Last year we offered a Christmas Carol themed post summarising some thoughts on the past, present and future. This time around I figured I’d go for one of the end of year top ten style posts that pop up as folks take a moment to look back at the year. So here I present a view on the top 10 searches insurance folks made on the Celent web site.

10. Model Insurer (Click on the words to do the search)

In at number 10 are explicit searches for the model insurer series of reports. We’re still working hard on this years but here’s some links to last years and the one the year before. This year we’ll be holding the Model Insurer event in Boston along with our insight and innovation day.
The model insurer reports can’t be beaten for offering a view of successful investment in change and technology across the insurance industry.

Also take a look at the Model Insurer Asia report and 2012 event.

9. Fraud

Sadly as pressure increases on the financial system, on wallets everywhere then the propensity for fraud increases. 2011 has seen an unprecedented rise in ill-feeling towards the financial services sector as a whole so it’s no wonder that fraud is on everyone’s agenda. Look out for work by Donald Light and Nicolas Michellod in 2012 on modern fraud systems across the globe.

• Insurance Fraud Mitigation Technology: Beyond Red Flags
• Celent Model Insurer 2010: Case Studies of Effective Technology in Insurance
• Emerging Insurance Technologies

 

8. CRM or Customer Relationship Management

Insurers have made great strides in moving from policy and agreement centric thinking to a more rounded view of the customer. With ever increasing ways of reaching customers and intermediaries, of simply transacting business this focus on technology to support the customer relationship is clearly still a focus.

7. Claims

Clearly a key focus for any insurer, from the systems supporting claims to the latest trends in claims analysis. In 2011 Celent examined the impact social media was having on claims and how insurers are interacting with claimants. We also looked at location intelligence solutions and below are just some of the reports looking at various angles of this key function. Look out in 2012 for the XCelent reports on claims system vendors.

• Using Social Data in Claims and Underwriting
• Understanding the Value of Location Intelligence Solutions
  
• Personal Injury Claims Market in the UK
• Claims System Vendors: North American P/C Insurance 2011
• European Claims Vendors in 2010

 

6. Outsourcing

2011 has seen a more pragmatic approach to outsourcing in the insurance industry globally. Strategic outsourcing is still a key tool for any large organisation and this is reflected in the term appearing in our top ten. The CIO survey series of reports (which will be refreshed in the new year) offer insight into CIO’s views on outsourcing globally.

• North American Insurance BPO Market Study
• Outsourcing Trends in Indian Life Insurance
• 2011 US Insurance CIO Survey: Pressures, Priorities, and Practices
• 2011 Asia Insurance CIO Survey
• Insurance in the United Kingdom 2011: The CIO Perspective
• Insurance in France 2011: The CIO Perspective
• IT Services Vendors Solutions Spectrum: North American Version, 2010
• IT Services Vendors Solutions Spectrum: EMEA Version, 2010

 

5. Policy Administration

Ah the big core system question. What was interesting to me was this wasn’t number one, still number 5 is pretty high up the list. Searches in this area were looking for advice on the core systems themselves, building a case for them as well as general trends. This year we published the 2011 reports on policy administration systems around the globe, each offering a different perspective on what’s available as well as what’s required.

• North American Policy Administration Systems 2011: Life, Health, and Annuities ABCD Vendor View
• EMEA Policy Administration Systems 2011: Life and Pension ABCD Vendor View
• Policy Administration System Vendors: North American Personal P/C Insurance 2011
• Policy Administration System Vendors: North American Commercial P/C Insurance 2011
• Policy Administration Systems for General Insurers in Europe 2011
• Deal Trends in Property/Casualty Policy Administration Solutions
• Reviving the Insurance Core Systems Business Case

 

4. IT Spending

In at number 4 is IT Spending – how are folks splitting their hard earned currency between projects? A key question on the minds of CIOs and others. A key insight into this is offered in the CIO interview series of reports as well as our emerging technology report – aimed at identifying technology gaining interest and investment from the insurance industry – take a look.

• Emerging Insurance Technologies
• 2011 US Insurance CIO Survey: Pressures, Priorities, and Practices
• 2011 Asia Insurance CIO Survey
• Insurance in the United Kingdom 2011: The CIO Perspective
• Insurance in France 2011: The CIO Perspective
• China Insurance Market and Technology Trends 2011
• Thailand Insurance Market and IT Overview
• P&C Insurance Technology Trends in India

 

3. Asia - or rather searches for India, China and Japan

A significant number of searches were for specific countries, the three top countries were India, China and Japan. Asia is a very diverse market and there is a great deal of opportunity in the region, not only financially but also in learning how insurance problems are being solved in these very different markets. Personally, I find one of the great things about working for a global company like Celent is the breadth of view it affords.

• 2011 Asia Insurance CIO Survey
• Model Insurer Asia 2011: Case Studies of Effective Technology Use in Insurance
• Cloud Computing in the Japanese Financial Services Industry
• IT Spending Trends in the Japanese Insurance Industry: 2010
• China Insurance Market and Technology Trends 2011
• Thailand Insurance Market and IT Overview
  
• P&C Insurance Technology Trends in India

 

2. Social

Number two in our list is social, social media and social networks. Technology is helping people to interact and changing the way they communicate. Customers, agents and members of insurers staff all expect very different things from an organisation now in a Twitter and Facebook world than just 10 short years ago. In addition, the relationship between the insurance industry and the vendors and service providers supporting it is changing.

In all this newly collected and aggregated information there lies privacy and brand-busting dragons but also great opportunity for those intrepid enough to sail the social seas.

• Using Social Data in Claims and Underwriting
• Mining the Chatter: Optimizing Social Media Monitoring
• Digital Marketing in Insurance: A Partnership with Potential
• Leveraging Social Networks: An In-Depth View for Insurers
• Big Insurance Data: Drawing Lessons from Amazon, Google, and Facebook

 

1. Mobile

I recently tried going around London for the day without my phone – it was hell! The debacle this year regarding the Blackberry outage created a wave of such feelings, although raised some counter blog posts as journalists recounted how they spent more quality time with their family without answer emails. Regardless of for better or worse, humankind has wed itself firmly to being constantly connected through mobile devices. This is a global phenomenon from geeks seeking the latest 4G android handset, executives and music lovers with their iphones or Kenyan farmers with simpler phones, mobile has changed the we communicate, interact with technology and each other and will continue to do so – the insurance industry is still feeling the impact and in many cases still leading the charge in changing peoples lives for the better through mobile technology.

• Mobile Technology for the Life Insurance Producer: Is It a Fad or the Future?
• So What If There Is An App? A Survey of Insurance Consumers
• North American SnAppshot, Life Version: Mobile Apps for Life Insurance and Annuity Consumers
• E-Business Strategies for a New Mobile World: Considerations for Insurance
• North American SnAppshot: A Look at Mobile Apps Aimed at Insurance Consumers

 

So there it is, a top 10 for you. I haven’t included links to the webinars, peer networking events and other events through the year but the links to each of the search terms will provide you with those. It’s been a phenomenal year of challenges, change and interesting times.

Have a Merry Christmas, a Happy New Year or indeed just a great season - depending on what you’re celebrating this Winter. We look forward to working with you in the new year and beyond.

Oo, look, I wrote an end of 2011 post without mentioning the Euro crisis - oops…

Insurance companies have always been risk averse to quickly adopting new technologies.  It is not uncommon for technologies to be mature in other industries and still be low on the adoption scale within insurers.  However, as the rate of change has rapidly accelerated over the last decade, carriers are in the uncomfortable position of having to determine much faster which new technologies to invest in, and which to continue to watch.  Unfortunately, the window to watch has dramatically shrunk before an insurer is playing catch up and has lost market opportunities.

Celent recently hosted a Creative Disruption workshop which focused on how insurers can more quickly adopt and leverage new approaches to solving existing problems, basically changing the behavior in thinking about, solving and implementing new solutions to existing and novel opportunities.  It was highly recommended that insurers include in the their project portfolio projects that included some of the less mature, emerging technologies, as well as the changing roles and organization structures that would be needed to gain the maximum benefit of the new paradigm shift. (See “Stirring the Creative Disruptive Pot” http://insuranceblog.celent.com/2011/11/stirring-the-creative-disruption-pot/)

In order to help Insurers better understand which emerging technologies have the greatest potential, it recently released its inaugural Emerging Insurance Technologies report (http://www.celent.com/reports/emerging-insurance-technologies) which provides a snapshot of the adoption rate of 24 technologies that insurers are implementing or evaluating. It breaks down the emerging technologies into 4 quadrants, namely, Growth and Retention, Risk and Compliance, Efficiency and Expense Control and Claims Indemnity Control.  While many of these technologies will have impact on several of these business areas, each has a primary impact on one of them.

In addition to the Emerging Technology Report, Celent has also just published “Big Insurance Data: Drawing Lessons from Amazon, Google, and Facebook” (http://www.celent.com/reports/big-insurance-data-drawing-lessons-amazon-google-and-facebook), which is one of the fast growing technologies and potentially largest impact to insurers as the amount of data continues to grow exponentially.  As more data is machine generated, as opposed to human generated data, through mobile appliances, third party data, web logs, etc., the ability to mine the data and find useful business insights becomes very expensive and/or time prohibitive.  This report looks at three leading big data users, Amazon, Google and Facebook, to provide learnings and benefits to carriers through their successful use of these technologies, such as MapReduce and Hadoop.

Celent claims that the game has changed and the old ways of looking at issues and opportunities will not work going forward for insurance technologies.  The rate of change has progressed to uncomfortable levels, forcing carriers to react faster than they are used to.  In addition, the technology changes are affecting roles, such as more configuration changes and setups to applications being done by the business instead of mostly or totally by IT and affecting organizational structures as well.  Knowledge is the greatest asset going forward as it has always been - it’s just the use of it is on hyperdrive.

Google recently received a patent for a driverless car that can handle the challenges of the open road. (Story: Google Granted Patent for Driverless Car Technology) I love this story, and the implications.

The NTSB’s proposed ban on texting will require a rewrite. Unless my autopiloted car and my smartphone are sharing computing power or connectivity, I’m assuming my texts sent while underway won’t impact safety. Of course, by the time this system is operational, texting will most likely have become passé.

The field of play for telematics is about to get more complicated. Sure, you can track where my car went. But was I at the helm, or was my car driving itself? And what if I get out of the car to let it park itself? Does that still count as me driving, for insurance purposes?

If my car can drive itself, under what circumstances will I even decide to go with it? For example, for many daily errands (e.g., picking up the dry cleaning, grocery shopping, taking the kids to football practice) the main value-adds I bring are navigation and execution of the route. Take those away, and I might choose to do something else.

We’re one step closer to answering one of life’s Big Questions. Namely: Are men or women better drivers? The answer may turn out to be neither, assuming that Google gets the product right. With R2D2 as our chauffeur, my wife and I will have to find something else to debate. Related question: Will my autopilot car stop and ask for directions when it gets lost, or will it just drive around hopelessly? For tradition’s sake, I propose to make that a user-configurable feature. I’d hate to have my car out-perform me in such an obvious manner.

Before working in insurance I worked in other sectors where it was common to quote the number of certified or accredited engineers working on a project. Usually these were mixed discipline projects involving mechanical, electrical and software engineers, but having chartered engineer status was an advantage regardless of discipline. Also any relevant certifications were highly sought after too.

My experience of the UK financial services industry is that such accreditations, certifications and recognition at a professional level are sought after only at an operations level. Here ITIL certification and relevant vendor certifications are king and rightly so. Chartered status is gaining some ground but is less well regarded in financial services than in other industries.

In the developer, architect and IT strategy community there is much less clarity on what certifications, skills and professional status really means. I personally feel that these disciplines are less well defined and harder to examine against. Not to say that they are more important than the other disciplines, but perhaps they are less well understood. ITIL has something to offer in the IT strategy space, TOGAF is of use to architects of a variety of disciplines and there are various platform and vendor specific certifications that could help across all the disciplines.

There must of course be balance. Certification schemes and membership of professional organisations that come at a cost to the industry must bring clear value. I think that overall IT professionals in the insurance industry that I speak with are naturally pragmatic and cost sensitive.

Now that the role of the financial services industry in the financial crisis and the ongoing Euro crisis is bringing a spotlight on the industry, perhaps there is value in all the supporting disciplines in reflecting on what professionalism means, what is IT professionalism, how it can be nurtured, measured, grown and how it can contribute to the industry we support.

Every now and then a strategic alliance occurs that makes a lot of sense. Today, McCamish Systems, an InfoSys BPO company, and Pegasystems announced a strategic partnership that will leverage the best of both their solutions, namely, McCamish’s VPAS Life and Pegasystem’s BPM technology. (See http://www.businesswire.com/news/home/20111207005172/en/McCamish-Systems-Infosys-BPO-Company-Announces-Strategic for full announcement.) McCamish VPAS Life is a policy administration system driving their BPO offering. VPAS Life provides full end-to-end processing from new business fulfillment and underwriting STP to claims. Pegasystems BPM technology is a robust BPM and case management solution providing configurable business process solutions, standards based integration solutions, strong rules capabilities and process metering and monitoring.

VPAS Life was evaluated in a recent Celent NA Policy Administration Systems report, with a solid showing in advanced technology, breadth of functionality and customer base. (See http://www.celent.com/reports/north-american-policy-administration-systems-2011-life-health-and-annuities-abcd-vendor-view for the full report.) However, it was also noted that “with a mature data model and an older code base, there are limitations to what can be achieved via configuration–for most applications, customized coding will be required.” In addition, while customer feedback was positive, the front-end, case management and workflow capabilities are not best of breed solutions.

Pegasystems has been a leader in the BPM and more recently case management solution space, providing a powerful, configurable platform on which to build insurance processes and applications. While they have provided a framework in which large insurers have begun to wrap and build core solutions through their Insurance Industry Framework, there is still a lot of work to do to create system of record core systems. In addition, due to the robustness of the framework, Pegasystems’ solutions require high level skill sets.

This all leads back to the McCamish-Pegasystems partnership. Each solution compliments the other’s perfectly to provide a potentially, industry leading, and possibly changing, life insurance and annuity solution. McCamish will leverage the Pegasystems framework to provide a configurable and powerful BPM, case management insurance framework to enhance their already strong insurance experience and solution. McCamish will be able to take advantage of the speed to market Pegasystem Insurance framework provides, addressing some of the hurdles that small to mid-size insurers face with framework solutions by providing it as a SaaS offering and through InfoSys already has a strong Pegasystem BPM center of excellence.

While the actual implementation is yet to completed, and thus true benefits realized, Celent views this alliance as a potential game-changing partnership that will greatly enhance the SaaS options for all insurers, but especially for small to mid-size carriers in the life insurance and annuity market.

I recently spent two days at the Richmond Convention Center at a Latin Convention.  Yes, a Latin Convention.  I was a parent chaperone of 59 middle school Latin students who, along with 1600 secondary school students from around Virginia, came together to share their love and knowledge of Latin and everything related to the Classics.  It was my second Virginia Junior Classics League convention, so I guess I can say I am a believer in what Latin does for the student.   I mean if they choose to go to a two day convention and take up to 9 TESTS on subjects related to Latin and Classics, is that a bad thing?

The theme of this year’s convention was “Dimidium facti qui coepit habet.” It was Horace who said, “He who has begun has the deed half done.” It’s an interesting quote and one that was discussed in oratory sessions throughout the two days.  But can one really say that?  Is the starting of a task half the difficulty in getting it done?  Using the analogy of an IT project, perhaps Horace was right if we consider that the beginning of an IT project is often defined as the day the vendor walks in the door or IT and Business kick off the in-house project.  If that is deemed the beginning of the project then I would argue that the project better be half done!   Let’s consider what should have been done before that day. . .

Sometime before the kickoff someone identified the need for a new system.  From there an analysis was conducted to determine who and what was involved in maintaining the current system, and what does that system really do?  Another analysis was conducted to determine what needed to be replaced, or wrapped, and should it be all or only part of the current system.  Yet another analysis considered buy versus build.  If buy was determined to be the best method, a vendor selection process was conducted. All the while the insurer is identifying who and what is impacted by implementing a new system: processes are identified, people are interviewed, and hopefully a change management program is created to deal with the issues that will accompany the new system.   A steering committee was formed and all the key players in the IT department and affected business units were identified and given tasks associated with the system project.  I could go on and on about what was done before the project started.  Or should I say, the things that should have been done before a project started.  If even one of the major tasks is not completed before that day the project kicks off, then Horace will have been wrong and the project will be nowhere near half done on the day of the kickoff.  And, sadly, the resulting implementation is going to be much longer than promised. 

Horace of course was not talking about IT projects.  He probably meant that taking that first step, or being willing to fight, is half the battle.  One Latin student made the perfect analogy: Nike’s motto is “Just Do It!”  If we apply the Nike motto or Horace’s quote to our life, to IT projects, to anything that may at first be uncomfortable, or a change from the norm, just being willing to begin the deed means you are half way to succeeding.

And, for all those who have begun their IT project journeys, per aspera ad astra!

 

 

 

 

This week, Celent hosted a London event on the UK regulatory topic of Retail Distribution Review (RDR) that will impact the entire life insurance industry. As Jamie Macgregor, pointed out, there are a little over 50 planning weeks until the deadline for implementation.

Matt Browne from the FSA covered key points and intentions of the regulations, and reminded the audience that this is the time to take action, not to debate. The essence of RDR is to fix the retail long term savings and investment market which many consider is not working for the mass market customer.

Jamie Macgregor presented key points from Celent’s recent research. Insurers that were interviewed for this paper highlighted that 2012 will be a “horrible year” with the barrage of regulatory deadlines including Solvency II, EU gender directive and RDR whilst continuing to focus on new propositions for growth and profitability. The level of change and effort in Q2 and Q3 will be massive. Even with the delay in Solvency II regulations, many organisations are still committed to the same level of project effort to meet the revised deadline.

It is Celent’s view that the biggest risk facing product providers is around orchestrating the end-to-end delivery of the change program across multiple partners both upstream and downstream.   This risk is then made worse by dependency on outsourced relationships within product providers and the visibility of their readiness.  Effective communication across all parties involved will be a critical success factor of many programmes.

Martin McKenna from Focus solutions presented a view from a distribution perspective. He noted that IFAs had originally seen the regulation as a threat but that there was a shift in views. IFAs are starting to see this as an opportunity to de-risk the business model. It’s clear that IFAs don’t have the capacity to serve HNW, the mass affluent and the mass market . IFAs will refocus their businesses towards what they see as high value clients and this may result in orphaned clients .  This is a great chance for new players to enter the market, particularly those with strong brands. New distribution opportunities become available like online only, retail outlets , and mobile. Martin went on to note that whilst the appetite for advice will still be there, consumers will want to choose companies they know and trust. This creates a space for larger brands like banks and insurers to offer products directly to the customer. His view was that the winners would be those companies who could understand the cost of servicing the customer, and who had the scale and brand to respond to the market opportunities.

Yesterday, we held a successful event in London on the key challenges and implications of implementing RDR in the UK following our report issued earlier this month. The event was supported with some great and insightful content from the FSA, Focus Solutions and Altus – oh, and of course ourselves.

At the event, the FSA told us that the long awaited final guidance on the rules for handling legacy assets were imminent. What they didn’t tell us was how imminent…the consultation paper was issued this morning with a target response date of 16 January 2012. It is already generating plenty of debate in trade articles. From our research, the treatment of ‘legacy assets’ was considered to be one of the key final pieces in the jigsaw that would enable product providers to complete their designs for RDR readiness at the end of next year.

From a quick scan of the consultation paper, it would appear that the original intent has been maintained. My current interpretation (pending a more detailed review) is that if advice has been given on a ‘top-up’ decision, then adviser charging applies and not commission. Trail commission on products sold prior to RDR continues and is unaffected. If the client decides to ‘top up’ their policy themselves without advice, then existing product rules on commission continue.

Beyond the obvious behavioural and motivational implications, from an operational and technology perspective, this presents some interesting challenges – especially from the view point of a product provider facilitating charges on behalf of an adviser.

• How does the product provider (or the regulator for that matter) know if advice has been given or not? What is the nature of the ‘hand shake’ that needs to take place between adviser and the product provider to determine whether the ‘top-up’ needs go via the advice charging route or the commission route?

• Each product open to ‘top-ups’ (and therefore the system supporting it) will need to be able to manage both adviser charging and commission and switch between them depending on whether advice has been given or not.

• Likewise, illustration systems, documentation, and financial performance reporting will need to change to cater for advice charging and commission in a similar way.

The best way to bring this to life is through an example. From my understanding, if a client has £50k invested in their pension, has an additional £50k to invest, and takes advice resulting in this new amount being paid into their existing pension, then trail commission will be paid on the original £50k and an advice charge will be payable on the additional new £50k.

In this scenario, the system supporting the product will need to differentiate which part of the investment pot was advised and which part was not. If you consider that most product providers do not have just one system supporting multiple products and that commission logic is often embedded inside each legacy product system, then this change may need to be repeated for as many systems as there are open products.

Sounds like a pretty tough and complex implementation challenge – especially when you consider that there are now less than 283 working days between now and the RDR deadline, and that the consultation paper is not yet final.

Product providers now need to work through this paper to assess the impact on their plans and finalise designs if they are to be ready in time. It will be interesting to see if any product providers choose to close books to ‘top ups’ owing to the inability to make a solid business case to keep the books open, or if any product providers seek to secure direct ownership of the client to avoid the complexity. This is an area that we will be watching with interest!

In my previous post: “Latin American Markets Are Hot for a Reason”, we discussed about the significant growth of this region compared to industrialized countries and how GDP of emerging markets was expected to match their industrialize counterparts 10 years from now. For those joining just now, growth expected for the Latin American region in 2011 is 4.5%; the world rate will be 3.2%; and in industrialized countries, growth will only be 1.4%. The trend since 2002 has been more growth from emerging markets than industrialized countries and we expect this to continue this way for the next 10 years.

Has the Insurance Industry in Latin America gained any benefit from this growth?

Equally to the economic growth trends described before, Life insurance in Latin America has been experiencing an average premium growth rate of 8% for the period 2000-2009 while non-life insurance premiums have grown an average of 6.5% in the same time. North America instead has been very steady in the life insurance market and only in non-life has experienced some growth at an average of almost 2.5%. Europe has not done much better with just over 3% increase in premiums in non-life and almost hitting 3% increase in life insurance in the same period.

Last year, Latin American life insurance market experienced a 12% growth in premiums with Brazil, Chile, Argentina and Peru as main contributors and expecting to maintain double digits growth rates next year although some challenges remain. Also as a consequence of the good economic performance of the region, non-life insurance premiums increased 5.5% and we continue to expect growth driven by investments mainly in infrastructure and energy in the short and medium term. 

On the other hand and considering 2010 figures, North America and Western Europe count for 60% of the world market share of life insurance and 72% of non-life, Latin American and Caribbean life insurance market represented only a world market share of 2.2% and non-life 4.0%. 

So, evidently the opportunity is not in the current size of the market. Where to find it?

I believe that insurers are seizing opportunities of a market that will continue to grow and that has the potential to drive premium to similar ratios than the ones found in industrialized countries.

Consider for example the insurance penetration ratio (premiums as % of GDP). In 2010 Latin American insurance penetration ratio was 2.7% very low compared to 7.9% for North America; 8.4% for Western Europe or even Asia with 6.2%. Emerging markets have a ratio of 3% and industrialized countries 8.6%. The world in average has a ratio of 6.9%.

As for insurance density (premium per capita) in 2010, Latin America shows a low ratio of 219.1 USD per capita when compared with 3724.4 for North America´s; 2890.3 for Western Europe or even Asia with 281.5. The world in average has a ratio of 627.3.  

The insurance industry clearly understands the unique opportunities this ratios bring into their business. That is why we have more insurers looking into build or grow capacities in Latin America. 

What to expect?

Looking in the future we should expect a very positive trend overall. Many things have changed in a positive way in the region and those companies taking advantage of it, will be able to produce extraordinary benefits and value for shareholders and stakeholders.

Technology will play a very important role for insurers competing in this market. There is a need to replace legacy systems and continue to incorporate best practices. Rules based underwriting, Straight Through Processing, standardized xml for data interchange, cloud computing, BPO and improved CRM techniques just to mention some. I hope to have some new reports on this subject soon for you, in the mean time I am available for some one-to-one consulting on Latin American issues.

To anyone who is considering doing business in Latin America just have in mind that although the region presents significant and unique perspectives of growth it comes along with some challenges. You should expect some countries to react defensively at the sight of the international crisis. Some protectionism should be also expected along with setbacks for commerce and investment. Companies will need to consider these in their plans and have a management team, processes and technology to overcome them.

Also bear in mind that although Latin America is always seen as a region it has its significant differences between countries not just cultural but social, economic and political as well.

We at Celent can now help you to navigate through the Latin American experience.

Hartford Life just introduced Issue First, a new way to provide immediate life insurance protection.  Get this . . . the policy is issued before underwriting.  The upper limit on face value and age is $2 million and 66, respectively, so they are not just targeting small policies or young insurers.  The Hartford estimates that on average it takes 48 days to issue a permanent policy; that’s almost two months!  But with Issue First, the policy is issued in as little as five days if the answers to eight medical questions meet the eligibility requirements.  The Hartford’s agents must be loving this.

Five days. That’s a huge reduction in time for the prospective policyholder.   For The Hartford it means fewer withdrawn applications.  And, from what they have found in a historical review on non-Issue First cases that 95% of the time, a final Issue First rate would have been the same or better than originally illustrated.  For the policyholder it means immediate life insurance coverage without a higher price tag.   At the completion of underwriting, the policyholder can accept the final rate, which may be the same, higher or lower than the initial illustration, or exercise a free-look and receive a full return of premiums.

So why is this so new and innovative?  Well, first I don’t know that anything like First Issue has been done before.  It’s changing the way that insurance has been issued for decades.  Second, the Hartford analyzed the wealth of data they had to determine that the risk of this process was worth undertaking to speed up the policy issuance process and to grow their business.  Lastly, they are changing a process that they see is unfriendly to prospective policyholders even if it means that they are disrupting the way they have always done business.

Disruption. Innovation. Words that are not normally attached to insurance.  Celent recently hosted a Creative Disruption Workshop in Boston where this topic was discussed.  See the video: http://vimeo.com/31409934   Although innovation and disruption are not typically associated with insurance, there were several examples presented where both have happened.  For example, Progressive changed the way car insurance is priced which in turn has had a lasting effect on the industry.  Telematics and ’pay as you drive’ is changing how car insurance is underwritten and priced.  Forward looking ideas like replacing a call center with a Watson like system were suggested as potential future disruptions.  Hartford Life’s Issue First can be considered another such example.  Can you think of other examples?  I’d like to hear of them.

And if your example has an IT project associated with it and you think it is worthy of an award, why not nominate your insurer and the project for Celent’s 2012 Model Insurer Awards.  Nominations are being accepted now at https://oliverwymangroup.wufoo.com/forms/celent-model-insurer-2012-selfnomination-form/.