Who has the best life insurance new business and underwriting system?

Celent has published a new report, North American LHA New Business and Underwriting Systems: 2016 ABCD Vendor View, in which Celent profiles fourteen providers of new business and underwriting systems. Each vendor responded to a request for information. Seven vendors met the criteria for inclusion as a potential Xcelent winner. The seven vendors eligible for the awards provided a demonstration and briefing of their billing solution.

Due to the ongoing economic conditions that continue to have an adverse impact on life insurance application volumes, insurers have strong interest in reducing the cost of acquisition, processing and issuing life insurance applications. Automating the new business and underwriting functions are critical components in reaching a level of straight-through processing (STP) for new business. Insurers hope that these systems will help reduce unit costs and improve margins. Celent believes that these initiatives are necessary to help the insurers address growth, service, and distribution mandates, in addition to reducing the cost per policy issued.

After years of development that started almost 30 years ago, automated underwriting systems have become highly flexible in allowing insurers to define and configure underwriting rules and workflow. Most systems include or integrate into eApplications. Data from the applications drive reflexive questioning and identify risk classes associated with application data. They offer high levels of automation when gathering third party medical requirements and flag risks when the third party data results are outside of the ranges set by the rules. They also can deliver decisions to the point of data entry or to an underwriter.

New business image

The interest in new business and underwriting systems is on the upswing. Deciding the best new business and underwriting system is unique to each insurer. The goal of the report is to provide detailed information so that an insurer will be able to make an informed decision on which systems may be the best for them.

A golden day for insurance: Celent 2016 Model Insurer winners

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

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

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

Model Insurer of the Year   

Zurich Insurance: Zurich developed Zurich Risk Panorama, an app that allows market-facing employees to navigate through Zurich’s large volumes of data, tools and capabilities in only a few clicks to offer customers a succinct overview of how to make their business more resilient. Zurich Risk Panorama provides dashboards that collate the knowledge, expertise and insights of Zurich experts via the data presented.

Data Mastery & Analytics

Asteron Life: Asteron Life created a new approach to underwriting audits called End-to-End Insights. It provides a portfolio level overview of risk management, creates the ability to identify trends, opportunities and pain points in real-time and identifies inefficiencies and inconsistencies in the underwriting process. 

Celina Insurance Group: Celina wanted to appoint agents in underdeveloped areas. To find areas with the highest potential for success, they created an analytics based agency prospecting tool. Using machine learning, multiple models were developed that scored over 4,000 zip codes to identify the best locations.

Farm Bureau Financial Services: FBFS decoupled its infrastructure by replacing point to point integration patterns with hub and spoke architecture. They utilized the ACORD Reference Architecture Data Model and developed near real time event-based messages.

Innovation and Emerging Technologies

Desjardins General Insurance Group: Ajusto, a smart phone mobile app for telematics auto insurance, was launched by Desjardins in March 2015. Driving is scored based on four criteria. The cumulative score can be converted into savings on the auto insurance premium at renewal.

John Hancock Financial Services: John Hancock developed the John Hancock Vitality solution. As part of the program, John Hancock Vitality members receive personalized health goals. The healthier their lifestyle, the more points they can accumulate to earn valuable rewards and discounts from leading retailers. Additionally, they can save as much as much as 15 percent off their annual premium.

Promutuel Assurance: Promutuel Insurance created a new change management strategy and built a global e-learning application, Campus, which uses a web-based approach that leverages self-service capabilities and gamificaton to make training easier, quicker, less costly and more convenient.

Digital and Omnichannel

Sagicor Life Inc.: Sagicor designed and developed Accelewriting® , an eApp integrated with a rules engine; which uses analytic tools and databases to provide a final underwriting decision within one to two minutes on average for simplified issue products.

Gore Mutual Insurance Company: Gore created uBiz, the first complete ecommerce commercial insurance platform in Canada by leveraging a host of technology advancements to simplify the buying experience of small business customers.

Operational Excellence

Markerstudy Group: Markerstudy implemented the M-Powered IT Transformation Program which created an eco-system of best in class monitoring and infrastructure visualization tools to accelerate cross-functional collaboration and remove key-man dependencies.

Guarantee Insurance Company: In order to focus on their core competency of underwriting and managing a large book of workers compensation business, Guarantee Insurance outsourced its entire IT infrastructure.

Pacific Specialty Insurance Company: Complying with their vision is to become a virtual carrier, meaning all critical business applications will be housed in a cloud-based infrastructure, PSIC implemented their core systems in a cloud while upgrading infrastructure to accommodate growth in bandwidth demands.

Legacy Transformation

GuideOne Insurance: GuideOne undertook a transformation project to reverse declines in its personal lines business. They launched new premier auto, standard auto, and non-standard auto products, as well as home, renter and umbrella products on a new policy administration system and a new agent portal.

Westchester, a Chubb Company: Chubb Solutions Fast Track™, a robust and flexible solution covering core business functionality, was built to support Chubb’s microbusiness unit’s core mission of establishing a “Producer First,” low-touch mindset through speed, accessibility, value, ease-of-use and relationships.

Teachers Life: Teachers Life has achieved a seamless, end-to-end online process for application, underwriting, policy issue and delivery for a variety of life products. Policyholders with a healthy lifestyle and basic financial needs can get coverage fast, in the privacy of their own homes, and pay premiums online in as little as 15 minutes.

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

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

 

Making property/casualty underwriting investments that pay off

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

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

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

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

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

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

Our key findings were:

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

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

You’ve got email, but not from your life insurance company

When was the last time you received email communications from your life insurance company? For most of us, the answer is never. Contrast that with the last time you received email communication from your bank, your financial advisor or your favorite retailer. Life insurance is so far behind that it is not even in the e-delivery race. E-delivery allows the customer to elect to receive documents such as contracts, letters, account statements, and billing notices via email rather than paper mail. Generally, a notification is sent that a document has been posted to a secure website, or, in the case of general notifications, mailed directly to the policy owner’s email address. Areas of opportunity for e-delivery in insurance span all processes, from field administration to customer acquisition to claims. The benefits of using e-delivery are typically derived from reducing scanning, mailing, and printing, lessening process complexity, and increasing automation and systems integration. These drivers lower costs, reduce cycle times, and increase customer and agent satisfaction. I recently published a report titled, You’ve Got Mail Two Decades Later, Why Are We Still Talking About E-Delivery Rather Than Doing It, where I interviewed 17 life insurers about their current and future e-delivery plans. Although e-delivery can bring multiple benefits to life insurers, it has been poorly adopted. In fact, only 25% of the surveyed insurance companies are using e-delivery. Areas of focus within the report include: • Progress of e-delivery. • Targeted documents for e-delivery. • Benefits and challenges associated with e-delivery. There are a number of challenges life insurers face when it comes to e-delivery, including legacy systems, policy holder adoption, and agent engagement. However, other industries have found a way to overcome these challenges. It’s time for life insurers to set aside the excuses and find a solution. Life insurers have been left in the e-delivery dust and need to run with haste to catch-up.

An invite to London and nothing to wear

There are lots of cues and clues to differing cultures across the insurance industry and it’s IT neighbour – one of the most obvious is dress code or at least communal agreement on how one should dress. For a chap in London it should be relatively easy, as the character Harry Hart put it in the film Kingsman, “The suit is the modern gentleman’s armour.” However, recent changes and external influences in London have left me in something of a wardrobe quandary. For example – the data scientist community and the digital community. I went to the first Strata event in London in my usual suit and tie and swiftly realised that I looked like I a fish very much out of water. Here jeans, t-shirts and the odd tattoo were the order of the day. My most recent visit to the conference I managed to correct my attire although didn’t acquire new tattoos just for the conference (perhaps next year). Oliver Werneyer’s observation at our event in February this year that one needs a good beard to fit in with the start up crowd is also well founded. Also in London we have Lloyd’s of London with a strict dress code and a requirement for a tie to be worn at all times. More Kingsman territory, clearly one can’t dress for both communities on the same day. In between we have an increasingly relaxed view of the suit attire or even simply trousers and shirt. Despite having a pretty good collection of ties these are now largely optional (although I still generally carry one around as wearing them varies by client and frankly I quite like wearing a tie to a meeting). What I don’t have of course is a pocket square – something I rarely have seen adopted before this year (perhaps I wasn’t paying attention) but I’m increasingly seeing a square used to add a splash of colour in the absence of a tie. Thus, we have the title of this post – I have nothing to wear! Fortunately, London is unlikely to see the weather required for hawaiian shirts and shorts to become the order of the day (albeit I may have something that might fit that bill should it come to pass). Circling back to culture though, the need to blend these clearly different and shifting cultures together in one organisation is crucial in a modern insurer. Aviva has gone to the extent of creating a digital garage in Shoreditch – the heart of the jeans wearing community, if I may use such a broad brush – to draw in talent to the organisation. Hiscox too has been going to great pains to attract the right talent, along with many other insurers in London seeking to bridge these cultures. Are you allowing for a varied culture in your organisation? How flexible are you in dress code and working practices across different communities? Have you ever set to preparing for a meeting and realised you simply have nothing to wear? Would love to hear your stories on changing insurance, if only so I know it’s not just me.  

Three things to consider when choosing your vendor partner

Choosing a vendor can make your head spin. There are so many things to consider. I know I have been tempted to create a dartboard and throw a dart to make the final decision. After hearing multiple presentations, most with similar pitches, the result can be “vendor soup.” So how do you decide? There are three things that I consider when making a decision that have nothing to do with the system itself. It is important to keep in mind that each insurer is unique, and there is no single answer that is right for all. The goal is to find a partner who is a good match for you.
  1. Delivery Approach
Aligning on how the deliverables will be carried out is critical. Project success depends on having everyone on the same page. Some questions to consider are:
  • What is the project methodology?
  • What is the development methodology?
  • Do you want the vendor on-site during the entire project?
  • How involved do you want the vendor to be with requirements and user testing?
  • How involved do you want to be with construction and unit testing?
  • Will the delivery schedule match your in-house schedule – not too short or too long?
  • How often does the vendor provide fixes?
  • How will the vendor work with your current vendors and/or outsourcers?
  • What is the vendor’s experience providing system deliverables along with the existing business priority deliverables?
  1. Culture
Projects that appear headed for success can take a nose dive because of a mismatch between insurer’s expectations and what is possible based on the vendor’s culture. Culture cannot be changed in the short term so it is essential to ensure a good match. Questions to ask:
  • What is the experience in the domain?
  • Are you more comfortable with a mid-size or large vendor?
  • Will the project team be dedicated to your project?
  • What is the profile of the staff who will be assigned to the project team? How deep is the bench?
  • What percentage is on-shore vs off-shore?
  • Will the project require 24×7 support to meet deadlines?
  • Who will be the main contact? How many domain experts are available?
  • What is the turn-over rate for developers, project managers, business analysts and business architects and is there a good mix of each of the skill sets?
  • What is the organizational structure?
  • What is the governance structure? How are issues escalated and resolved?
  • Are the vendor’s values and behaviours a match for your company?
  1. Industry Experience
Everyone enjoys a good marketing story. However, to run a successful project, it is a necessary to understand the vendor’s actual experience. The following questions will provide a good assessment:
  • How long has the vendor been selling systems? How many similar sales has the vendor made?
  • Does the vendor have the capacity to run multipe projects simultaneously? Can the vendor provide successful references?
  • Does the vendor use system integrators?
  • Do the estimated time frames match the actual time frames for the implemented projects?
  • Do the projects expected benefits match the actual benefits?
  • Is there an active user group?
  • What is the vendor’s financial strength?
  • Will the vendor provide thought leadership and best practices from actual experiences?
  • Is there a five year roadmap? Is the roadmap innovative or does it reflect the addition of common features or functions?
There are no guarantees that the decision will be the right one. However, having a set of vendor specific questions and expectations will assist in highlighting the best choice for your company. One of the keys to program success is to choose the vendor understanding that delivery approach, culture, and industry experience are as critical as the features and functions of the system.

Strategic issues in insurance distribution management

Carriers use a variety of techniques for growing the book and most consider distribution management as a key component of their growth strategy. They are expanding channels, adding distributors, moving into new territories, and working to optimize their existing channel to improve customer acquisition and retention. Some carriers are investing in improving the servicing of distribution channels. Others are focused on managing the compliance aspects of distribution management — assuring the distributors have the right licenses, and that state appointments are made in a timely manner. Many carriers are concentrating on using compensation tools and techniques to more effectively stimulate production. To understand what top carriers are doing in this area, I conducted a survey of carriers around this topic. The goal of the survey was to understand how the carriers are organized to manage the distribution channel, what types of techniques they use, how effective those techniques are, and what challenges they face. Check it out here.
  • In most organizations, a formal Distribution Management organization has primary responsibility for channel management. Managing relationships and compliance are seen as the biggest issues they face.
  • A wide variety of compensation techniques are used by carriers and most say they get value from those programs – although carriers report that it is more important to calculate compensation accurately than to assure compensation is effective at driving desired business. Some techniques such as incentive comp and contests may only be available to top tier or qualifying agents – but receive mixed reviews on their effectiveness. Only 25% of those offering incentive compensation programs see them as effective. “Having an incentive compensation program isn’t highly effective, but not having one would be even worse.”
  • Most carriers rely on a variety of different systems to manage compensation – including Excel and find efficient calculation and distribution of compensation to be quite challenging. For many, the ability to administer a compensation program easily is the key driver as to whether the program will be offered. While they may wish to utilize a particular technique, their technologies create barriers.
  • Compliance is another challenging area with many carriers in the early phase of considering additional automation.  Fewer than half of carriers have automated any of the major processes – validating licenses, processing an appointment or providing self-service to distributors. Those that have automated the processes generally report them as delivering value.
Managing the distribution channel requires discipline in a number of areas – from managing the day-to-day relationship, assuring the distributor is in compliance with the licenses and appointments, and strategically managing compensation. However, carriers face significant challenges in performing these tasks efficiently. Carriers looking to improve distribution effectiveness use technology as a strategic differentiator.

Robotics, bots and chocolate teapots

Increasingly in operational efficiency and automation circles we’re hearing about bots and robotics. As a software engineer in days past and a recovering enterprise architect I have given up biting my tongue and repeatedly note that, “we have seen it all before.” I’ve written screen scrapers that get code out of screens, written code to drive terminal applications and even hunted around user interfaces to find buttons to press. The early price comparison websites over a decade ago used these techniques to do the comparison. These techniques work for a while but are desperately fragile when someone changes the name of a button, or a screen or a screen flow. However, they can help. I recall a while ago a manager lamenting ‘the solution’ was about as useful as a chocolate teapot. A useful 10 minutes hunting for this video of a chocolate teapot holding boiling water for one whole pot of tea made the point for me. Sometimes all you need is one pot of tea.
Tea poured from a chocolate tea pot

Tea poured from a chocolate tea pot

So it’s not new, some bots may be fragile and with my “efficiency of IT spend” hat on (the one typically worn by enterprise architects) stitching automation together by having software do what people do is an awful solution – but as a pragmatist sometimes it’s good enough. Things have moved on. Rather than a physical machine running this with a ghost apparently operating mouse and keyboard we have virtual machines and monitoring of this is a lot better than it used to be. Further machine learning and artificial intelligence libraries are now getting robust enough to contribute meaningfully smart or learning bots into the mix that can do a bit more than rote button pressing and reading screens. In fact this is all reminiscent of the AI dream of mutli-agent systems and distributed artificial intelligence where autonomous agents collaborated on learning and problem solving tasks amongst other things. The replacement of teams of humans working on tasks with teams of bots directly aligns with this early vision. The way these systems are now stitched together owes much to the recent work on service oriented architecture, component orchestration and modern approaches to monitoring distributed Internet scale applications. For outsourcers it makes a great deal of sense. The legacy systems are controlled and unlikely to change, the benefits are quick and if these bots do break they can have a team looking after many bots across their estate and fix them swiftly. It may not be as elegant as SOA purists would like but it helps them automate and achieve their objectives. The language frustrates me though, albeit bots is better than chocolate teapots. I’ve heard bot referred to as a chunk of code to run, a machine learning model and a virtual machine running the code. I’ve even heard discussion comparing the number staff saved to the number of bots in play – I can well imagine operations leads in the future including bot efficiency in their KPIs. Personally, I’d rather we discussed them for what they are – virtual desktops, screen scraper components, regression models, decision trees, code, bits of SQL were appropriate, etc. rather than bucket them together but perhaps I’m too close to the technology. In short bots may not be a well-defined term but the collection it describes is another useful set of tools, that are becoming increasingly robust, to add to the architects toolkit.

Keys to Successful Policy Administration System Upgrades

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.

Data Governance in Insurance Carriers

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. http://celent.com/reports/importance-data-governance-current-practices