The 2017 Model Insurer Nominations Start Now

The 2017 Model Insurer Nominations Start Now

It’s been five months since we awarded Zurich with our top distinguished award, Model Insurer of the Year, during our Innovation & Insight Day (I&I Day) on April 13. I&I Day has been growing and gaining recognition since its inception over 10 years ago. Over last two years, more than 250 financial services professionals joined us in New York City at Carnegie Hall in 2015 and at The Museum of American Finance in 2016 to celebrate the Model Insurer winners.

From September 15, we will be accepting Model Insurer nominations. The window for new entries will close on November 30. We are looking forward to receiving your best IT initiatives. You may be announced as a Model Insurer at our I&I Day in 2017. The Model Insurer award program recognizes projects that essentially answer the question: What would it look like for an insurance company to do everything right with today’s technology? It awards insurance companies which have successfully implemented a technology project in five categories:

  • Data mastery and analytics.
  • Digital and omnichannel technology.
  • Innovation and emerging technologies.
  • Legacy transformation.
  • Operational excellence.

Some examples of initiatives that we awarded early this year are:

Model Insurer of the Year   

Zurich Insurance: Zurich developed Zurich Risk Panorama, an app that allows market-facing employees to navigate through Zurich’s large volumes of data, tools and capabilities in only a few clicks to offer customers a succinct overview of how to make their business more resilient. Zurich Risk Panorama provides dashboards that collate the knowledge, expertise and insights of Zurich experts via the data presented.

Data Mastery & Analytics

Asteron Life: Asteron Life created a new approach to underwriting audits called End-to-End Insights. It provides a portfolio level overview of risk management, creates the ability to identify trends, opportunities and pain points in real-time and identifies inefficiencies and inconsistencies in the underwriting process. 

Celina Insurance Group: Celina wanted to appoint agents in underdeveloped areas. To find areas with the highest potential for success, they created an analytics based agency prospecting tool. Using machine learning, multiple models were developed that scored over 4,000 zip codes to identify the best locations.

Farm Bureau Financial Services: FBFS decoupled its infrastructure by replacing point to point integration patterns with hub and spoke architecture. They utilized the ACORD Reference Architecture Data Model and developed near real time event-based messages.

Digital and Omnichannel

Sagicor Life Inc.: Sagicor designed and developed Accelewriting® , an eApp integrated with a rules engine; which uses analytic tools and databases to provide a final underwriting decision within one to two minutes on average for simplified issue products.

Gore Mutual Insurance Company: Gore created uBiz, the first complete ecommerce commercial insurance platform in Canada by leveraging a host of technology advancements to simplify the buying experience of small business customers.

Innovation and Emerging Technologies

Desjardins General Insurance Group: Ajusto, a smart phone mobile app for telematics auto insurance, was launched by Desjardins in March 2015. Driving is scored based on four criteria. The cumulative score can be converted into savings on the auto insurance premium at renewal.

John Hancock Financial Services: John Hancock developed the John Hancock Vitality solution. As part of the program, John Hancock Vitality members receive personalized health goals. The healthier their lifestyle, the more points they can accumulate to earn valuable rewards and discounts from leading retailers. Additionally, they can save as much as much as 15 percent off their annual premium.

Promutuel Assurance: Promutuel Insurance created a new change management strategy and built a global e-learning application, Campus, which uses a web-based approach that leverages self-service capabilities and gamificaton to make training easier, quicker, less costly and more convenient.

Legacy Transformation

GuideOne Insurance: GuideOne undertook a transformation project to reverse declines in its personal lines business. They launched new premier auto, standard auto, and non-standard auto products, as well as home, renter and umbrella products on a new policy administration system and a new agent portal.

Westchester, a Chubb Company: Chubb Solutions Fast Track™, a robust and flexible solution covering core business functionality, was built to support Chubb’s microbusiness unit’s core mission of establishing a “Producer First,” low-touch mindset through speed, accessibility, value, ease-of-use and relationships.

Teachers Life: Teachers Life has achieved a seamless, end-to-end online process for application, underwriting, policy issue and delivery for a variety of life products. Policyholders with a healthy lifestyle and basic financial needs can get coverage fast, in the privacy of their own homes, and pay premiums online in as little as 15 minutes.

Operational Excellence

Markerstudy Group: Markerstudy implemented the M-Powered IT Transformation Program which created an eco-system of best in class monitoring and infrastructure visualization tools to accelerate cross-functional collaboration and remove key-man dependencies.

Guarantee Insurance Company: In order to focus on their core competency of underwriting and managing a large book of workers compensation business, Guarantee Insurance outsourced its entire IT infrastructure.

Pacific Specialty Insurance Company: Complying with their vision is to become a virtual carrier, meaning all critical business applications will be housed in a cloud-based infrastructure, PSIC implemented their core systems in a cloud while upgrading infrastructure to accommodate growth in bandwidth demands.

If you have completed a project during the last two years that you feel is a role model for the industry, don’t hesitate to send us your initiative here. You may be the next Model Insurer of the year.

For more information about the Model Insurer program click here, leave a comment, or email me directly at lchipana@celent.com. I’d be more than happy to talk with you. The Celent team and I are looking forward to hearing from you and meeting you in person at the 2017 Innovation & Insight Day.

See you there!

How the IoT caused the Internet of Upside Down

How the IoT caused the Internet of Upside Down
The architecture around the Internet of Things and the constraints it poses has fascinated me for a long time. The good news for insurers is integrating the Internet of Things into insurance processes has some fairly common patterns now as described in my recent report [http://celent.com/reports/emerging-architecture-internet-things]. For those with responsibility for the infrastructure of the Internet however, it is providing some interesting headaches. 
 
Upside down?
Why do I say upside down? In the early days of the Internet it was a collection of machines each with broadly the same importance connected together. As information services moved onto the Internet, followed by commerce and retail sites, banks and insurers and then streaming companies the Internet shifted more towards many machines seeking to consume from a (relatively) few machines. 
To support this demand architectures evolved to n-tier structures where data storage areas sat behind application servers, which sat behind web servers and then, not that long ago, caching servers and content delivery networks. 
The Internet has become a pyramid with a consumers machines at the bottom, hooked up to broadband geared towards downloading content quickly and increasingly powerful infrastructures delivering that content to be consumed. 
 
And then homes became data rich farms…
Suddenly homes are the sources of data everyone wants! Key information possibly of use to insurers even, now sits on devices at the bottom of the pyramid. In practice the Internet is shifting more towards the structure it had originally, but the infrastructure supporting todays services is not well suited to this new paradigm – or perhaps one that has re-emerged. 
 
In practice, most of this activity has moved from a pyramid to a less structured cloud already but software of the Internet is still catching up. 
 
So as you're looking at InsurTech firms or attending InsTech groups spare a thought for those poor architects and operations staff of the Internet and the headaches you're causing. 

Fintech is a Development Opportunity for High Potentials in Financial Services

Fintech is a Development Opportunity for High Potentials in Financial Services

What does the development of high-potential Financial Services employees have to do with Fintech? Possibly, quite a lot. 40-something executives climbing the corporate ladder, or anyone mentoring such a person, or anyone concerned with developing future leaders in financial services – this blog is for you. You have an opportunity to differentiate yourself if you act now.

There is significant energy and investment happening outside of the four walls of financial services companies. The question many incumbents are asking is, “How do we best engage with the new, external innovation ecosystem?” Catherine Stagg-Macey @Staggmacey and I just released a report that outlines a framework for leveraging this emerging business approach (Making the Most of the Innovation Ecosystem: Adapting to the New Insurtech World). The report includes insights from more than a dozen interviews with a range of players in the innovation system including internal company venture capital staff, independent venture capital employees, innovation service providers, system integrators, accelerator, and innovation lab leaders. A central conclusion is that the new innovation ecosystem will eventually mature into a form where financial services firms and startups coexist and regularly form partnerships to improve specific parts of the value chain. A few new entrants may find success as disruptors, but the predominant model will be a mix of joint ventures, partial ownership, and outright purchase of emerging technology firms by incumbents.   

This is very different from the traditional buyer-supplier relationship that financial services companies usually enter into with technology companies. The feedback we received from innovation participants is that differences in culture, process, the speed of decisions (or lack thereof), risk tolerance, and goals must be deliberately managed in order to get the most out of these partnerships.

Leadership experience on “both sides of the fence” – both in the startup and the financial services worlds – will be a differentiator. The candidate with a financial servcies background who can demonstrate an understanding of the challenges in bringing both of these very different worlds together will be very valuable. Those actively managing personal development plans in banks, insurance companies, and capital market firms are encouraged to:

  • Mentor startups though a technology accelerator that is focused on financial services; StartupBootcamp @Sbootcamp, Global Insurance Accelerator @InsuranceAccel, and Plug and Play @PlugandPlayTC are examples
  • Attend technology “meet ups” in your local area to learn about startups in your area and network your way into the community
  • Offer your services as a sounding board for new tech companies, either informally as subject matter expert or more formally as a board member
  • Communicate with your mentor and your H.R. career development resources about your goal to develop the necessary skills to effectively act as a “go-between”

The realization that such a role is valued is just beginning to emerge, so those acting now will be slightly ahead of the curve and well-positioned to step into critical leadership positions.

The Great Insurance Experiment

The Great Insurance Experiment

There is a battle going on today for the future of the insurance industry. Like other industries there are those within the insurance industry and new entrants who are seeking to test whether alternate, digital models will prevail. As a participant in the industry and an observer the intriguing thing for me is no one has proven the existing model is actually broken or that there is a better proposition out there. It seems the telematics experiment I wrote about a few years ago is expanding in focus.

I'm sure taxi drivers said the same when faced with Uber, hotels with AirBnB, the print industry, the travel industry, etc. However let's look at the benefits of digital propositions to customers and see if they apply to insurance.

Transparency
One of the key benefits of digital propositions is transparency and low prices – something that telematics and IoT propositions endeavour to deliver for consumers. The peculiar thing about insurance is that transparency and too much data is at odds with what insurance tries to achieve. Put another way, insurance is designed to hedge the risks to a population across the whole population, so that individuals pay a reasonable price and those that suffer a significant loss are reimbursed disproportionally to what they put in. Absolute data and visibility – transparency in its purest form – will reveal the poor risks and in practice deprive them of the very service they need. Good for some who will not see a loss, but not good for all and not good for society as a whole.

Propositions in this area have moved towards education and rewarding behaviours that reduce risk – the win-win for insurer and client. Many have observed that this is arguably not insurance but rather risk advice, engineering and management. Others observe that claims prevention is absolutely part of insurance and has been all along, albeit the tools of old have been regulation, law and classical education rather than the digital variants.

Existing experiments reveal customers care do care about not claiming, about limiting the impacts of a claim and about small rewards for good behaviour. Regulators have also shown they're keen that all parts of society have access to financial services and insurance at a reasonable cost. Use of transparency and data can go so far in insurance but there are limits to how far it can disrupt.

Control
Another key benefit of digital propositions is the just in time and just enough nature of them – the ability to finely control the product and as a result the costs. This is another area that is being tested in insurance with micro control over what is and isn't on cover available to customers via their phone.

The challenge here of course is that this again removes some of the hedging. By assigning a cost per item turning everything on will typically yield a higher price for insurance than a classic contents policy which offers blanket cover for items in a property or even while travelling.

The other benefit of the classic policy is that one doesn't have to engage with it. It's all well and good that one can turn cover for items off and on quickly but to really take advantage of this capability the insured has to care deeply about the level of cover or the cost.

There will be customers who want this level of control in their insurance and will actively seek it – but for the mass market a good enough policy at a reasonable price will be just fine.

The long tail
Now here we could see some disruption, or at least shake up of the market. We're already seeing some splits in the market as people interested in health rewards take up the various incarnations of vitality insurance, young people take up telematics car insurance after being priced out of the classic policies. There will be customers interested in control over their policies, customers who give up human interaction in favour of digital cost control.

In this way we might see smaller, more agile companies with lower cost bases taking their share of the market by satisfying a niche.

Conclusion
In practice, the jury is still out and the experiment still continuing. Do todays consumers want the products they have always been offered or something new? What of tomorrows customers?

Is State Farm Pre-positioning Itself for the End of Auto Insurance (and Maybe the End of Homeowners Insurance Too)?

Is State Farm Pre-positioning Itself for the End of Auto Insurance (and Maybe the End of Homeowners Insurance Too)?

Once in a while an insurance company asks me for advice—and occasionally even follows the advice which I provide.

I can say, however, that State Farm has never asked me for any advice about what they should do if the need for auto insurance disappears or substantially declines. Nor has State Farm ever asked me what they should do if the demand for homeowners insurance should take a similar dive.

Some readers may be wondering why would State Farm seek advice from your humble blogger about either topic?

Well, because I have been writing and talking about the end of auto insurance for four years. My just posted Celent Report, The End of Auto Insurance: A Scenario or a Prediction?  looks at how three technologies—telematics, onboard collision avoidance systems, and driverless cars—will depress auto insurance losses and premiums over the next 15 years.

I have also been writing and talking about the impact of the Internet of Things on the property/casualty industry for two years. Celent research subscribers can look at my reports: The Internet of Things and Property/Casualty Insurance: Can an Old Industry Learn New Tricks and Can a Fixed Cost Property/Casualty Industry Survive the Internet of Things?

So without even a word of advice from me, it looks like State Farm has pondered potential declines in auto and homeowners insurance; and decided to start some early positioning for itself and its agents if such things come to pass.

Proof Point: A new State Farm commercial called “Wrong/Right” shows a world without windstorms, traffic accidents, building fires, and emergencies. The commercial goes on to ask what about State Farm in such a world? The implied answer is that State Farm and its agents will be in the lending, wealth accumulation, and retirement income businesses. The tag line is “Here to help life go right.”

Which personal lines property/casualty insurer will jump in next?

Re-inventing underwriting: New ingredients for the secret sauce

Re-inventing underwriting: New ingredients for the secret sauce

Innovation is exploding across all aspects of underwriting and product management. New technologies are transforming an old art. But if there is one lesson to be learned, it is that carriers whose systems are not already capable of handling these changes will be alarmingly disadvantaged.  I've just published a new report looking at innovation in underwriting. 

Underwriting is at the core of the insurance industry. It is the secret sauce of the insurance industry. For hundreds of years, this process was accomplished through the individual judgement of highly experienced underwriters. Insights were captured in manuals of procedures and carefully taught to succeeding generations. 

Over the last few years, carriers have been heavily engaged in replacing core policy admin systems enabling a fundamental transformation of the underwriting process.  Gone are the days of green eye shades and rating on a napkin.  Gone are the days of identical products across the industry.  Gone are the days of standard rating algorithms used by all carriers. 

Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience.  This transformation of underwriting is enabled by the ability to use business rules to drive automated workflow, but even more importantly this is a story about the fundamental transformation of insurance through the application of data.

This report looks at underwriting and product management and describes some of the newest innovations in each area with specific examples provided where publicly available.

What you’ll see is that almost every aspect of the underwriting and product management functions are being fundamentally transformed as carriers find new ways of utilizing and applying data. Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience.

Key findings:

  • Carriers are using product innovation as a competitive differentiator and are experimenting with new types of insurance products that go well beyond basic indemnification in the event of loss.  Parametric products, behavior based products and products that embed services to prevent or mitigate a loss are becoming more common.
  • Predictive analytics are being used to better assess risk quality and assure price adequacy, as well as to control costs by assessing which types of inspections are warranted, or when to send a physical premium auditor, or when to purchase third party data.
  • Individual risk underwriting hasn’t gone away for commercial Ines, but the characteristics that are driving it are more quantified, requiring more data and more consistent data. 
  • The role of the product manager is changing dramatically to one of managing the rules rather than managing individual transactions.  This requires new skills and new tools. It also will drive changes in how regulators monitor carriers underwriting practices. 

We expect to continue to see innovative technologies being deployed in underwriting and product management over the next 3-5 years – especially in the following areas:

  • Carriers will continue to focus on product differentiation.  The Internet of Things will facilitate more behavior based products and more parametric products. Carriers will find new ways of embedding services within the product, or as part of the remediation after a claim. 
  • The role of the product manager will change dramatically focusing on deep understanding of rules.  Vendors will need to provide tools to better analyze the usage rates, the impact, and the stacking of rules. 
  • We’ll continue to see a massive eruption in the amount and types of data available.  Unstructured data such as in weather, car video, traffic cameras, telematics, weather data, or medical/health data from wearable devices will become even more available.  Carriers will invest in managing and analyzing both structured and unstructured data.  Implementation of reporting and analytic tools as well as supporting technologies – data models, ETL tools, and repositories – will continue to be major projects.
  • New technologies will create new exposures, drive new products, and generate new services.   From wearables, to advanced robotics, from artificial intelligence to gamification and big data, carriers will be applying physical technologies as well as virtual technologies to drive product development and risk assessment.

The available technologies to support property casualty insurance are exploding. Shifting channels, new data elements and tools that can help to improve decisions, provide better customer service or reduce the cost of handling are of great interest to carriers.  Investments are being made across all aspects of underwriting and product management. Staying on top of these trends is going to continue to be a challenge as new technologies continue to proliferate.  But if there is one lesson to be learned, it is that carriers whose systems are not already capable of handling these changes will be alarmingly disadvantaged.

For carriers who are already moving down this path, this report will shine a light on some of the creative ways carriers are transforming the process of underwriting.  For carriers who have not begun this journey, this report may be a wakeup call. The pace of change is increasing and carriers who continue to rely purely on individual underwriting judgment will find themselves at a disadvantage to those who are finding new sources of insights and applying them in a systematic manner to improve profitability. Wherever you sit, this rapid pace of change is exciting, empowering and galvanizing the insurance industry.

The Future May Be Closer Than You Think: Cat Bonds Traded on Blockchain

The Future May Be Closer Than You Think: Cat Bonds Traded on Blockchain

In June @JamieMacgregorC and I published a Celent report, Blockchain in Insurance: Use Cases which included a scenario we labeled “Alternative Marketplaces”. We described it as a blockchain that provided a:

shared environment for placing insurance risk, where brokers or the insured and the insurer capture the status of the risk, including exposure, risk share, and policy conditions. Smart contracts are then used to ensure collection and disbursement of premium amounts and the checking of coverage in the event of an incident. The distributed ledger acts as the record of risk placement, including layers and participants.

We didn’t expect that, in July, we would see an announcement that @Allianz and their partner, Nephila Capital, had completed a proof of concept around trading catastrophe bonds on a blockchain. http://www.carriermanagement.com/news/2016/06/15/155462.htm

In general, there are challenges with blockchain technology regarding handling large transaction volumes, managing complex rules, and delivering acceptable response time performance, but this announcement is an indication that the platform is moving forward.

The UK’s First Personal Insurance Policy for ‘driverless cars’: Too early or just in time?

The UK’s First Personal Insurance Policy for ‘driverless cars’:  Too early or just in time?

Yesterday, we received a press release announcing the launch of a new insurance proposition targeted at personal use for ‘driverless cars’ from Adrian Flux in the UK. This news arrives hot-on-the-heels of the Queen’s Speech last month that announced the UK Government’s intention to go beyond its current ‘driverless’ trials in selected cities and legislate for compulsory inclusion of liability coverage for cars operating in either fully or semi-autonomous mode.

As the press release suggests, this may be the world’s first policy making personal use of driverless cars explicit in its coverage (we haven’t been able to validate this yet). Certainly, up until now, I suspect that most trials have been insured either as part of a commercial scheme or, as Volvo indicated last year, by the auto manufacturer itself or trial owner. 

What I find particularly interesting about this announcement is that they have laid the foundation for coverage in their policy wording and, in doing so, been the first to set expectations paving the way for competition.

Key aspects of the coverage (straight from their site) include:

  • Loss or damage to your car caused by hacking or attempted hacking of its operating system or other software
  • Updates and patches to your car’s operating system, firewall, and mapping and navigation systems that have not been successfully installed within 24 hours of you being notified by the manufacturer
  • Satellite failure or outages that affect your car’s navigation systems
  • Failure of the manufacturer’s software or failure of any other authorised in-car software
  • Loss or damage caused by failing when able to use manual override to avoid an accident in the event of a software or mechanical failure

Reflecting on this list, it would appear that coverage is geared more towards the coming of the connected car rather than purely being a product for autonomous driving. Given recent breaches in security of connected car features (the most recent being the Mitsubishi Outlander where the vehicle alarm could be turned off remotely), loss or damage resulting from cyber-crime is increasingly of concern to the public and the industry at large – clearly an important area of coverage.

Given the time taken to legislate, uncertainty over exactly what the new legislation will demand, and then for the general public to become comfortable with autonomous vehicles, I suspect that it may be quite a few years before a sizeable book of business grows.  Often, the insurance product innovation is the easy part – driving adoption up to a position where it becomes interesting and the economics work is much harder.

Maybe this launch is a little too early?  Or maybe it's just-in-time?  Regardless of which one it is, in my opinion, this is still a  significant step forward towards acceptance. I also suspect that some of these features will start to creep their way into our regular personal auto policies in the very near future. I wonder who will be next to move?

If you’re interested in learning more about the potential impact of autonomous vehicles on the insurance industry, why not register here for Donald Light’s webinar on the topic tomorrow.

 

Reporting from Celent’s Model Insurer Asia Summit

Reporting from Celent’s Model Insurer Asia Summit

If 2015 was the year of FinTech, 2016 will surely be the year that InsurTech comes into its own. Celent has been presenting our views on InsurTech and emerging technologies at insurance conferences throughout Asia for some time now, so naturally we see this as a welcome—and inevitable—development.

We held our 7th Annual Model Insurer Asia Awards event in Singapore last month, with presentations focusing on InsurTech and digital financial services. Celent Research Director Karlyn Carnahan set the tone with a keynote presentation on the challenges facing insurers as customers are increasingly seeking real-time, digital interactions tailored to their personal needs and channel preferences. Karlyn outlined the steps to becoming a digital insurer and provided many insights on how insurers can embrace the digital paradigm. In the afternoon session, Karlyn also led a peer-to-peer discussion on how insurers in Asia are responding to these significant changes in the digital landscape.

We were delighted to have GoBear, one of the stars of Asia InsurTech, on the program. GoBear is an online financial services aggregator with a decidedly digital offering that is expanding at a remarkably fast pace throughout Southeast Asia. In his keynote presentation, GoBear’s CEO Andre Hesselink discussed how his firm developed their product with the goal of better serving consumers while at the same time satisfying the business needs of their suppliers, the insurance carriers. Quite the balancing act I am sure.

Celent Analyst KyongSun Kong presented the results of Celent’s annual Asia Insurance CIO survey, revealing that nearly 80% of insurers surveyed are engaged in digital transformation initiatives.

Finally, we came to the heart of the event: the Model Insurer Asia Awards themselves. This year we celebrated best-practice technology initiatives at 14 insurers, including ICICI Lombard General Insurance, Taikang Insurance, multinationals Aegon and MetLife, and online insurance innovator DirectAsia, among many others. All winning initiatives are profiled in our report Celent Model Insurer Asia 2016: Case Studies of Effective Technology Use in Insurance.

For sustained innovation, it is not only the “What” but also the “How”

For sustained innovation, it is not only the “What” but also the “How”

I read an excellent article recently by CoinDesk on John Hancock Insurance Company’s testing of blockchain in insurance. This is one of the early, public declarations that insurers are exploring the potential of this technology. Jamie Macgregor and I also explored this subject recently in the report: Blockchain in Insurance: Use Cases

There is another important angle to the John Hancock story that lies beyond the technology. In our approach to innovation at Celent, we separate the “what” of innovation (blockchain, artificial intelligence, analytics that personalize the customer experience) from the “how”. How companies execute on innovation involves building repeatable processes, incentive systems, and cultures of experimentation that establish a new “way we do things around here”. Note that John Hancock’s LOFT program provided the mechanism through which the insurer could test blockchain. Next week, month, year it will be a different “what” to feed into the “how” machine.

Beginning in the Q3 of last year, Celent research observed the pattern that leading financial services companies which have invested in the "how" of innovation are beginning to gain fast mover advantage over those that have not.  We expect to see an increasing, widening gap between those insurers which have investe in the how of innovation and those that have not. The leaders will use their innovation machines to more rapidly and effectively figure out how to make the “what” of the possible real in their organizations.