Digital Insurance and the Customer: Mind the Gap!

Digital Insurance and the Customer: Mind the Gap!

Let’s play Jeopardy together! If the most frequently given answer from a panel of insurance customers is “Don’t know,” what was the question?

It was: “Which UK insurer do you think is the most innovative?”

For those who think that is an exaggeration of the common opinion that the insurance industry is not innovative at all, let me tell you that the second most frequently given answer was “None.”

As Jo Hind – Industry Head, Finance at Google – explained during the first presentation of the Digital Insurance and the Customer: Mind the Gap! event Celent organized in collaboration with Google, the pace of change is accelerating. More and more people are using digital communication means to get information about financial products, including insurance policies, and among others mobile devices are getting great traction. To pave the ground for the rest of the event, Jo left the audience with simple but relevant questions to insurers: How important is mobile to the insurance business? Are insurers optimizing and planning for the four-screen world (computers, TVs, pads, and smartphones)? How can insurers engage better with their customers? Are products offered by insurers meeting consumer expectations?

When Craig Beattie followed Jo’ s final interrogations with the Celent views on the customer, Google, and UK car insurance based on research he and Catherine Stagg-Macey published recently, we – in the audience – could not anticipate that the phlegmatic British analyst would provide the audience with such an insightful and dynamic analysis of the reasons for and consequences of the changing behaviour of insurance online shoppers. After this moment of brilliance, it was time for people to take their breath and enjoy the networking break to exchange about what had just been exposed to them by Google and Celent.

The audience had opportunities to share their thoughts during the discussion panel session which ended the whole event. Ian Morgan – Industry Leader Financial Services at Google – moderated the session, which saw Jem Eskenazi – CIO of Groupama Insurances, Ollie Holden – Solution Delivery Director at LV=, Catherine Stagg-Macey – Head of EMEA Celent insurance, and Jo Hind debate about mobile and digital insurance predictions. The audience was asked to provide its opinion on these predictions before they were discussed in more detail with the panelists.

Let’s play Jeopardy again! What question related to the Celent event summarized above will result in the following answer? “Certainly.” It is: “Are insurers who were present in the audience going to view digital insurance and the customer differently from now on?”

Vertafore’s Move Helps Insurers Gain a Bigger Piece of a Smaller Pie

Vertafore’s Move Helps Insurers Gain a Bigger Piece of a Smaller Pie

Vertafore’s purchase of Kaplan Compliance Solutions is another step towards delivering on the ease of doing business promise to insurance distribution professionals. It is an indication of the consolidation of vendors along vertical lines as providers deliver solutions that can solve multiple problems in producer management.

Managing the insurance distribution chain involves disparate administrative functions such as configuring compensation plans, administering payment and reconciliation, registering and licensing of producers and tracking education requirements. To a producer, all of these tasks are part of a single process — maintaining and growing a critical relationship. However, in a many insurance companies, multiple departments perform separate tasks in the chain. Systems and work processes have been separated according to history and habit.

When service issues arise, agents are not interested in knowing that different people are handling different parts of the process using systems that do not “speak” to one another. They would like their commission or licensing or education inquiry to be resolved immediately with as little time investment as possible.

In the New Normal environment of a low-growth economy, it is critical to increase production within existing agents (keep them happy), necessary to expand into new channels (bring them onboard quickly and with minimal hassle), and essential to monitor performance of all sales activities (know who is doing what and take action appropriately). Celent believes there is an opportunity for insurance companies to gain market share through the execution of a strategic approach to producer lifecycle management. Carriers can gain competitive advantage in their distribution efforts if they bring together and consolidate these various processes to create an integrated approach that delivers higher quality service, more reliable information, and lower costs.

Accomplishing this goal will require process optimization and integrated automation. In order to meet these objectives, leading insurers will manage producer relationships in a more holistic manner. Vendors will continue to consolidate, form partnerships, and build solutions which facilitate these process changes.

An "official" guide to writing applications for the mobile web?

An "official" guide to writing applications for the mobile web?
Mobile insurer apps have seen a great deal of press and investment in the last year, it’s about time the mobile web saw some attention too. Every insurer that Celent has spoken to about mobile apps has also invested in the mobile web – that is to say that insurers are working towards ensuring their existing web sites also work with smart phones, tablets and other portable devices. The World Wide Web Consortium, the international standards body behind other internet technologies, has published a best practices document for building applications in the mobile web. For each of the 32 best practices and the 3 additional advisory notes the document offers advice on what the best practice is and how to achieve it. Also available are a simple set of reference cards for the best practices that may be more useful to developers and of course, there is a mobile friendly version of the material as well. This document then is a must read for e-business and technology leaders in insurers and for the service providers working with them. In our recent research, we have found that the top insurers all have some sort of mobile app and that these have functionality that stretch across the full life cycle of an customer from a person looking to purchase a car or looking for information about insurance products through quoting, finding agents, buying insurance and all the way to making a claim. Many of the apps make novel use of smart phone features such as location information and the ability to store data. Since these capabilities are coming to the mobile web with the arrival of HTML5, this set of best practices can only grow in significance. The document has existed as a proposed recommendation for some time with a veritable who’s who of the Internet involved in it’s authorship. The document moved to a full recommendation on the 14th December 2010. The document can be found here: http://www.w3.org/TR/mwabp/ and the reference card here: http://www.w3.org/2010/09/MWABP/ The cheat sheet site is available here: http://www.w3.org/2009/cheatsheet/#mwbp

The Good and the Bad of Today's "New Normals"

The Good and the Bad of Today's "New Normals"

I’m enamored of Donald Light’s recent report about the “New Normal” for insurers. (For the summary, click here.) It does a nice job showing how the lukewarm economy is impacting insurers, and should be reflected in their IT strategies. It’s a sobering picture, in many ways.

But for those of you who make a living in some part of the insurance industry, all is not lost. There are other new normal factors in play that should help to balance out the doom and gloom scenarios being driven by the economy. For example:

We’re really getting somewhere with this Internet thing. The wry tone behind that lead stems from the fact that it has clearly taken us longer to embrace the Internet than it should have. On the other hand, every insurer I talk to now reflects Web-driven customer behaviors in their strategies. This was inevitable, because people of all ages are now Web consumers. But it also produces some efficiency opportunities, like replacing paper with emails and text messages. And replacing snail mailing of forms with guided Web sessions that create clean streams of data. This is good news for insurers, and getting better.

As consumers, we’re pretty darn reachable. I just got an email from my mother-in-law (she’s a well-intentioned email forwarder, and an example of my previous point) saying that my cell phone number is about to become fair game for telemarketers. As dreadful as that sounds, it reminds me that I can now have trusted, known providers reach out to me virtually anywhere I am, 24/7. If my auto insurer calls me, it could well be that I forgot to pay my bill, and I will be grateful. But if they want to deliver a clever product pitch at the same time, I just might say yes. Good for me, good for my insurer.

Coffee brings us together, despite the calories and the cost. I probably drink too much coffee. But I totally buy into the thinking that a simple pleasure now and then is a good thing. So imagine my surprise when I pulled into an oddly orange coffee shop in Chicago and discovered that it was a front for…ING Direct? Now, I did not buy insurance from ING that day, even though the caffeine (and a biscotti) put me in a good mood. But there were lots of people there, and someone probably did. Or will because they snagged some info while they were there. The point is that new business models are emerging, in perfect sync with changes in consumer behavior. Coffee and free wi-fi are influential, and smart insurers will leverage that fact.

So next time you’re relaxing in a cyber café, have a latte, fire up your laptop, and check out Donald’s report if you can. It’s important and interesting reading. But remember that you’re part of a number of new normals, and some of them are very good for our industry.

Adapting to distribution changes

Adapting to distribution changes
My recent discussions with CIOs of general insurers in Europe have demonstrated that distribution remains an important topic. European insurers need to understand the changes affecting the distribution channel landscape and build in appropriate supports to leverage them. Among others, I would recommend insurers to consider the following considerations:

The direct channel requires an appropriate front end: To take advantage of the growing adoption of the direct channel, insurers have to emphasize low cost, highly automated flexible processes on a scalable platform. This goal can be best achieved through the implementation of open and flexible front end systems facilitating interactions with potential customers, integrating modern communication tools for call center officers and allowing a high level of reactivity in terms of product, pricing and discount changes.

Communication with aggregators is key: With the growing adoption of online insurance, aggregators gain more importance and insurers need to make sure that communication with aggregators is optimal (for more on the importance of aggregators, read the following Celent report “The Perils of Success: Rethinking the Maturing Online Insurance Market in Europe, February 2010”). There are two alternatives that can be chosen from. The first one consists in letting online shoppers fully perform the purchasing process on aggregator’s websites. With this alternative, customers and quote data are transferred to insurers via XML files on a periodic basis either daily or weekly following a batch process agreed between the aggregator and the insurance company. The second alternative consists in directing shoppers automatically onto the insurance online platform to perform the last step of the buying process (the effective purchase of the insurance product and its payment). This alternative requires an instantaneous transmission of customer and quote data by aggregators to insurers. I consider the latter alternative to be preferable for online insurers.

Insurers need to improve integration of affinity and bank channels: Banks and affinity channels tend to deal with more complicated insurance products. They offer specific advice to customers through in-person meetings. To leverage the value generated by these types of channels, insurers need to implement relevant portals allowing management and process of sophisticated insurance products.

Use brokers and agents in specific customer segments: Brokers and agents have still an important role to play. However it is important insurers use these channels for specific segments of customers requiring particular attention, products and services. To promote a frictionless communication with brokers and agents, I recommend insurers to implement sophisticated portals with rich functionality to provide point of differentiation.

Responding to multi-channel management: The changes affecting the distribution landscape make it more difficult for insurers to apply an efficient multi-channel management strategy. I believe insurers should prioritize sophisticated portals providing a single view of the customer based on service oriented architecture (SOA) with high level of automation. In addition, as the multi-channel environment evolves, it is important insurers implement all on a scalable infrastructure.

As the insurance distribution landscape is changing fast and drastically, I expect this topic to be part of the European insurer’s top priorities in the coming years.

If You Build It, Will They Come?

If You Build It, Will They Come?

What is the link between improving service technology and improving sales incentives? This was the topic of a very insightful conversation that I had recently with an insurance CIO. It highlighted how interrelated the processes are in the insurance value chain. Investments can be made in one area, but if other, correlated areas do not receive attention, the benefits from the initial investment may be less than expected.

The two areas in question are policy administration and distribution management. This company has determined that the key to managing their profitability properly is the ability to change their mix of business in order to respond to market conditions. This strategic imperative led to a recent investment in best-in-class rating technology to increase the responsiveness of product updates and the speed of new product introductions. The company also upgraded their BI and analytic capabilities, allowing their actuaries to develop new discounting and pricing methods.

The CIO shared that they were pleased with the cycle time reductions and productivity increases that resulted. However, he reports that they only got full benefits they sought after they updated their compensation system. They needed to be able to change incentives in line with product modifications in order to effectively modify their portfolio and manage profitability. In other words, they had to be able to give their distribution force a reason to sell the new products, not just deliver product changes.

This was a twist on the phrase “if you build it they will come” and a reminder to be sure and consider the interplay between separate processes when evaluating investments. In constructing a product administration roadmap, an assessment of incentive management should be made. Incentive system upgrades may be necessary in order to fully benefit from administration enhancements.

Producer Relationship Management (PRM)

Producer Relationship Management (PRM)

The full year results for 2009 are in and they reflect the continued decrease in top line for both Property & Casualty and Life & Annuity insurers. In P&C, net written premiums dropped 3.7% and life premiums and annuity considerations were reduced by slightly less than 5% over 2008 levels (excluding outlier results from two companies).

This underscores the importance of distribution management. The last Celent report on the topic, Distribution Management Systems Review: A Bigger Piece of a Smaller Pie”, November, 2009, noted a convergence in vendor offerings between commission systems and recruiting/training/licensing solutions. The next step in this evolution should be to apply the considerable expertise and process built for Customer Relationship Management (CRM) to producers in an integrated approach – Producer Relationship Management (PRM).

For example, some insurers currently track and manage the “once and done” call resolution rate for policyholders. That is, how many times can the company’s service operation leverage process and automation to resolve a customer’s issue at the time of first contact? Why not apply this principle to producers who seek help from field or home office support? Keeping the production resources productive and satisfied will be increasingly important in the next months of lean growth. PRM is a lever that is just waiting to be used.

2010 Celent Insurance CIO Surveys

2010 Celent Insurance CIO Surveys
It is at this time of the year that Celent conducts its famous surveys providing useful insights about insurers preoccupations, priorities and plans for the coming year. This year we have decided to apply the same usual method for the United States market. In other words, our readers will be able to access our famous US insurance CIO survey report in late January. On the European front, we have decided to get a more focused look at two countries. Indeed, Celent is currently conducting interviews with CIOs in United Kingdom and in France and we will publish a specific report for each country. I am personally dealing with France and so far, the main concerns of French CIOs are the following:
  • Distribution: French CIOs understand that the distribution landscape is changing fast. They have all listed distribution as one of their priorities for 2010 and most of them intend to launch IT initiatives to take advantage of the growing importance of online insurance notably.
  • Regulation: the Solvency II regulation framework affects directly insurers IT investment priorities. As the results of the quantitative impact study 4 launched by the CEIOPS in 2008 tend to demonstrate, there is a growing interest by French insurers in understanding what are the impacts of the new set of prudential regulation not only on their solvency ratios but also on their ability to comply with the other elements of the regulation. Some insurers have already invested in new IT systems for instance capital modeling tools but some others still need to understand what they have to start with and what they need to focus on to be ready in 2012.
  • Improvement of core processes and cost reduction. Even though most of the CIOs interviewed so far clearly mentioned they had not really implemented drastic measures (layoff program, IT investments cancellation, etc.) following the financial crisis and the economic downturn, improvement of core processes leading to cost reduction via a smarter use of IT resources represents a priority for 2010.
Celent pays full attention to insurance and IT trends and having the chance to discuss directly with key players on specific markets makes our job interesting. I hope our clients and readers feel our passion for our research and the insurance industry when they read our reports. I wish to all of you a happy Christmas and a successful new year.