How do insurance providers develop an agile IT infrastructure?

Insurers have always faced the challenge of taking products and solutions to market faster and doing so at lower cost. The sources of this challenge are not new – changing partner and customer expectations, increased and new competition and demanding regulators with perhaps the addition of the current financial climate.

Insurers have risen to each challenge, offering new ways to interact with their customers, offering new products and tracking their processes against new requirements. However, warning signs loom as insurers are increasingly finding that each of these solutions involve adding something new, encumbering their infrastructure with the latest systems, applications and integrations. Insurers already suffer from heterogeneous and complex IT landscapes and many are in the throes of large, costly programs designed to simplify and reduce costs.

The challenge today is a little more specific from those in the past: How can an insurer increase in agility, speed to market and flexibility while keeping the support and maintenance costs manageable?

Insurers are increasingly realising the benefits of a Software as a Service (SaaS) approach for some parts of their IT landscape. The promise of being up and running on an out of the box solution can be very appealing for activities that don’t differentiate the insurer or are well understood. While these solutions continue to be additive, they don’t increase the load on the IT infrastructure team beyond the due diligence exercise. However, many of the areas that need the greatest speed to market are differentiating and require customisation – how can insurers achieve that without increasing complexity?

Is Cloud the Answer?
There has been much discussion about cloud and how this is changing the way start-ups and businesses deal with their IT infrastructure. Insurers exist in a heavily regulated environment and are rightly hesitant to jump on the latest technology fad to solve their problems. However, dismissing the developments in cloud and SaaS propositions altogether for their core operations may be throwing the baby out with the bath water, along with possibly the bath as well.

There is value in considering cloud-thinking or a cloud style approach to problem-solving when considering the insurer’s infrastructure. Central to enabling cloud is simplifying, standardising and above all automating activities with IT infrastructure. Once the common activities one needs to do are automated this frees up costly team members and time to look at other problems. Through automation one can keep adding new applications and solutions to the IT landscape with a lower impact on support and maintenance costs, enabling an insurer to remain flexible, agile and keep their costs manageable.

It is time for the IT department to look internally and apply the same automation and efficiency thinking of their business counterparts to their own operations. Regardless of an insurer’s position on cloud, there is value in applying cloud-thinking. Consider how automation and simplification can increase predictability, supportability and quality in IT Operations. If appropriate, take that learning and move some services to the cloud.

In practice this approach doesn’t simplify the IT landscape and move everything to one “cloud” way of doing things. Rather it accepts the insurance industries need for complexity, for flexibility in approach and seeks to enable a fast and cost efficient approach to deliver it.

 

Your customers hate your group email box (and you should too)

I’m currently dealing with two group email box issues. In one instance, I’m a frustrated customer, irritated beyond belief by the lack of response to my repeated email service requests. In the other instance, I’m the party ultimately responsible for a group email box, and I’m getting an earful from a frustrated customer. The overlay of these two, unrelated incidents is perfect: Some sort of cosmic justice is clearly being served.

Stages of Group Email Box Grief

You might be familiar with the Kübler-Ross model, which shows how grieving people progress through Denial, Anger, Bargaining, Depression, and Acceptance. I think something similar happens when any of us try to use a poorly managed group email box. It goes something like this:

  • Hope. After the initial disappointment of not finding a human being with whom we can interact directly, we console ourselves that, at least, our problem has been recognized by our service provider. By creating a named email box, the service provider is clearly implying that help is a click or two away. Got a generic question about your health plan coverage? Email coverage@xyzhealthplan.com. Need help from someone in Finance to get an expense check cut? Why, ExpenseTeam@yourcompany.com sounds like a productive place to turn. But the relief at finding such elegant, targeted service solutions is often short-lived.

  • Perplexity. After a day or so of non-response, we wonder. Did I really send an email to that email box? Did it get through? If it got through, did anyone read it? This stage is characterized by self-doubt and forensic examination. We check and recheck our Inbox, Spam Folder, and Sent Mail under the (reasonable, by the way) assumption that if the tool was working, someone would have responded by now.

  • Dismay. A week has passed. On the realization that no process could possibly take this long, Dismay sets in. In this stage, we ratchet up the pressure, typically by resending our original note with a snarky addition, like, “I really would like to hear from someone on this! Please?”

  • Anger & Activation. At this stage, we realize that help is not forthcoming. For most of us, this happens between Day 7 and Day 8. (Though my experience with them suggests that Millenials make the entire progression from Hope to Anger & Activation in as little as an hour.) We start looking for alternatives, as confidence in the system plummets. In the extreme, we try to get face to face with someone who can solve our problem (“I’m going to drive in to the cell phone store and make them solve this billing issue!”). But alternatives include calling switchboards and asking for the CEO, starting a Twitter rant, or activating a defection to other providers. None of these reactions enhance a customer relationship.

The Service Provider’s Response

As a service provider myself, I’m embarrassed to admit that emails to info@celent.com don’t always get perfect, productive responses. Of course we have a process in place that routes inbound queries to more than one person, to make sure we don’t run into out of office issues. But things occasionally fall through the cracks, due to technical reasons (e.g., aggressive, evolving spam filters), scheduling quirks (e.g., all Celent staff are in the same meeting), or simply due to human nature.

The latter category is particularly vexing. When several people are responsible for something, the real-world effect is that no one feels responsible. I’m convinced that using an info@ email box inevitably lessens the sense of accountability and responsibility that drives all effective service teams. Add in the dynamic of impersonal, electronic communicationswhich by its nature generates less empathy than a simple conversation between two human beings and you’ve got a recipe for disaster.

In this annoying age of one-to-many communication (says the blogger, ignoring the irony), there’s a strong case to be made for enabling more direct, personal connections. Many companies will resist this old-fashioned, and by some measures, expensive, view. They will go down the path blazed by online retailers, and try in vain to provide acceptable service levels via FAQ and info@ email boxes. But the price they will pay is customers who frequently progress to Anger & Activation, and then walk away grumbling.

A smarter play is for firms to foster real relationships with their customers. For me, that means going old school. Making it easier for customers to navigate to a real person who is ready to listen and willing to solve problems. I’ve told my team to plaster their direct contact info on every report, presentation, and marketing piece. I’ll keep the info@celent.com address open as a benign trap for spammers. But the rest of you are encouraged to email me directly at cweber@celent.com.

A golden day for insurance: Celent 2016 Model Insurer winners

In the historic Museum of American Finance, surrounded by golden exhibits including gold bars, a gold Monopoly game and even a gold toilet(!), the 2016 Celent Model Insurers were announced yesterday.  Part of our annual Innovation and Insight Day, we had over 150 insurance professionals in attendance (and over 300 in total), it was a great day for networking, idea sharing, learning about award winning initiatives and hearing inspiring speakers talk about the future of financial services. 

Yaron Ben-Zvi, CEO and co-founder of Haven Life, was the Model Insurer key note speaker. He discussed how Haven is using technology to reach a younger, digital-savvy customer with a life insurance experience that meets their expectations. He spoke about the journey from ideation to reality for their term insurance products which can be purchased online in only 20 minutes. He encouraged the audience to “think big but start small” and to apply the learnings along the way.

The Haven Life presentation was followed by the main event, the announcement of the 2016 Model Insurer winners. Every year, Celent recognizes the effective use of technology projects in five categories across multiple business functions.  We produced our annual Model Insurer Case Study report which clients may download here.  This year there were fifteen insurers recognized including Zurich Insurance, the Model Insurer of the Year.  Here are the winners: 

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.

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.

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.

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.

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.

The quality of the submissions this year is a clear indication the industry is turning a corner and embracing transformation, digital initiatives, innovation and valuing data analytics.  It is inspiring to see the positive results the insurers have achieved and a pleasure to recognize them as Model Insurers for their best practices in insurance technology.

How about your company? As you read this, are you thinking of an initiative in your company that should be recognized? We are always looking for good examples of the use of technology in insurance. Stay tuned for more information regarding 2017 Model Insurer nominations.  

 

Making property/casualty underwriting investments that pay off

Underwriting is at the core of the insurance industry. The processes of selecting and pricing risk and the additional operational processes necessary to deliver a policy and provide ongoing services are essential to the overall profitability of a carrier. Over the last few years, carriers have been heavily engaged in replacing core policy admin systems and increasing the automation of their underwriting processes.

Automation of underwriting processes carries the promise of improved results, but can come at a significant cost — both the hard costs (purchasing technology, implementing technology, and changing processes) and the soft costs. Change can be hard on both underwriting staff inside a carrier and on the agents who receive the output of the underwriting process.

So when does it make sense to invest in automation — or, put another way, are there pieces of the underwriting process that when automated are more likely to result in improved results? We thought it would be interesting to investigate these questions to provide guidance to carriers that are trying to prioritize their efforts.

Our goal was to understand the actual state of underwriting automation in the insurance industry. Are carriers living up to the hype in the media that implies that virtually every carrier out there has automated every step of the process? Or is the progress slower? Are carriers with older systems at a disadvantage against those who have replaced their systems with modern solutions? Do high levels of automation actually result in better financial results?

The process of underwriting was broken into 26 logical components of work. For each component, three levels were defined — ranging from little automation used to significant levels of automation. Carriers can use this report as a self-diagnostic tool by comparing their scores to the benchmarks that follow in this report. To understand what top carriers are doing in this area, Celent conducted a survey around this topic looking to answer these key research questions.

  1. What are the different components of underwriting that can be automated?
  2. Where are carriers utilizing automation in underwriting?
  3. Are high levels of automation in underwriting correlated with improved metrics?

Our key findings were:

  • Average levels of automation vary dramatically by line of business, even within the same company.
  • Personal lines carriers are more likely to be applying high level of automation in the front end processes related to automated quote, issue, and renewals — including automated communications with policyholders.
  • Commercial lines carriers tend to apply higher levels of automation for the back end including workflow, product management, rating, and reporting/analytics.
  • Workers compensation and specialty carriers tend to have slightly lower levels of automation in all aspects of underwriting but can achieve significantly better results when applying automation to processes related to analytics and service.
  • Carriers with newer systems are using high levels of automation in more of the processes. Those who have had their systems for over 15 years have had a lot of time to customize their solutions and have slightly more highly automated processes than those whose systems are between 10 and 15 years old.
  • Personal lines carriers are the most likely to benefit from high levels of automation, especially automation related to process efficiency and underwriting insights.
  • Commercial and specialty carriers benefited most from high levels of automation in processes related to underwriting insights. Generally, the best combined ratios were found in those carriers with a medium level of automation — processes that were supported by technology, but had some level of human intervention as well.
  • Workers comp carriers are most likely to benefit from high levels of automation in processes related to driving underwriting insights.

Here’s a link to the report.  You can download it if you’re a customer. If you’re not a client, ping me and we can chat.

John Hancock launches Vitality 2.0, rewarding life insurance consumers for healthy eating

As many of you know, John Hancock introduced the Vitality program to the US Life insurance market a year ago this month. At its core, the program offers discounts and earns points for healthy living. It is a program that has been offered for over 15 years in other markets, originating in South Africa. The program is exclusive, in the US Life insurance market, to John Hancock.

Today Hancock make another major announcement in enhancing the program and it directly, and positively, affects the health and pocketbooks of their customers.

The core of the new program is a partnership with major grocery chains, headlined by Walmart. Hancock Vitality members will get discounts, up to $600 per year, on health foods when they participate in the program, as well as points in the program that could reduce their premium up to 15%. This is measureable money and can go far towards offsetting the cost of the insurance. The real benefit, though, is continuing to encourage healthy living. In the case of Walmart, and likely other groceries, the savings are printed on the receipt, so the customer can be immediately aware of their savings.

Policyholders also gain access to nutrition information, at no charge, from the Friedman School of Nutrition Science and Policy at Tufts University.

Just last week, a study was released that for the first time, the number of people in the world that are obese outnumber those that are under weight.

The study also shows that China and the US have more obese people than any other countries. Given the disparity in population, this confirms what we already know – Americans are dangerously overweight.

While we would not expect that this program alone will have a measurable impact on obesity in the general population, it certainly can for Hancock’s policy holders.

For more information, see John Hancock’s press release. We will be watching this development closely as it takes off.

Insights from the trenches – west coast CIO roundtable

On March 22 and 23, Celent hosted a CIO roundtable in San Francisco that brought together CIOs from a variety of Property Casualty carriers. Sessions included presentations by CIOs and discussions on innovation, core systems in the cloud, transforming the customer experience, digital strategies, dealing with millennials and gender balance in the workplace, and optimizing the agent experience to drive growth. Some of Celent’s recent research was presented to stimulate discussion as well. The discussion highlighted the similar challenges that carriers face, regardless of size, lines of business, or geography, as they look at transformation.   Innovation Celent research shows that the population of highly digital individuals is growing and that a firm’s ability to innovate has a high impact on a highly digital agent or consumer’s willingness to work with them. Yet there are often barriers to progress as not all leaders within an organization are seen as supporting a company’s innovation efforts. While carriers see that innovation is critical to meeting customer expectations, innovation is not always seen as important to a firm’s strategy.   Carriers discussed the distinction between driving innovation processes and culture within an organization, and implementing specific innovation ideas. It was noted that employee engagement is key to innovation.   One carrier presented the program they initiated to drive innovation within their own organization with the results of improving employee engagement, driving improved financial results, and improving the speed to market of idea deployment. The CIOs discussed a variety of best practices for stimulating new ideas, capturing and triaging these ideas and rewarding employees for their contribution while moving towards implementation.   Core systems in the Cloud Activity in core system replacement continues to occur at record levels with well over half of the carriers in the industry either currently engaged in system replacement projects, or planning a future project. But these projects often take years to complete and deploy. As vendors look for ways to speed up these deployments, one option is a cloud deployment. Software vendors clearly recognize the importance of the cloud to drive their businesses forward – 50% of policy admin vendors surveyed in Celent’s recent report on cloud capabilities tell us that cloud is mission critical, and 50% tell us they offer a cloud solution.   But carrier take-up has been relatively nascent with few carriers choosing to make the leap. Almost 60% are waiting and watching while 20% are sure it’s not for them Typical concerns include data security lack of visibility into the infrastructure, concerns about difficulty moving data off the cloud, and how a cloud deployment will change the IT organization. One carrier spoke about their journey of replacing their core suite with a full cloud deployment. Specific issues the carrier faced were echoed by other carriers as core system replacements are often accompanied by a process redesign and often include a greater use of analytics to improve decisions and streamline processes.   The cultural issues can be significant and change management is key to a successful implementation. Moving solutions to the cloud also raises new terms and condition in the contract with the vendor that carriers need to understand and think through carefully before signing. But a cloud deployment can potentially result in a faster implementation and can allow a carrier to deploy their scarce IT resources on the aspects of maintenance that are strategic to the insurance business rather than using staff on infrastructure management.   A changing workforce 2015 was the year that millennials became the majority in the US workforce and millennials have very different expectations of their career and the role they can and will play. But there is a perception disconnect between what managers and millennials view as the most important factors that indicate career success. Millennials are most interested in meaningful work, flexible working hours and high pay. Managing millennials can require a shift in a leader’s traditional practices. Gender diversity is also a gap in the industry with few women in executive level roles in the financial service industry. Men and women have different views of the opportunities available to them.   CIOs exchanged a number of ways they’ve been successful at attracting and motivating millennials including gamification efforts and opportunities to reward and recognize millennials for their contributions while providing them with expanding learning opportunities. Various sources of unconscious gender bias were discussed and ways of helping women become better at networking and building relationships within an organization were seen as tools to help women progress in an organization   Going Digital Digital is a buzzword in the industry and CIO’s don’t all have a common set of terminology or definition for what digital really is. Some define digital as automation of work processes and some define it as automation of decisions. Celent described four digital goals that are typically the results of a carrier’s digital strategy – getting leaner by reducing expenses or increasing productivity; getting smarter by making better decisions and getting the right content to the policyholder at the right time; getting faster with shorter cycle times for policy issuance claims and product changes; and making the experience better for a customer.   One carrier described their journey towards digital and transforming the customer experience. When every business unit owns the customer experience, it’s difficult to provide a consistent customer experience across the entire relationship without a true owner of customer experience. A discussion of who is the customer resulted with most carriers recognizing the role that the agent plays and the need to optimize the agent experience.   CIOs then discussed some of the cultural issues faced as long-term employees work to absorb the change. It was clear that implementing the technology was not the roadblock to moving forward –but that finding staff that are skilled in understanding the business and also understand the ways to digitize is hard. Combine that with the cultural challenges of massive changes in how the work is being done creates barriers to moving forward quickly. All agreed that aligning their digital initiatives with the company strategy is key to finding the right projects. An interesting question arose around is there a place where it’s too much? How do you know when to stop? CIO’s agreed that this is a constantly evolving world and processes need to be in place to regularly assess, screen and prioritize new initiatives.   Optimizing the agent experience Celent presented some recent primary research around agent needs and drivers when it comes to placing business. Agents clearly state that they place business with carriers that make it easy to do so. While a carrier must have a good product, a solid price, and excellent claims, in a tie, the agent with the easiest process for placing and servicing business wins the deal. CSRs have significant influence in the placement decision and the CSR community, like other roles in the industry is in the process of undergoing a generational shift with older CSRs looking at retirement and younger millennials entering. This generational shift means that carriers are looking at how to provide additional tools and support such as gamifying the training process, providing additional help text and supplying more documentation as transactions occur.   CIOs described their own efforts in prioritizing connectivity with the agency management solutions and discussed the high priority that portals take when it comes to making IT investments.   Overall This event gave CIOs an opportunity to share ideas with their peers and the mix of research and the CIO discussion of the practical applications was seen as extremely valuable by the participants. Additional events will occur over the summer in the Midwest and in the fall in the Northeast.

One last look back at Google Compare

It’s old news by now that Google is shutting down Compare, its financial services and insurance comparison site. It wasn’t open long – less than a year. When Compare was first announced, the industry reacted with warnings that this was a major disrupter in insurance distribution. With the massive audience that Google has, the industry expected that Google was going to swoop down and capture the online insurance market – which by the way is pretty big – typically 75% of prospects research online and 20-25% of all new auto policies are purchased on line according to those who track this type of metric.   So what happened? Well, the fundamental idea of capturing the online market is a sound idea. And Google was pretty smart at avoiding all the hard technical costs of building out the aggregator engine by partnering with those who had already done the hard work – like Compare.com, Coverhound and Bolt.   But the business model of an online aggregator is hard. There are three models – online agents – who earn full commissions. That wasn’t really Google’s deal. They weren’t interested in any of the after service or ongoing relationships. A traffic generator – sending a potential lead to another site and being paid for the eyeballs. Well, that’s not very lucrative either – and frankly, Google can make money through their own advertising and search capabilities. Spending the money to build an online quoting front end only adds cost to something they already do quite well, thank you.   So why would Google have invested the money in an online quoting front end? To take advantage of a lead model. With a lead model, the aggregator collects data, processes a request for quote and sends a highly qualified lead to be fulfilled. The price per lead is significantly higher than the price for traffic. But there’s a fundamental challenge with this model. For the lead to be valuable to a carrier, the lead has to actually purchase insurance. And because a lead is sold to multiple carriers, the acquisition costs rise for a carrier.   Let’s say a lead is sold for $5 to ten carriers. The aggregator makes $50 for that lead. But only one carrier actually writes the lead. If ten leads are sold, and each carrier writes one, the aggregator makes $500 but the carrier has spent $50 for that lead. Play out a competitive situation where the leads aren’t equally distributed, and you can see that the acquisition costs can rapidly rise. If I only get one lead out of twenty, I’ve spent $100 for that lead. If I only get one lead out of $30 I’ve now spent $150 for that lead – which now is pretty close to what I’d probably be paying an independent agent. And what if the customer NEVER buys – and simply goes in looking for prices so they have a comparison to an off line model? The numbers rise rapidly. Remember those numbers above – 75% shop on line and 25% purchase on line. That means that only one in three leads actually results in a sale. Assuming leads are distributed evenly, an aggregator will distribute 165 leads before I close one. That brings this $5 lead fee up to $82.50 –, which is pretty expensive. The way to make those economics work is to increase the conversion rate so that more of the leads a carrier purchases actually ends up buying a policy.   So while carriers are very interested in participating in the online marketplace, they really want to work with those aggregators who are successful at converting traffic to leads that will convert to policyholders. The online agent model is attractive as the carrier doesn’t pay until the policy is written. The traffic model is similar to online advertising, so that works as well. But the success of a lead model is a combination of the price of the lead and the likelihood of closing that lead – which is dependent on the number of carriers the lead is sold to and the propensity to buy.   So here’s where Google lost an opportunity with Compare. They thought they could convert relatively low paying traffic into high paying leads simply by putting a quoting front end on and didn’t think through what they could have done to improve the conversion rates. With their analytical power, Google could have created a truly disruptive experience by providing consumers with a powerful recommendation engine. Google is a master at finding out information about individuals from social media and other publicly available data. They could have created an algorithm that used the information about the lead to tailor and target recommendations.   Personal auto isn’t that hard. If we were talking about commercial, it’s a much harder set of algorithms. But honestly, it’s not that hard to create something that tells a customer that given their location, the value of their home, the type of vehicle and their driving record, 64% of people like you choose this limit/deductible/additional coverage etc. And getting a personalized recommendation drives conversion. When people trust that the advice is good, they’re willing to buy. We’ve seen many examples of how inserting advice and recommendations into the quoting process drives conversion.   When I personally go to get an online quote – it’s part of my job – I enter information that shows I own a home in California and I drive a luxury car. So why oh why do the aggregator sites today recommend minimum limits coverage to me? My car is worth more than that. Today, trusting the advice from an aggregator site is dicey. And that is why policyholders continue to rely on the advice of an agent. Does this mean the role of aggregators is dead? No.   But Google missed a major opportunity to truly disrupt by providing a powerful recommendation engine that could use their ability to easily find information about individuals and combine it with their powerful analytical abilities. They ended up creating just the same thing we had back in the 90’s. Kudos to them for killing it quickly – but they missed an opportunity to use their capabilities to make the model work.  

The secret to profitable organic growth? Deliver a customer experience that your competitors can’t match

Maintaining growth and relevance is more challenging than ever for carriers. It is a hyper-competitive market with new entrants, a poor investment market, and rapidly changing customer expectations.  
  • Customers are demanding a different relationship model from their insurers. They are increasingly demanding transparency and simplicity with simpler contracts, clearer pricing disclosures and tailored recommendations with extraordinary service.
  • They are more and more self-directed and using non-traditional third party advice. Clients are more financially literate and are increasingly relying on aggregation and comparison tools. They look more for concepts than for entities – diminishing the value of advertising.
  • They are demanding collaboration and participation in product choices, claims, and risk management. They expect proactive communications that demonstrate knowledge of the customer. They expect customer service to be fast, excellent, and available through any channel they choose.
  Whether you define your customer as a policyholder or an agent, (it’s a matter of religion in this industry), expectations are being driven by innovations by non-insurance players. Uber provides instant information availability without long waits on the phone, which gives control and transparency to the customer. Amazon recognizes their customers and provides product and service recommendations that come to the customers without any additional work. Apple provides variations on their products that allow customers to choose among the different value propositions and the flexibility to change those purchases with minimal hassle.   But limited customer interactions in insurance have pushed incremental innovation to focus on products rather than customer experience.   As ardent incrementalists, most players in the insurance industry look at the customer experience from the inside out by thinking about all the points where WE touch a customer. However, being good at the discipline of focusing on customer experience requires taking a broader view of customers’ lives and the context in which they are interacting with the brand. Those who excel at customer service are masters at looking from the outside in, understanding what is going on in a customer’s life when THEY touch us and then delivering unexpected signature moments across a broader expanse of experiences.   Certainly efforts have been made to drive effectiveness for insurance processes, nevertheless, there are still many areas where improvements are possible. The way forward requires a comprehensive digital view that goes well beyond process automation. By recognizing that customer experience is about more than designing a clean and friendly user interface (UI), insurers can move beyond the superficial and achieve real results.   The technology is there to support this. But what keeps us from moving forward? Surprisingly, few carriers have anyone who owns the entire customer experience. Customer experience is usually owned by organizational silos. When no one owns the experience, it becomes a low priority. If there are limited metrics, or metrics which don’t focus on the quality of service from a customer viewpoint, then there are too many competing priorities to drive investments here.   Digital makes possible a level of engagement that was never possible before. But beware – the democratization of digital technology is eroding competitive barriers. And to meet customer expectations in an increasingly digital world, carriers will be required to make both cultural and physical shifts to incorporate new systems and processes while harnessing data and using real time analytics.   Like it or not, customer and distribution partner behaviors and expectations are changing the business model. It is not just about reducing expenses and writing more business. Carriers have to look at new distribution models, new product types well beyond pure indemnification products, and revolutionizing the customer experience.

Personal musings from one of the world’s first InsurTech incubators

Last Friday (and flowing into the weekend), I was privileged to take part as a mentor in the final selection process for the first “InsurTech” cohort of the StartupBootcamp’s accelerator programme targeted at the insurance industry. This programme claims to be one of the first specialist “InsurTech” accelerators to be run globally by an independent firm. The programme has attracted pretty impressive backing from the industry with firms like Admiral, Allianz, Ergo, Intesa SanPaulo, LV=, Momentum, LBG/Scottish Widows, Tryg and UnipolSai taking partnership roles. To give you an idea around the scale of achievement of those who got through, the process started with circa 1.3k interviews, 250+ applications, 42 short-listed ideas and then whittled down to just 18 finalists…from which just 10 could be accepted onto the program. These ten firms will now go on to be mentored during their start-up phase, have their ideas challenged and further developed from people within the industry and independent entrepreneurs and, in doing so, build the network they will need to both attract funding and find new clients. Over the two days that I spent with the finalists, there were a number of themes that came through the submissions. Here are my personal musings: Data featured strongly across nearly all of the initiatives. Having access to either unique sources of data (whether from a home move, from a travel plan or from connected world) and a model for assessing underwriting risk appeared to be a winning combination. Digital engagement, aggregation and ‘robo-advice’ are hot topics. What I found most interesting was the focus on underserved markets, whether targeting prospects with poor health records, in difficult to reach populations around the world, or educating Gen-Y/Z of the value of insurance. Addressing underserved markets profitably is a big issue that the industry often struggles with. A fertile area if tackled well. What impressed me the most, however, was the passion and sense of purpose displayed by the teams in fixing something that just feels ‘plain wrong’ to them. The Internet of Things (IoT) is going to change the industry’s client engagement experience and liability profile. Five initiatives related to the IoT were submitted. Three were focused on wellbeing, one on the connected home and one on drones. Although it didn’t quite make it into the final ten, I found the drone initiative fascinating. With Amazon and others itching to launch commercial drone services at scale, this is a market that is set to grow. Drone insurance could be the next ‘fleet’ or ‘auto insurance’ (as was pointed out by my fellow mentor Charles Radclyffe). Certainly, the current risk models in use today are immature and unlikely to be adequate for a world where autonomous vehicles are delivering packages across our heads 24×7 (assuming the regulator allows it). Sadly, the drone initiative didn’t quite make it into the final ten. Personally, I wonder if it’s just maybe a little too early, but perhaps still one to watch for the future? As with anything IoT related in insurance currently, each initiative will face a shared challenge. Although the proposition concepts may be compelling, the instrumentation rate of adoption will ultimately set the pace for growth. The IoT is still in its infancy across the industry and convincing prospective clients to share their instrumented personal data is no small undertaking. Data permissions are a growing concern for both individuals and regulators. It was refreshing to see some of the propositions pitch personal digital vaults as part of their propositions, whether for managing data from connected devices, personal wellbeing or personal belongings. Although it’s not yet clear how the market will develop for these services or how they will be monetised beyond a simple subscription model, services like these may suddenly find themselves in the limelight once regulators step in to protect personal privacy. Regulatory compliance. It wouldn’t be the insurance industry unless there was at least one idea focused on regulatory compliance. What if you took all of your regulatory compliance reports produced, aggregated them, and then analysed them? A really simple idea without a huge amount of cost involved. It was a refreshing couple of days. I look forward to seeing how their ideas and propositions develop over the next year. If you’d like to know more about each of the final ten, details can be found here.

Free advice for auto manufacturers: how to sell the experience of driving an autonomous car

I rarely, actually never, give advice to automobile manufacturers because I am an insurance technology analyst, and not an automotive analyst. But as more and more and more auto manufacturers make announcements about their plans to get autonomous cars on the road, ready or not—the dire implications for automobile insurance cannot be ignored. So on occasion I do find myself thinking about what autonomous cars will mean for manufacturers. In particular, since the marketing of cars emphasizes the driving experience so heavily, what will the automakers do when all they can offer is a riding experience? I mean a rolling home office, or family room, or man cave, or walk-in closet only has so much appeal.  And yes I know that all these cars will be totally connected, but still how many touchscreens will entertain a car buyer/driver during the morning commute? So I do have an answer: virtual reality! Not just any virtual reality, but a virtual reality that makes the passenger in an autonomous car believe that he or she is actually driving that car—with appropriate physical artifacts (steering wheel, pedals, brakes, dashboard, etc.); and a choice of scenic and challenging routes.  If Disney can create rides that make people feel like they are accelerating, de-accelerating, steering, and cruising, why not GM and Toyota? As mentioned, this advice is free. But if any manufacturer reading this post is so inclined, please send a large check to Celent (not to me, alas). Thanks.