Data Initiation Helps Define Digitization in Insurance

Oct 9th, 2014

My colleague Karen Monks and I have published a report on digital transformation in insurance recently. The main objective of this report was to identify differences in terms of digital transformation in insurance between different continents. However we have quickly noticed that the term “digitization” can generate confusion in insurance professionals’ mind.

Celent defines digital transformation as the strategy of transferring as many manual tasks as possible into digital activities. This strategy can be achieved through different ways, including:

  • Process automation.
  • Selling products online.
  • Leveraging mobile devices and mobile technologies in general.
  • Dematerialization of documents and communication materials.

In addition, we believe that data gathering through all sorts of tools, and therefore data management and analytics, play an important role in digital transformation efforts.

This been said I personally think there is a priority insurers should define when embarking in digital transformation initiatives. First of all I recommend them to set up a basic constraint as the corner stone of their digitization initiatives portfolio prioritization: data must be entered into their information system only once (not two, three times but only once). With this in mind they should reexamine all their core processes and find out where data leading to the same information is entered more than once. When this analysis is done they can start defining initiatives that will reduce these repetitive tasks. You’ll be surprised to see how this simple principle can generate drastic improvements to processes and drive higher automation, efficiency, etc.

When doing this, I also advise insurers to question whether the unique initial data entry into their information system can be done differently. With this advice I am trying to get them think of what I call the second wave of digitization. Indeed, to me digital transformation initiatives nowadays assume that human action is the initial generator of new data within an information system. However with the Internet of Things concept that my colleague Donald Light explained in two reports recently (here and here), insurers can also automate the initial data entry by leveraging connected objects. No need for human action any longer then!

To me there is a digitization sequencing insurers need to respect between these two phases. Indeed I think it is easier to generate value from the Internet of Things concept if an insurer has already well thought how to minimize repetitive tasks consisting in entering new data within their information system. Therefore I do think that insurers who have already done a great job at minimizing these tasks initiated by human action and who have an appetite to leverage the Internet of Things will be the leading insurers going forward.


Vendors Embrace Mobile Technology

Karlyn Carnahan

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Sep 18th, 2014

The adoption of mobile technologies is accelerating. Smartphones rocketed from a 10% adoption rate to 40% in just two and a half years, faster than any technology except television, and tablets are moving even faster, blowing away all previous adoption standards. Carriers are increasingly turning to their software vendors to create mobile access to core functionality for employees, agents, and customers. But where are the vendors? Do all vendors have mobile applications? Are they aligned with carriers on the importance of mobile apps? What challenges do vendors face and what are their plans for the future?


I surveyed 39 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. This report examines mobility attitudes among vendors, the status of mobile solutions, the methods and staffing models used for deployments, statistics around marketing including typical pricing models, and an assessment of the significance of the challenges vendors face as they move into the mobile market.

IT leaders at software firms clearly recognize the importance of mobility to drive their businesses forward. Almost 70% see mobility as mission critical or important to their organization today.

Today the majority of vendors do not generate revenue from mobile applications. Many are not yet charging for mobile solutions but include the product in the overall price of the software. Vendors clearly intend to change that practice. More than half expect mobile to generate 1-20% of their overall revenue within the next three years. This may be optimistic, but clearly, vendors see strong growth and market momentum for their enterprise mobility business.


However, the explosive growth in the mobile technology landscape has created unmistakable challenges for vendors entering this market. Challenges fall into three categories – those related to the technology and the devices themselves; those that relate to the organizational changes and cultural issues inherent in mobile such as obtaining staff and managing changing organizations; and challenges that are focused on market acceptance and pricing models


Increasingly, carriers are asking about mobile capabilities as part of their evaluation process when selecting new vendor solutions. Vendors looking to move into the mobility market can learn from those who have gone before them. Those who have not yet put their mobile plans together may want to begin to build a roadmap for the future.



A Value Roadmap: Don’t implement a new core system without it

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Sep 16th, 2014

I’m sometimes asked, “What is the worst error an insurer undergoing replacement of its core solutions can make? And how can that pratfall be avoided?”

There are a lot of candidates for this honor: for example poor governance, inadequate project management, underestimating the complexity of data conversion and or integration, incomplete knowledge transfer—the list goes on and on.

My nominee is: Failure to define and follow a Value Roadmap as part of the implementation and near term post implementation process.

Conceptually, a Value Roadmap identifies the specific types and sources of value which the new system will provide. If the insurer has already developed a good business case for the new core system, the Value Roadmap will address many of the cost reduction and revenue enhancement elements of that business case. In addition, the Value Roadmap will place these benefits on a timeline which could start (to a limited degree) during implementation, and definitely starts when the new system goes live.

If the insurer does not have a reasonably complete business case for the new system (and yes that does happen); the Value Roadmap allows senior management (C-Suite and/or the Technology Governance structure) to:
**  Document for future ROI and performance analyses the business and competitive rationale for the project
**  Provide guidance for the remaining implementation period
**  Focus on realizing value through new offerings, processes, and organizational structures

Note: an earlier version of this blog appeared on the Insurance Technology Association website.

Is that a computer on your wrist?

Tom Scales

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Sep 16th, 2014

Just a follow-on to Donald Light’s post about the newly annouced iWatch.

I’m very curious to see if Apple can again legitimize a new market segment. They didn’t invent the wearable watch, but they have introduced a modestly attractive watch and have a market impact that is impressive.

As a part of Celent’s Life and Health team, I see so many uses for the information that could be provided by a solid entrant in the market.

I have personally been watching the space for awhile. There are many entrants in the space — Samsung alone has introduced four watches in the last year. I am also a true geek and love new toys.

But I don’t own a wearable yet.

My fundamental problem is that none of them are really very good watches. They fail every test I have, particularly the size test. I am old school and like watches, but I lean more towards a small, thin Skagen. Even the smallest of wearables, to me, would be like strapping an iPad to your arm and calling it jewelry.

We are starting to see some innovation here. The Moto 360 is beautiful, but still huge.

Let’s hope Moore’s law kicks into the space soon and we see a sleek, attractive, useful product. Maybe it is the iWatch.

We’ll see.


Keys to Successful Policy Administration System Upgrades

Karlyn Carnahan

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Sep 15th, 2014

All IT professionals have a horror story about a system upgrade gone wrong. Since most policy administration systems (PAS) have a 12 – 18 month upgrade cycle for major releases, there are plenty of opportunities to misstep. To address this dynamic, a consistent claim of modern PAS vendors is that multi-tiered architectures and other technical designs ease the pain of upgrades as compared with legacy environments.


However, up to now, objective data concerning upgrade metrics was difficult to collect. How long does it really take to upgrade a PAS? Do modern systems live up to the levels of ease that vendors cite? Historically, have insurers experienced any difference in outcomes when using vendor or third party system integrator staff versus internal staff to execute the upgrade?


In order to close this gap, Mike Fitzgerald and I surveyed 44 North American insurance carriers to provide answers to these questions as well as to understand major challenges faced and overcome. The report reviews carrier’s experiences in policy administration upgrades. It examines reasons for doing upgrades, staffing strategies, scope, time and budgets inherent in upgrades and provides advice from carriers on challenges to prepare for and advice to assure a smooth successful process.

Here are some of the key findings from the report.

  • Most carriers doing upgrades do a point upgrade and generally, these are successful.
  • All upgrades to modern systems in the survey group were successful, supporting the expectation that these platforms reduce the pain related to ongoing updates.
  • The most frequently reported reason for taking an upgrade is “to gain new functionality” and the second most common driver is “current version no longer supported”.
  • Only 10.7% of insurer respondents used their own employees without assistance from vendors or third party companies. The most common uses of vendor services for upgrades are for coding, configuration and testing.
  • Most upgrade projects (64.3%) meet their delivery deadline.
  • Some carriers actually came in below budget on their upgrade, but the vast majority, 60.7%, came in on budget.

Many carriers report that they have not upgraded their PAS either because they are homegrown, or, more frequently, because these are new installations. This places a particular importance on the lessons that can be learned from other carriers’ experiences as the new installations prepare for their first upgrades.


For many carriers upgrades are a big deal. They take months of effort, tie up a lot of staff, and can frustrate business partners. However, done well, they go smoothly and can add new functionality, upgraded configuration tools and deliver significant benefits.

Watch out. Apple with Mayo is heading your way

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Sep 10th, 2014

Hmmm . . . That combination is pretty tasty in a Waldorf salad, but it’s a bit hard to think of other recipes that do appeal.

The Apple Watch is very attractive—one analyst hoped it would be stylish enough to wear to the Oscars. (I’ll let everyone know what I decide to do next year).

But from a healthcare and health insurance Internet of Things perspective, questions still remain. Early information is that the Apple Watch’s biomonitoring functions are pretty modest: pulse and movement (and distance?). Did anyone say fitness band?

Somehow “killer app” doesn’t sound quite right in this context, but that is the real question in terms of making people with serious medical conditions (or serious medical vulnerabilities) want to buy the Apple Watch. In roughly ascending order of technical and ergonomic challenges—temperature, blood pressure, glucose levels, blood chemistry of all different types, urine analysis, and (why not?) genome-driven personalized medicine—are off in the future, in some cases well beyond the horizon for a wearable (time telling, messaging, location-revealing) device.

Meanwhile there is always next year’s Oscars.

btw: about the Mayo:



Risk, reward and cyber-scurity

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Sep 3rd, 2014

For most people the amount of time, skill and effort required to get access to our family photos far outweighs the possible value someone would find there in. Thus, security measures based on making it really quite difficult to get to the data while at the same time not too hard to use have become increasingly popular. I would file username and password security in here.

Occasionally, the digital assets on the other side are valuable to the right group. Banks use 2 factor authentication and a variety of non-digital schemes to ensure security. Even World of Warcraft where rare digital swords and armour carry their own value offer broader measures of security to protect accounts. The recent leak of a number of celebrities private photos shows that there are other assets worth the time and effort required to break this level of security.

The risk associated with the data insurers hold has to date been quite minimal. There are health, specialty lines and large commercial lines where this isn’t the case, but for most people the data held by insurers and available through portals is largely innocuous and available through other means. As insurers start to tap into wider data sources and the Internet of Things it is imperative that the industry considers how it protects it’s customers.

A simple example from products available today: some insurers likely hold the real-time location of the car driven by celebrities and millionaires children, thanks to the increasing popularity of telematics based car insurance. This brings with it increased security, the opportunity to recover the car if stolen and the opportunity to bring much needed assistance swiftly if the car and driver suffer an  accident. In the wrong hands this data is sadly highly valuable and thus worth the time, effort and risk to assault and try to recover.

Whilst the details around the leak are still emerging it is clear that it is incumbent on the providers of these services to offer sufficient security in the first place and to educate it’s users on appropriate use.

To insurers looking at cloud and portals, I say consider the edge cases – the celebrities using your security for instance, those for whom there are organised groups who would be rewarded for getting the data.

Take into account the type of data available through various security schemes and portals, some information is naturally less sensitive. No one will read a story about a film star’s driving score and premium due next month, but where they drove and when – well maybe that’s a headline you don’t want your name associated with.

It Wasn’t the Big One– Yet

Karlyn Carnahan

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Aug 25th, 2014

I was jolted at 3:20 Sunday morning by a 6.1 earthquake. I live about 15 miles as the crow flies from the epicenter of the quake. I woke up as the bed began to shake –noticeable enough to wake me – and then stronger and stronger. The quake went on for about 20 seconds- which actually feels like a VERY long time – and it was a noisy one. You could hear the house creaking as it shook back and forth. I laid in bed thinking –I wonder if this is the big one.

It’s been almost 25 years since the 1989 Loma Prieta Quake which was the last big quake to hit the bay area. I was out of town when that hit – at the national CPCU convention –and trust me –there is no weirder place to be than an insurance convention when a major disaster hits. It was the night of the confirmation dinner and the hotel commandeered every television in the place so the different insurance carriers could meet the rest of their crew, huddle in front of the television and decide what they were going to do.

The shaking got stronger. It wasn’t a rolling motion – it was back and forth. Imagine your bed on an electric toothbrush or an oscillating saw. I was in a third floor bedroom and was reminded of my great grandfather who survived the 1906 earthquake because he was in a top floor bedroom when the hotel he was staying in collapsed, killing almost everyone in it. He rolled under an iron bed as the ceiling began to fall and that was part of what saved his life. (whew! Thanks Gramps for being smart enough to do that.  I kind of like being here.)

We all know that disasters happen. I write and speak regularly on topics such as catastrophe management but it always feels like such a remote possibility that anything will REALLY happen to me. But this weekend, as the house shook back and forth, I realized it has been a while since I checked the contents of my emergency kit, made sure the water supplies were fresh, backed up copies of all my documents to the cloud, or updated my home inventory.

The shaking calmed down and then stopped. Nothing seemed damaged – nothing had fallen over or broken. I turned on the radio and began to listen to see what had happened. At 3 in the morning, it takes a while for the pre-recorded program to be interrupted with real news. But Facebook and Twitter – oh thank you social media – was already live with friends actively posting information from a wide variety of sources. And I was already getting messages – are you okay.

The news came on and one of the first things mentioned – in the first thirty minutes after the quake – was a mention of a large carrier who had already contacted the news station to let them know where adjusters would be, an 800 number and mention that they were already out contacting people. And remember – this is earthquake insurance – most people don’t even have coverage. Talk about rapid contact.


Later that afternoon, I was out to lunch with friends as we celebrated a birthday. The topic of conversation kept coming back to the earthquake. Light comments – “Did you see what happened at Silver Oak? I volunteer to go clean it up – with a straw!) as well as detailed discussions about emergency kits, and what we’ll do in the event that the big one hits.

It wasn’t the big one… for me. But in Napa, it was the big one for a lot of people. It’s times like these that remind us why we’re in this business.

Capital Opportunities

Karlyn Carnahan

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Aug 20th, 2014

AM Best came out today with a revision for the reinsurance sector from stable to negative as the reinsurance market continues to soften. When it comes to reinsurance, it’s been a buyers’ market. Competition in the global reinsurance industry is fierce as there is significant excess capacity. Reinsurers have experienced lower than anticipated cat losses despite some well publicized events earlier in the year. There’s also been robust use of alternative capital as cat bonds continue to increase.

What this means for carriers is that they have opportunities to take advantage of falling prices and get improved coverage across all lines of business. In addition to low prices, terms and conditions are improving. Carriers are able to purchase increased coverage because of the low prices and lock in multi-year deals for portions of their reinsurance coverage. They’re negotiating more customized reinsurance programs – lasering out specific exposures. And even property cat renewals are getting improved prices and terms. With pressures on growth, carriers who retreated from catastrophe exposed coastal areas in earlier years are reassessing the potential opportunities and looking for tools to help them re-enter a potential growth market.

The question is how long can reinsurers keep this up? Is the bottom of the soft market emerging? Private reinsurance capital is now competing at a level comparable to current government roles in some areas. AM Best isn’t the only rating agency that is posting negative outlooks on the reinsurance market. Primary carriers are starting to look more aggressively to determine if they should consider locking in lower rates and favorable terms for longer periods. Especially as reinsurance becomes even more of a strategic decision since regulators are increasing their use of economic capital modelling. Many carriers find rating agency capital requirements are driving a higher capital constraint and therefore are becoming a leading factor in strategic decisions about how insurers manage capital and make reinsurance decisions.

But reinsurance is a unique area in an insurance carrier typically managed by a small unit with one or two gurus who have the knowledge of the programs preserved in their heads. Although reinsurance programs are becoming increasingly complex, large numbers of carriers rely on excel spreadsheets to manage these programs which are rife for error.



As carriers structure more complex programs because prices and terms are favorable, we’re seeing increased interest in reinsurance software to help manage these complex programs. Modeling potential programs, automating premium and commission calculations, processing complex inurements and improving claims recoveries are helping many find huge returns when investing in these types of systems.

Data Governance in Insurance Carriers

Karlyn Carnahan

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Aug 12th, 2014

Data initiatives abound in the insurance industry. Most carriers have some type of data initiative in place. They focus their efforts on implementing reporting tools, analytic tools, and repositories — with all the tools that go with them.


Data governance, on the other hand, is an emerging discipline. The discipline includes a focus on data quality, data management, data policies, and a variety of other processes surrounding the handling of data in an organization. The purpose is to assure carriers have reliable and consistent data sets to assess performance and make decisions.


As the insurance industry moves into a more data-centric world, data governance becomes more critical for assuring the data is consistent, reliable, and usable for analysis. Analysis and reporting issues are more often related to data governance issues, not technology issues.


Data governance initiatives are generally designed to assure the data is accurate, consistent, and complete in order to maximize the use of data to make decisions, to find unique insights, and to improve business planning. It assures that your data capture mechanisms are set up to capture what you need to capture and assures there is alignment between analytics tactics and strategic goals.


But carriers face governance challenges. Data is spread across a wide variety of applications, and data ownership is most often shared across the business and IT. Carriers report cultural resistance to understanding data issues, which makes it harder to find sponsors for data governance initiatives. Consequently, a large number of carriers deploy informal data governance initiatives — especially larger carriers.


I’ve just published a new report that surveys carriers around their attitudes, challenges, and initiatives related to data governance. Some very interesting findings. Check it out.