On the cusp: regional integration in Asia

Neil Katkov

Post by

Jan 26th, 2015

It’s 2015, the mid-point of the decade and a good time to start looking at major trends in Asian financial services over the next five to ten years.

One of the major themes will be regional integration, which is another way of saying the development of cross-border markets. There are at least two important threads here: the ongoing internationalization of China’s currency, and the development of the ASEAN Economic Community (AEC) in Southeast Asia.

RMB internalization is really about the loosening of China’s capital controls and its full-fledged integration into the world economy. And everyone seems to want a piece of this action, including near neighbors such as Singapore who are vying with Hong Kong to be the world’s financial gateway to China.

The AEC is well on its way to becoming a reality in 2015, with far-reaching trade agreements designed to facilitate cross-border expansion of dozens of services industries, including financial sectors. While AEC is not grabbing global headlines the way China does, we see increasing interest in Southeast Asia among our FSI and technology vendor clients.

From Celent’s point of view, both trends will open significant opportunities across financial services. In banking, common payments platforms and cross-border clearing. In capital markets, cross-border trading platforms for listed and even OTC products. In insurance, the continued development of regional markets.

Financial institutions will be challenged to create new business models and technology strategies to extract the opportunities offered by regional integration. It’s the mid-point of the decade, and the beginning of something very big.

World Economic Forum: Why aren’t insurers leading?

Tom Scales

Post by

Jan 23rd, 2015

As you all likely know, the World Economic Forum is this week in Davos. I have reviewed much of the information, as the world economy interests me, and one area was the list of 100 strategic partners. I clearly do not know every company but it appears that 13 of the 100 are banks. That makes sense, given the topics. So I look at companies whose focus is insurance. We are a huge part of the economy, so I thought we would be equally represented.


Just six.


Two are local Swiss insurance giants — Zurich and Swiss Re, so you would expect them to be involved. One is a huge world-wide insurance brokerage, risk management and consulting firm — MMC (full disclosure, Celent is a part of MMC).


That leaves three insurers:

  • Aetna
  • Old Mutual
  • Prudential


I obviously don’t know why other major insurers are not involved, but it does seem interesting. My perception, having been in this industry for over 30 years, has always been that insurance companies are followers, not leaders. You only have to look at our research on online customer service in the life insurance industry to see that, as an industry, we are not very advanced.


What is really keeping insurers from leading in multiple areas? We have experts in risk and financial management. We have experts in technology. We know everything there is to know about mortality and morbidity. Shouldn’t we be leading?


The start of a new era: digital retailers and insurance

Post by

Jan 22nd, 2015

Insurers from all around the world are making great efforts to become digital. This shows in our research in terms of priorities and increased spending in digital initiatives. Nevertheless, it is a great effort to take a brick & mortar company and move it into the digital world. Ask retailers if not?

It is true that there are some pure digital initiatives out there in insurance such as esurance (an Allstate company), Kroodle (an Aegon company) or Friendsurance (not an insurance company) but none today have the critical mass to compete head to head with brick & mortar insurers.

In this scenario, digital in insurance is still today an aim but not an established reality. This is why I believe recent news become extremely relevant to the industry. Digital native companies – retailers that have disrupted the brick & mortar retail business – are jumping the fence.

It is no news that Google has interests in the financial industry offering car insurance, credit cards and bank accounts in the UK and with all the potential to scale this business model globally. Though, still only playing on the distribution side, so not an insurer; but what happens when giant digital retailer Alibaba decides to cross that fence?

The founders of Alibaba and Tencent Holdings Ltd purchased stakes in Ping An Insurance Group Co of China Ltd in a $4.7 billion deal in December 2014. Now Alibaba is seeking stake in insurer New China Life according to different public sources, such as Reuters.

The potential of an integrated end to end business going from digital distribution and all the way back to managing and taking risks.  With the possibility of having an important say in which are the products that digital native consumers want to buy and how they want to buy them from these insurers and having the capability to create and deploy them, managing the entire value chain.

Nothing will be the same if Alibaba manages the complexity of integration, achieves the potential sinergies of these businesses tied together, and decides to replicate this business model globally taking advantage of its existing positioning as an established and successfull digital retailer.

Scary for established insurers (and existing distribution channels), but true. It is all a catch-up game for insurers now.

In my opinion a new era for insurance.


Driving growth through distribution management

Karlyn Carnahan

Post by

Jan 22nd, 2015

Growth and retention continue to be the top business goals affecting IT investments. However, in our current hyper-competitive marketplace with continued pressure on rates, growth opportunities for insurers are limited. Many carriers are focusing on improving their distribution practices as a key technique for driving growth. Carriers are expanding channels, adding distributors, moving into new territories and working to optimize their existing channel in order to improve customer acquisition and retention. Designing, developing, maintaining and managing productive channel relationships can create a sustainable competitive advantage. Conversely, a poorly designed or executed distribution channel strategy can create conflict, inefficiency and disruption up and down the line.


Some carriers are placing their priority on servicing distribution channels and improving service to distributors, increasingly using producer service excellence as a way to retain and grow business. Others are focused on managing the compliance aspects of distribution management – assuring the distributors have the right licenses, state appointments are made in a timely manner. Many carriers are focusing on using compensation tools and techniques to more effectively stimulate production. While in the property casualty world, most carriers work with independent agents, this is no longer an exclusive channel. Most carriers are looking at more effectively using data to manage carriers strategically rather than tactically. In addition, carriers are adding channels including wholesalers, GAs and MGAs. On the life side carriers work with exclusive agents, independent marketing firms, financial planners, banks and a wide variety of other channels.   These multiple channels are effective at targeting different aspects of the market, but add complexity when it comes to channel management.


Distribution management encompasses a wide variety of administrative functions that are focused on operational issues such as registering and licensing producers, configuring compensation plans, administering payment and reconciliation, and tracking performance.


Distribution management systems provide tools and technologies to help carriers with the administrative aspects of distribution management. They are most typically used by carriers with a mixed distribution channel, multiple policy admin systems, multiple jurisdictions, complex compensation programs, or some combination of these factors.


I’ve just published a new report Distribution Management System Vendors: North American Insurance 2015, It profiles 14 distribution management solutions. Check it out – or give me a call if you’d like to talk about the report.



Google Glass is dead–long live Google Glass!

Post by

Jan 16th, 2015

On January 15, Google announced that Google Glass was not ready for prime time. Google is withdrawing it from general availability, but says it will relaunch at some unspecified future date.

With the benefit of unaided 20-20 hindsight, Google Glass was a consumer product designed by engineers to appeal to, well, other engineers. Consumers who bought the $1500 device, started to be called a number of things, but “cool” was not one of them.

The form/function of Google Glass (a hands-free, heads-up display, sourcing various kinds of data and information, with a video recording capability) suggests several business uses, for example, in insurance: field loss estimators and loss control engineers. And there are of course many other professions with similar needs (e.g. service and repair technicians).

The form/function of Google Glass will live on, probably in several diverging incarnations. But whether any of these descendants will be recognizably a “Google Glass” or whether their wearers/users will ever be cool; remains to be seen.

Life in the Cloud – vendor activity is high

Karlyn Carnahan

Post by

Jan 14th, 2015

Few technologies are talked about as much as cloud computing. Cloud services may top the list of technology buzzwords used in corporate board rooms, by Wall Street analysts, in the trade media and within insurance IT organizations, but it often is talked about as an emerging technology – one that is potentially transformative but still little used.

The level of general interest in cloud computing is understandable. It promises tremendous flexibility, tempting economic advantages, and unending operational efficiencies. To that end, insurance carriers are dependent on the cloud offerings available. Only if vendors are offering products on the cloud can carriers take advantage of them.

So where are the vendors? Do all vendors have cloud applications? What options are available for insurance carriers and are they aligned with carriers on the importance of cloud apps? What challenges do vendors face, and what are their plans for the future?

I surveyed 41 vendors to provide answers to these questions as well as to understand pricing models, platform investments, and their expectations of where the market is going.

Cloud has grown from an emerging trend to the way of doing business for most vendors in a remarkably short time. While vendors may believe they are leading the competition by offering a cloud solution, the reality is that cloud options are now the norm. Vendors have moved swiftly to create cloud offerings and those that don’t have some type of offering are rare. Although these offerings are common, that doesn’t change the very real and significant concerns that carriers have, particularly around privacy issues and performance.

Yet carriers interest in cloud computing continues to gain traction as a way of managing costs, improving efficiencies, and offering opportunities to transform the business. Despite the high interest, vendors who wish to be successful in selling cloud options to carriers will have to address concerns in three key areas: privacy and data integrity, reliability and performance, and may want to provide tools to help carriers learn to manage and govern their cloud offerings.

This rapid evolution is not without its challenges for vendors. Customer-facing challenges are of high concern for vendors include issues such as managing the release cycle across multiple clients balancing front end, customer facing features reliability and performance enhancing features, and the impact of a changing target market customer base. Vendors are also concerned about identifying the right pricing model. Managing the shifting business model from license and professional service fees to subscriptions is formidable for many vendors. In addition, cloud creates notable organizational challenges, especially competing for scarce engineering resources.

Cloud is expected to generate significant levels of revenue, and vendors that have not put their cloud plans together may want to begin to build a roadmap for the future.

Check out the report – Life in the Cloud: Vendor Plans and Priorities

Tags: ,

Wearables: living with a smart watch

Tom Scales

Post by

Jan 13th, 2015

As a research analyst in technology, and a serious geek, I like to play with new technology. I resisted the urge to buy a smart watch for a long time, but finally succumbed. The first several generations of watch were unusable. The next generations were huge and clunky.

What finally made me jump was that, while still huge and clunky, the latest watches are round! Perhaps not the best justification, but any geek would understand that rationalization is the key to virtually every technology purchase.

I chose the LG G Watch R. While not an exciting name, the R is the round one and it is actually a decent looking watch. That was a long lead-in to the point of this post — what’s it like to replace your watch with a smart watch? Or perhaps more accurately, what’s it like to have some of your tech on your arm, since few people really wear watches any more?

The results? Mixed, which likely isn’t a surprise.


  • There are some great apps for the watch.
  • I use Google Maps on the watch which is much safer when I am in a rental car than trying to balance my cell phone. It is limited, but works.
  • I receive emails, tweets and Facebook posts on the watch. Again, limited, but it has kept me from pulling my phone out for what turns out to be something that can wait.
  • I just installed a new app called Hold the Wheel. This app automatically responds to a text or call while I’m driving with an SMS that, well, I’m driving.
  • I like that I can change watch faces easily too. I mostly use the analog faces — so it still looks like a watch. I have a nice one for when I’m home and a different one, that shows two time zones, when I travel. Sometimes I’m in a mood and in becomes a Mickey Mouse watch. OK, my daughter likes the Hello Kitty watch face too.
  • For me, though, the defining application is one that most people will never install — an app called tinyCam monitor. You see I have lots of small children — four year old twins and three year old twins. They’re full of energy and still need lots of supervision. So we installed inexpensive cameras in their rooms, the playroom and by the doors. The tinyCam app lets me watch the cameras on the watch. Very, very Dick Tracy. For me, I feel like the kids are safer, as I can keep better tabs on them. Yes, it is an app that I won’t need soon, but by then I hope that the next defining app will show up for me.


  • Not as many as I would have expected.
  • It is large and a little clunky, but surprisingly not very heavy. It makes up for this a bit by actually looking like a watch.
  • You also have to charge it every day, but it docks easily, so you just put it on the charger at bed time. Eventually I expect wireless charging, like my phone and tablet have.
  • I also feel like it could just do more. I’ll keep exploring as new apps come out.
  • Lastly, the big challenge, is that it is expensive. $300 expensive. Yes, I can rationalize well to have bought it.

So the moral of the story? Don’t look at watches, look at applications. If you can find that one or two defining apps that make the purchase a positive experience, then jump on board. If not, wait. However, for some that wait might be forever.

What does this have to do with insurance? Lots has been written, including by Celent, about the use of wearables in insurance. It has a place in the future and we can already see benefits. But in the end it all comes down to the consumer actually wearing it.


“What We Need is a Good Catastrophe”…in Insurance Innovation

Post by

Jan 9th, 2015

I’ve had the opportunity to work alongside commercial property insurance underwriters. This is a very unique group – extremely detail-oriented, whip smart, very black and white, but not given to back-slapping humor or ironic observation. So, when one used the phrase “What we need is a good catastrophe”, it really made an impression on me. He was referring to the fact that property insurance prices were trending downward and a hurricane or tornado would raise them again.

In working with insurers on innovation this past year, I feel the same way – the industry needs a good disruption to get it moving. Perhaps today’s speculation about Google entering U.S. insurance will provide a push. Kudos to Ellen Carney @ellenmcarney for doing the gumshoe investigation that uncovered some interesting activity by Google regarding insurance licensing in numerous states (see New York Times http://bits.blogs.nytimes.com/2015/01/08/new-clues-on-googles-plans-for-insurance/)

In a survey last year, we asked 100 financial services professionals about the importance of innovation in their business (Celent subscribers can access the report here: http://celent.com/reports/innovation-financial-services-firms-leadership-gap). Comparing some of the responses demonstrates that, while many are saluting the flag on innovation, there still is no burning platform in most firms. The details are:

Respondents overwhelmingly believe that customer expectations are rising and that innovation is critical if the industry is to keep up:

customer importance

However, the same group said that innovation is important, but not critical to their business strategy:

strategy import

So, innovation is critical to respond to customers, but only important to company strategy…a recipe  for complacency.

The momentum for innovation in insurance is rising, there is increased interest, but it remains to be seen how many insurers will grab the mantle and make innovation a critical part of their strategy. Perhaps a good catastrophe will help.

Six things insurers should know about the 2015 Consumer Electronics Show

Post by

Jan 7th, 2015

The 2015 Consumer Electronics Show is winding down—and if any personal lines insurer wasn’t there, taking names, and setting up meetings, they jolly well should have been.

Here’s a short list of insurance-relevant news:

  1.  Keynote Speaker, Ford CEO Mark Fields, promised Ford will be first to market with a mass-production autonomous car. Somewhere Henry Ford is smiling and suggesting that the autonomous car come in many colors, all of them black.
  2. Mercedes-Benz showed a driverless concept car, the F 015 Luxury in Motion, which has swivel chairs, lots of display screens, and for the “Minority Report” fans gesture recognition and eye-tracking capability.
  3. Samsung’s Co-CEO B.K. Yoon, another Keynoter, pledged the development of open IoT devices working with its Open Interconnect Consortium. No detailed discussion about interconnectivity with the alternative AllSeen Alliance, or with Apple’s HomeKit.
  4. Augmented reality (aka heads-up displays) are coming to a windshield near you – so says the CEO of automotive supplier Bosch.
  5. Connected home controller hubs are also emerging as a key category, backed by some very back players (Google for Nest, GE for Quirky). The question remains what exactly your light bulb has been wanting to say to your dishwasher, if only it could.
  6. And two non-CES announcements: USAA is offering the Protection 1 range of security and connectivity services to its membership (http://www.businesswire.com/news/home/20150105005901/en/Protection-1-Joins-USAA-Strategic-Alliance-Relationship) ; and GM’s OnStar is linking with Progressive’s UBI program.

But seriously, insurers: autonomous cars (whenever they arrive in force) are going to have a lot fewer accidents (and generate a lot less premium) than today’s human-driven cars. Here’s what I said nearly 3 years ago.

Connected homes will have kitchen and electrical fires detected much more quickly, fewer losses from theft, and more advance notice of weather-caused catastrophes. Some story: a lot fewer losses, a lot less premium.


It’s no longer about “Why” innovate in insurance, but “how”

Post by

Jan 6th, 2015

The opportunities and threats facing the insurance industry are forcing a change in the conversation around innovation in the sector. Celent has been tracking innovation in financial services for the last 18 months and we have detected a recent shift in interest. In 2014, insurers were exploring why they might need to invest in disciplined innovation practices. What is the next disruption that will change the industry? What can new technology offer regarding improved risk selection and pricing? Now the conversation is moving on to how to execute on innovation. How exactly are firms which are finding success in innovation executing their initiatives? What processes have they put in place that enable them to move beyond the theoretical and carry them into the realm of practical benefit?

To respond to our clients’ needs, Celent is facilitating an innovation event in London on February 25, 2015: Making Innovation Happen in Insurance: Hedging Against the Future. The programme will focus on how to deliver innovation in an established insurance franchise.

Our design team has developed an agenda which combines research and experience and will provide attendees with practical advice on how to make progress with innovation. The programme includes a mix of first-hand accounts from firms who have achieved success as well as hands-on activities that simulate typical decisions innovative firms face. In this and subsequent blogs, we will give you a look at the agenda in detail.

The first portion of the day will provide a look at the current state of innovation in the UK market. This will include data from a survey to benchmark how insurers in the UK market are structuring their innovation initiatives.

Celent research finds that success in innovation often entails establishing new types of partnerships that link emerging technologies with traditional insurance products. Sometimes, but not always, this involves direct investment in spin-off firms. In all cases, it involves a dynamic that extends beyond the usual vendor-customer relationship as companies co-develop new approaches to their markets. The second portion of the programme includes presentations from three start-up companies to explain how they are working with insurers to deliver successful innovation.

In the final section of the day, we are very pleased to welcome Oliver Werneyer, the Head of Innovation at Swiss Re, to present a Practitioner’s Perspective. He will outline the journey his company has taken so far as they combine their company’s valuable experience with new operating practices. Oliver joined Swiss Re in 2012 and focuses on commercialising traditional life insurance concepts in the modern world of apps, social media and digital connections. His comments will detail how Swiss Re uses data analytics and consumer experience techniques to change the way people experience life insurance.

More details are forthcoming on the sessions on measuring innovation and barriers to change, so stay tuned. Click here for more information and to register.