology investment and domain investments to win market share. The BPM technology vendors will win a significant number of deals, continuing to enhance their vertical frameworks, and the bar keeps getting higher.

A Tale of Two Cities: Insurance Peer Networking Week @ Celent

A Tale of Two Cities: Insurance Peer Networking Week @ Celent
The week of April 22nd was something of a landmark in the Celent Peer Networking process. For the first time, we held two events in the same week; the first in Wellesely, Ma. focusing on Group and Voluntary Insurance, and the second in Columbus, Oh. with a focus on Innovation across business lines. I was fortunate to be able to participate in both events and will give you a summary of the events which really speak to the depth and breadth of the issues we are discussing with insurers today. Tuesday April 23rd, Wellesley, Ma. – The Group Experience Sun Life Financial was kind enough to host this session in their offices and representatives of eight insurance companies focused on the Group and Voluntary Insurance markets joined Karen Monks and I to discuss the changing Employee Benefit space.  We used some concepts from the recent Celent research note “US Group and Voluntary Employee Benefits: Changing Markets, Changing Technology” to kick off the discussion. Key points and questions from the discussion included:
  • How the Patient Protection and Affordable Care Act (PPACA) disrupts the current distribution/carrier détente, making direct to consumer and alternative distribution a more attractive option
  • IS PPACA creating an opportunity for cradle to grave products more strongly aligned to key lifecycle events that require less broker planning/intervention?
  • Can exchanges really disrupt the Group/Voluntary market when PPACA is major medical and dental only? A discussion of state sponsored ancillary exchanges and private exchanges ensued.
  • Enrollment was a key issue for all the carriers in the room and we discussed where enrollment fits in the sponsor/broker/carrier world, how carriers continue to promote brand through third party enrollment and service providers, and how carriers should architect for enrollment and self -service going forward.
  • One of the carriers led a discussion around the specific challenges Group carriers have in handling billing.  While there was an in depth discussion of specific billing issues for the Group market the big issues fell into three major categories:
    • Data Management
    • Lack of standards
    • Convergence of Group and Voluntary products
Karen Monks finished the day with some Celent data from two recent reports,  “2013 North America Insurance CIO Survey: Pressures, Priorities—and Innovation and  “IT Spending in Insurance: A Global Perspective” Karen highlighted the current state of the life insurance industry across segments and talked about the opportunity in the Group space to create a more interactive, four-season approach to Employee Benefits. Karen then spoke about IT spend in insurance and then dove into the issues CIO are thinking about today and in the future.   As we wrapped the day, the insurers decided we will maintain the “Group of Group Insurers” as a focused segment within our PNE process and will meet again in the fall.  For those insurance carriers that are interested in the Group space, I hope you will join us by reaching out to Chuck Smith csmith@celent.com.   Thursday April 25rd, Columbus, Oh. – The Innovation Agenda Nationwide Insurance graciously sponsored the 2nd Peer Networking Event of the week. Mike Fitzgerald of Celent led the event, where we were joined by representatives of 7 carriers from both life and p&c lines of business. This session was again a little different from the typical Celent Peer Networking Event as we focused on Innovation as a topic and did an abbreviated, public version of Celents Innovation workshop. This workshop helps insurers understand how their current IT project portfolio aligns with their business goals and appetite for innovation, get a sense for the investments they are making by business driver sector and create a common language around innovation for the enterprise. The insurers took away some new ideas around innovation, a new model for discussing and categorizing initiatives and some new organizational ideas about managing the innovation process. This will be an evolutionary process for most insurers as fostering innovation within a corporation may be the hardest task an executive has before them. Key points covered were:
  •  The need to separate emerging technologies from business innovation: Emerging technologies can be great enablers of insurance business innovation but are not in themselves innovative from an insurance business perspective.
  • For best results, differentiate between improvement, innovation and disruption: Most of the people in the session had little problem with differentiating insurance status quo (of which there is a lot) and disruption (of which there is very little). Finding the line between improvement and innovation was much more difficult. The difference is meaningful for insurers to make informed choices about the allocation of their scare resources.
  • Using a portfolio discipline can be challenging: We broke into groups and gave the attendees the opportunity to get hands on experience with the Celent Innovation model. There were a variety of experiences. Some found it harder to break projects down by level of innovation; others struggled with categorizing by driver sector.
  • An insurer presented their structured model for driving innovation using a centralized innovation-funding model. Their model is an outgrowth of their strategic planning process and is still evolving, with a current focus on ensuring the ideas are captured, managed and evaluated against current business need and opportunity. There was a lot of discussion of sources of potentially innovative ideas and how to ensure top down ‘great ideas for innovation’ from senior management don’t drown out other sources of ideas. There was also discussion about decision-ing lifecycles and the need to never discard an idea out of hand, both to ensure a positive environment for fostering new ideas and because some ideas need to wait for the right climate and business environment to be successful.
Overall the PNE attendees found the exercise useful in helping them find a common language to talk about innovation and avoid some of the common traps one falls into when trying to drive innovation.   We hope you will join us for a PNE event. We are always looking for hosts and again  if you would like to sponsor a Peer Networking event please reach out to Chuck Smith csmith@celent.com.  

Agoraphobia and Insurance Cloud Models: Don't Be Afraid to Play Outside

Agoraphobia and Insurance Cloud Models: Don't Be Afraid to Play Outside
The insurance industry is currently engaged in an important discussion about the potential opportunities and risks presented by modern cloud architecture. Insurers have a continuing need to reduce operational costs, increase flexibility and most importantly become better at communicating and integrating with partners and customers. Cloud computing models have the potential to help in all these dimensions and can potentially have enough impact to fuel disruptive business models. Unfortunately, there is a recent trend toward labeling private clouds as less risky than public clouds and hybrid clouds as a reasonable compromise. This is an example of cloudy thinking (sorry!) designed to maintain the current architecture and business status quo and does a disservice to innovative technology and business models. Celent believes that over the next 5+ years, insurers will naturally move to an “outside in” architectural model that that aligns well with a hybrid cloud model and, for some classes of carrier, a public only model. Private clouds adopt the services-based model which enables service reuse and enterprise process and data consistency, but only draws upon internal services. This is an incremental improvement for insurers, more efficiently organizing resources for extended private networks that often pre-date the public internet. The biggest value driver for private clouds is the ability to consolidate resources and systems across business units and geographies, which is great if you have consolidated those systems. Among insurers, HCM and financial systems fit this model well, core systems not so much. Insurers assumptions that these private networks are safer is predicated on the idea that insurers are better at network security, infrastructure management and disaster recovery than the public cloud infrastructure providers, which is unlikely. There are appropriate uses of private clouds, especially in interim IT architectures, but beware of private clouds as a key element of your longer term IT strategy. Public clouds are generally used as Software as a Service providers of a specific application or suite of applications that are somewhat configurable and maintain data security and privacy for each customer in a multi-tenant model accessible over the Internet, possibly through VPN. Like more traditional ITO outsourcing, the customer needs to do due diligence on the vendors technology choices and roadmap, infrastructure investments and security models to ensure long term vendor viability. Public cloud based SaaS applications are very useful for very specific applications that require minimal configuration, widespread access and limited integration into larger workflows. Generally, public cloud applications do not integrate well into other applications without extensive API work and work arounds. In many cases, public cloud applications were introduced to the enterprise by business units to bypass IT budget issues and work queues and are not part of the Enterprise Architecture. Note that for small companies or startups, public cloud based SaaS providers can make sense as virtual IT, IF the carrier can get past the idea that most of their business processes and concomitant IT systems are not significant business differentiators. Hybrid cloud models that are designed to integrate ‘best choice’ public services and carefully chosen internal services using a robust business process management orchestration tool to manage across an extended bus architecture are the best choice for insurers seeking innovation, cost control and risk reduction. Insurers currently use a wide variety of external services, for rating, underwriting, service fulfillment, social media, mobility and analytics. A properly implemented hybrid model that is agnostic as to where services are fulfilled, can enable insurers to reduce costs, focus on core competencies, extend distribution networks to non-traditional channels and explore new business models.