Your Natural Best Friend will certainly know that you are sad. But will your customer service chat bot know?

AI and machine learning things are moving right along. A few months ago, in a Celent report, I predicted the emergence of a “Natural Best Friend,” a term combining “natural language” and “best friends forever.” However, there is nothing organic about the Natural Best Friend; it is completely a product of technology. The Natural Best Friend will at some point pass the Turing Test (interacting with a person in a way that is indistinguishable from how another person would interact). Natural Best Friends will become sources of not only trusted information and advice, but also of companionship, friendship, and perhaps even some form of wisdom and intimacy. The use of the Natural Best Friend has obvious applications in throughout the entire insurance life cycle: from underwriting to service to claims. Even the possible characteristics of companionship, friendship, wisdom, and intimacy may be of use to insurers. Consider insurers’ brands, built over decades, which stand for trust, reliability, and succor. Once it becomes socially normal to have a personal relationship with the Natural Best Friend, insurers’ (and many other service industries’) sales and service processes will change dramatically. IBM has just announced it is developing customer service software that can interpret the customer’s emotional state by the content and pattern of the customer’s chat messages. Somewhere in the future, the software may be able to analyze a customer’s voice to determine the emotional playing field. Here’s a link to the WSJ story (warning: this might be behind a paywall). The family tree that will produce a baby boom of Natural Best Friends now has a new branch.

Choosing a New Claims System?

Few carriers are doing nothing when it comes to claims. Year after year, we continue to see significant activity as carriers replace or enhance their claims solutions. The reasons for such activity are plentiful. Claims systems are aging which means that they are expensive to maintain. Older systems generally are much less flexible than modern systems with robust configuration environments. Business rules are regularly embedded in code, which reduces a carrier’s agility in making changes rapidly. They often are decoupled from policy or customer systems so accessing and aggregating data across these systems can be difficult. They were initially designed to focus on managing the financial aspects of claims not the customer service aspects of claims. It’s also getting harder to find resources that can or want to work on older technology. Meanwhile, carriers replacing core claims admin systems are trying to achieve multiple goals. Insurers’ corporate objectives fall into three broad categories:
  • Getting bigger by growing the top line. A policyholder who feels that a claim was handled quickly and fairly is a policyholder who is much more likely to renew.
  • Getting leaner through higher productivity and expense control. When specific tasks (such as accessing external data or generating forms and correspondence) are automated, an adjuster’s time is focused on the remaining tasks and decisions.
  • Getting smarter by adjusting claims more accurately. Through workflow and rules, a new core claims system gives claims adjusters much improved tools to make the right decisions and take the right actions.
Selecting and implementing a new core claim system can contribute to the achievement of all three corporate objectives. Donald Light and I have just published a report that profiles the available claims solutions in North America. The report provides an overview of the different basic, advanced and technical features a carrier can evaluate. It also provides detailed profiles of the different vendors. Some of the vendors qualified for a more in depth profile that includes customer reference checks and our opinion of the solution. If you’re thinking about beginning a claims replacement, check out the report here. It’s a great place to start your research process. Then give us a call. We will be happy to chat in more detail about any of the solutions and help you as you move through your selection process.  

A Recipe for Digital Innovation

At each of the five Celent Innovation Roundtables held in the last several months, innovation practitioners consistently identify culture change as a significant success factor. A particular challenge, poor communication between technologists and their business partners, is often cited as a barrier. The Second Machine Age by MIT professors Erik Brynjolfsson @erikbryn and Andrew McAfee @amcafee offers some help. Their explanation of digital innovation made a big impression on me as the clearest description that I have found so far.  The approach is simple: “digital information….is built on multiple layers”. It is a “recipe” of different automation solutions mixed together. That is, look at a list of digital technologies, pick a few and combine them in unique ways so that they work together, and deliver new value. This description led me to revisit some Celent insurance innovation case studies and rethink how to best explain them.  The first, the AXA claims example (Visualizing the London Riots at AXA UK,, outlined how the insurer combined data from public police records, media reports, and their internal systems to predict which of their insureds might suffer a loss during the multi-day rioting in the U.K. in 2011. AXA “layered” successive sources of digital data, then added some analytic algorithms to produce a new and valuable tool designed to proactively identify at-risk insureds (mainly small businesses that were exposed to looting). All of these technologies existed on their own, in isolation, until they were combined to yield new insights which helped avoid losses. The second study is from Tokio Marine & Nichido Fire Insurance Co., Ltd. They were recognized as a Celent Model Insurer for their One Time Insurance product (Model Insurer 2012: Case Studies of Effective Technology Use in Insurance They combined geo-location, text messaging, and data prefill services to deliver real-time insurance offers to subscribers. As a prospect drives to the airport, their mobile phone receives a text from the insurer with an offer for travel insurance. Similarly, texts are sent as golfers arrive for their tee times, skiers approach the lifts, etc. It is the combination, or layering, of these technologies in a unique manner that creates the innovative service. The value of this explanation is not only academic. Layering strikes me as a useful tool to explain how all of this “digital stuff” can fit together. The recipe and layering metaphors succinctly describe digital in non-technical, accessible terms. It can be used with any audience to illustrate how the sum of the parts can be greater than the whole. I also see value in using layering to generate new ideas. My thought is that, in an interactive session, a group of participants can create a list of technologies, data sources, etc. and then brainstorm different combinations from them. Our continuing research illustrates that there is no one prescription for innovation, but there are guideposts to follow.  The use of the layering metaphor to improve communication and as a technique for brainstorming is one such guide.

A holiday gift from Celent – Top 10 searched for terms and links to reports

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.   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.   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.   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.   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.   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.   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.   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.   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…

Claims Investigations Using Social Media

I had a very interesting discussion with a claims investigator last Thursday at Celent’s industry networking event in London (New Rules of Engagement: How Digital and Social Innovation Challenge the Insurer Business Model – see Nicolas’ summary of the event on the Celent Blog). He went into some detail about how they were using social media in their claims work.

As background, this gentleman is the Managing Director of an independent investigation company based in London which serves the UK market. His company has expertise in both personal and commercial claims and is hired by insurance companies to detect and research suspected claim fraud.

He confirmed what I have heard from other claims investigators – their first step in an investigation is to check the social networking sites for information. What he added was a richly descriptive context in which this information is used.

The interview sounds as if it is out of a television script. Paraphrasing his comments, they went something like this:

“After obtaining some interesting information from social sites, we bring a claimant in to the office for a chat. I often say “May I make you a cup of tea?” I then lay a folder on the desk and say “Have a look at this whilst I get your drink”. I then leave the room and they invariably open the folder. In it, we have screen prints of Facebook postings, pictures, Twitter feeds, etc, all of which refute basic facts in their claim statement. Many times it is not the pictures that are most incriminating, it is the text that they have posted themselves. For example, we have discovered postings that read: “I had a great time in Ibiza. I danced all night!” (This can cast some suspicion on the status of a back injury that is paying disability!) I return with their tea and say “Have you had a look? Great. Super. Now, there are only a couple of ways this can go…one, you can sign a paper that relinquishes your claims payments and agrees to pay my fee or two, don’t sign it and we will hand this information over to the police who will begin a criminal investigation.” Obviously, almost all sign.

I felt as though I was in a television show, but a couple of specifics really intrigued me about his comments. First, when I have seen the “have a look at the folder” technique on TV, it almost always contains pictures that someone has taken without their knowledge, or transcripts of wiretaps – both collected by a third party. What is very different about this “evidence” is that the claimant posted it him/herself and offered it freely for the world to see. Something to be said for the efficiency of self incrimination.

Second, I agree that there is an uncomfortable, “big brother”, “Orwellian” aspect to this type of monitoring. I have seen some opinions that criticize insurance companies for using such tactics. My stand on this issue is that insurance fraud costs all of us money and if someone who is adding to my insurance costs can be found out through their own hand, I am all for it. Invading privacy is not acceptable, but using what is voluntarily placed in the public domain should be employed to its full use in order to match insurance rates and coverages with actual exposure.

Japanese Insurers Poised for Technology (r)evolution

In Japan, Internet banking and online brokerage have been around for some time. The Internet revolution is taking a bit longer to come to the Japanese insurance industry. Currently, most insurers’ web sites are limited to providing information and some online tools, such as premium calculators or financial planning simulators. Customers who want to actually buy some insurance are directed to call a contact center, which will then mail application materials to the customer. In 2008, though, two firms–SBI AXA Life Insurance, a joint venture between Softbank Investment and AXA; and Lifenet Insurance, a greenfield firm– began to offer fully online insurance sales for the first time in Japan.

But for the most part, the insurance industry here has yet to realize the benefits of Internet-era communications in reducing processing cycles, supporting agents, or improving customer service. Here and there some new technologies have been adopted—some firms have built basic agent extranets and offer some online policy and claims information to their customers. The basic building blocks for a more integrated insurance infrastructure, however, are not in place. SOA is in its infancy in Japan, and the use of standards is limited. “Business intelligence” software generally takes the form of embedded Excel spreadsheets used by analysts and underwriters in lieu of more efficient assisted workflow solutions.

Change is on the horizon, however. Japanese insurers have seen foreign entrants succeed in taking large chunks of their market share, particularly in new product areas like retirement and health products. This has focused their attention on some of the techniques used by the foreign entrants, such as the BI used to support direct marketing, and more flexible core systems.

Due to a long-term trend towards declining market size—a result of the country’s shrinking population–Japanese insurers are also under intense pressure to reduce costs. This is driving even large domestic insurers for the first time to consider international vendor solutions and even outsourcing. As insurers move towards more modern, flexible PAS and claims systems, they will look to update their infrastructures, introducing more remote channel capabilities for their salesforce and agents as well as their customers. We expect the technology landscape at Japanese insurers will be transformed steadily, and in the end significantly, over the next few years.

Technology enabled claims

Last month, I was invited to speak at the Insurance Times Claims Clinic in London. A key theme of the event was how to improve the claims process. It is our view at Celent, that looking at the industry as a whole, there is a very uneven use of modern claims technology. We’ve covered this topic in a greatreport that talks in detail about the different types of tool available to insurers for this key process. Being a business audience, I kept it focused around the benefits. We’ve estimated that careful use of technology can take out 4 or 5 points in the combined ratio. That’s very compelling. In a roundtable discussion after the event, it was clear there is still concern about ambitious IT projects and their likely success rates. As technologists, this is something we need to manage aggressively and continuously. It’s only through a collaborative partnership with the business, can we be successful. Future developments are unlikley to even out the use of technology in claims. Some insurers will have to play catch-up. Others will deepen their understanding and broaden their use of the functionality their claims systems provide. Both types of insurers will find their own variation on the theme of using fewer resources to restore claimants to their prior state quickly and fairly. Celent’s research shows investment in technology this year will continue, with longer decisions cycles and more focus on the business case. Now is the time for careful, targeting investment in claims technology in the organization. For more about the event and my presentation, check out