That timeless principle – “Know Your Customer” – has never been more relevant than today. Customer expectations are escalating rapidly. They want transparency in products and pricing; personalization of options and choices; and control throughout their interactions.
For an insurance company, the path to success is to offer those products, choices, and interactions that are relevant to an individual at the time that they are needed. These offerings extend well beyond product needs and pricing options. Customers expect that easy, relevant experiences and interactions will be offered across multiple channels. After all, they get tailored recommendations from Amazon and Netflix – why not from their insurance company?
Carriers have significant amounts of data necessary to know the customer deeply. It’s there in the public data showing the purchase of a new house or a marriage. It’s there on Facebook and LinkedIn as customers clearly talk about their life changes and new jobs.
One of the newest trends is dynamic segmentation. Carriers are pulling in massive amounts of data from multiple sources creating finely grained segments and then using focused models to dynamically segment customers based on changing behaviors.
This goes well beyond conventional predictive analytics. The new dimension to this is the dynamic nature of segmentation. A traditional segmentation model uses demographics to segment a customer into a broad tier and leaves them there. But with cognitive computing and machine learning an institution can create finely grained segments and can rapidly change that segmentation as customer behaviors change.
To pull off this level of intervention at scale, a carrier needs technology that works simply and easily, pulling in data from a wide variety of sources – both structured and unstructured.
The technology needs to be able to handle the scale of real-time analysis of that data and run the data through predictive and dynamic models. Models need to continuously learn and more accurately predict behaviors using cognitive computing.
Doing this well allows an carrier to humanize a digital interaction and in a live channel, to augment the human so they can scale, allowing the human to focus on what they do best – build relationships with customers and exercise judgment around the relationship.
Sophisticated carriers are using advanced analytics and machine learning as a powerful tool to find unexpected opportunities to improve sales, marketing and redefine the customer experience. These powerful tools are allowing carriers to go well beyond simple number crunching and reporting and improve their ability to listen and anticipate the needs of customers.
Innovation is exploding across all aspects of underwriting and product management. New technologies are transforming an old art. But if there is one lesson to be learned, it is that carriers whose systems are not already capable of handling these changes will be alarmingly disadvantaged. I've just published a new report looking at innovation in underwriting.
Underwriting is at the core of the insurance industry. It is the secret sauce of the insurance industry. For hundreds of years, this process was accomplished through the individual judgement of highly experienced underwriters. Insights were captured in manuals of procedures and carefully taught to succeeding generations.
Over the last few years, carriers have been heavily engaged in replacing core policy admin systems enabling a fundamental transformation of the underwriting process. Gone are the days of green eye shades and rating on a napkin. Gone are the days of identical products across the industry. Gone are the days of standard rating algorithms used by all carriers.
Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience. This transformation of underwriting is enabled by the ability to use business rules to drive automated workflow, but even more importantly this is a story about the fundamental transformation of insurance through the application of data.
This report looks at underwriting and product management and describes some of the newest innovations in each area with specific examples provided where publicly available.
What you’ll see is that almost every aspect of the underwriting and product management functions are being fundamentally transformed as carriers find new ways of utilizing and applying data. Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience.
- Carriers are using product innovation as a competitive differentiator and are experimenting with new types of insurance products that go well beyond basic indemnification in the event of loss. Parametric products, behavior based products and products that embed services to prevent or mitigate a loss are becoming more common.
- Predictive analytics are being used to better assess risk quality and assure price adequacy, as well as to control costs by assessing which types of inspections are warranted, or when to send a physical premium auditor, or when to purchase third party data.
- Individual risk underwriting hasn’t gone away for commercial Ines, but the characteristics that are driving it are more quantified, requiring more data and more consistent data.
- The role of the product manager is changing dramatically to one of managing the rules rather than managing individual transactions. This requires new skills and new tools. It also will drive changes in how regulators monitor carriers underwriting practices.
We expect to continue to see innovative technologies being deployed in underwriting and product management over the next 3-5 years – especially in the following areas:
- Carriers will continue to focus on product differentiation. The Internet of Things will facilitate more behavior based products and more parametric products. Carriers will find new ways of embedding services within the product, or as part of the remediation after a claim.
- The role of the product manager will change dramatically focusing on deep understanding of rules. Vendors will need to provide tools to better analyze the usage rates, the impact, and the stacking of rules.
- We’ll continue to see a massive eruption in the amount and types of data available. Unstructured data such as in weather, car video, traffic cameras, telematics, weather data, or medical/health data from wearable devices will become even more available. Carriers will invest in managing and analyzing both structured and unstructured data. Implementation of reporting and analytic tools as well as supporting technologies – data models, ETL tools, and repositories – will continue to be major projects.
- New technologies will create new exposures, drive new products, and generate new services. From wearables, to advanced robotics, from artificial intelligence to gamification and big data, carriers will be applying physical technologies as well as virtual technologies to drive product development and risk assessment.
The available technologies to support property casualty insurance are exploding. Shifting channels, new data elements and tools that can help to improve decisions, provide better customer service or reduce the cost of handling are of great interest to carriers. Investments are being made across all aspects of underwriting and product management. Staying on top of these trends is going to continue to be a challenge as new technologies continue to proliferate. But if there is one lesson to be learned, it is that carriers whose systems are not already capable of handling these changes will be alarmingly disadvantaged.
For carriers who are already moving down this path, this report will shine a light on some of the creative ways carriers are transforming the process of underwriting. For carriers who have not begun this journey, this report may be a wakeup call. The pace of change is increasing and carriers who continue to rely purely on individual underwriting judgment will find themselves at a disadvantage to those who are finding new sources of insights and applying them in a systematic manner to improve profitability. Wherever you sit, this rapid pace of change is exciting, empowering and galvanizing the insurance industry.
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.
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.
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.