Major software vendor acquisition: TAI

Tom Scales

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Feb 19th, 2015

There was a major upheaval in the vendor space with msg global and Logiq3 acquiring TAI. For those not in the know, TAI has been a major player in the Ceded Reinsurance space for a long time. Their impact on the market is hugely disproportionate to their small size.


This is a big deal for all their customers and those considering becoming their customer. They have investment behind them now, which should be good.


Of course, acquisitions come with disruption, as we have seen in the industry before, so we are hopeful this will transition smoothly and those involved will continue to be involved.


Something to watch for today. Read the press release here.


If Apple can’t do wearables, who can?

Tom Scales

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Feb 18th, 2015

As we all know, the idea of wearables is very topical, but not selling well. All Androidwear watches combined only sold 720,000 watches last year. (Full disclosure, I like mine).

Now we have news out of Apple that its most hyped feature isn’t going to happen. The watch was supposed to check our blood pressure and the oxygen in our blood and even our stress level. These are important measures of health.

Apple announced that it is apparently too difficult, at least with today’s technology. More advanced features, like glucose detection had not even been planned (admittedly, no one has reliably accomplished that yet).

Does this spell the death of wearables? Probably not, they may just be farther out than we would like.

Personally, I believe that real-time monitoring of your health is a big part of our future. Apple’s simple design seemed great, and of particular interest to their customer base.

I guess the time has not yet come. Unless Samsung beats them to it.


The security breach of the month/week/day – and why you should consider the Cloud

Tom Scales

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Feb 6th, 2015

I don’t want to pick on one particular company, but the breach at Anthem hits pretty close to home — our industry is under attack. Should this surprise you? Absolutely not. What is particularly concerning is that these are companies that are spending enormous sums of money to stop these intrusions.


And are still getting hacked. JPMorgan Chase, Home Depot, Target, Michaels. I list these, not just as a reminder, but because I personally was affected by all four breaches. I’m on my third credit card in just over a year because every breach forces a new one. The JPMorgan Chase and the Anthem breaches are different and more onerous. In the Target breach, and others like it, credit cards were compromised. You can close a credit card account. In the recently disclosed Anthem breach — everything was lost. Name, Address, Social Security number, employer, net worth.


In other words, everything to steal your identity. I can’t close my life and open a new one. Is there a purpose to this rant? There is.


First, the technology exists — and is reasonably affordable — to encrypt this data. Is it a big project? Of course. Do you still want me to be your customer? How is it that in 2015 critical data about me is sitting in a data center and not encrypted?


Second, one of the biggest arguments against using applications in the Cloud is that having data in your own data center is more secure. Really? Seems not. I was recently discussing running a Life insurance system in the cloud with the CIO of a larger insurer. They put forth the ‘safer in my shop argument’, so I asked them a simple question: Is your budget for security larger than Google, Amazon or Microsoft (three of the largest Cloud vendors)?


After much thought, he replied that it was not, and our discussion changed paths. So maybe it is time to rethink the importance of your own data center. Beyond just security, is it your core competency to run a data center? Does it bring new revenue into your company to run a data center? Is it cheaper to run your own data center?


I believe the answer to all three is a resounding No. So when you are out looking for new applications and technology, I suggest it may be time, or beyond time, to think differently. Oh, and start asking your personal bank, credit union, insurance company, etc.: is my data encrypted?

Seeing claims and risks in 3D : Might HoloLens succeed where Google Glass didn’t?

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Jan 27th, 2015

There have been radical changes in user interface and computing technology over the last decade or two. The Nintendo Wii propelled a new style of gaming to the forefront and touch enabled smart devices have done wonders for Apple, Samsung and Google’s Android platform. All of this seems to have made Microsoft’s old WIMP based Windows platform less relevant, despite moves to touch enabled interfaces and Windows mobile in recent years.

Perhaps now though Microsoft has found the key to the next generation interface with HoloLens. With a tip to Google Glass this is a wearable headset based system more focused on enabling the holograph interface to interact using augmented reality to undertake various tasks. Perhaps Microsoft have found the killer App Google Glass was missing? Or perhaps the high end 3D gaming style interfaces are better at capturing our imagination than the simpler, untilitarian mobile interfaces we find on todays phones….

What might this mean for the Insurance industry? The interfaces and augmentations imagined for loss adjusters and those in the field apply equally to this new technology, albeit the headset is much more intrusive. Leveraging this technology to engage with people on the ground and share a common visualisation, to direct loss engineers to the right items and help provide data about clients in catastrophe affected areas in a rich and useful manner are all possible.

Augmented reality and chunky headsets aren’t new, but the experiences previewed by HoloLens have sparked the imagination of those who have seen and played with it. With the response to HoloLens being very positive so far I wonder if we will see a relaunch of Google Glass or it’s successor sooner than one might have expected.

For those who are interested the technology appears to have it’s origins in big data, as this article from April last year talks about leveraging the Holograph interface for visualising large datasets.

On the cusp: regional integration in Asia

Neil Katkov

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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

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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

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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

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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!

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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

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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

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