- Are we headed for a new AI winter?
- Or an AI apocalypse?
- Also, will I still be cleaning my home in 2020?
The two topics that were discussed during this PNE were emerging technologies and the architecture concerns to incorporate and integrate these new technologies into the existing environment with which carriers must deal today. Celent provided its perspective and insight into these areas and the group engaged in a lot of interactive dialog. Carriers were interested in what others are doing with respect to telematics, customer sentiment and the use of external data. There was a growing concern expressed about how to deal with the large amounts of varying data and how to incorporate that information into the business decisioning process. For example, one carrier wanted to know if anyone had experience with data aggregators to help deal with the Big Data challenge that is beginning to hit the insurance industry.
Another concern expressed is how to maximize the user experience for policy holders, agents, and CSRs (Customer Service Representatives). The insurers said they face a challenge with their ability to integrate across their systems to provide the level of experience that users have come to expect with Google, Facebook and Amazon. They also discussed the significant advantages available to specialty insurers by leveraging more customer data to better underwrite risks.
There was a high value discussion regarding the need for IT to educate the business on the art of the possible. Regarding emerging technologies, IT needs to better understand the business and take a seat at the table to help drive the business and help them understand what is truly possible; what is still just a concept; and the true impact to the business of the emerging technologies that are so hot in the press.
Celent proposed that in the future insurance IT landscape, all that carriers will own is the architecture and the information. This generated good debate around the role of enterprise architect and the role of the business architect. Only three of the carriers in attendance have a formal, mature business architect practice. Others described their business architects as really business SMEs (subject matter experts). The insurers also observed that IT architects and insurers rarely talk about human capital. Carriers need to develop an IT human capital plan related to IT architecture skills. A central theme of the day was that the role of the insurance IT architect is definitely changing as we move forward.
One carrier presented their EA (Enterprise Architecture) journey. They have been moving away from business siloed architectures to a true enterprise architecture, responsible for the enterprise, not just a single line of business. They created an EA roadmap and established an EA governance group that was quite effective. The surprising aspect of their efforts was the speed (six months) in which they established and matured their EA governance group. Some of the key reasons for this are that the EA governance committee consists of senior executives from IT and business and all projects must go through a practical EA review. The governance process enhances the project deliverables and has not become a bottleneck for project delivery. Their focus is on their value proposition and how they can help drive their company to achieve the business goals.
In the afternoon, another carrier presented their system modernization efforts and the journey that they have come over the last couple of years. As with most carriers, they have a myriad of systems and had a lot of manual processes. They found it took longer than expected to get the first line of business up, but new lines now only take 5-9 months (reduced from 18 months previously). They have rationalized many of their systems and continue moving forward on improving the back end and introducing portals and improved customer experience on the front end. A key lesson learned was to fix underwriting first and then focus on the back end process systems, such as Claims and finance. Other lessons learned included:
o Need 100% commitment from the business
o Change/fix the process, not the system
o Define your requirements based on the new business process
o Decide what you want to do, then pick the tool (not vice versa)
o Define reqs up front before selecting an implementation partner
o Be realistic about data conversion time and effort
o Dedicate a Project Manager from underwriting full time
o Do not convert policy data! Convert policies at time of renewal.
o Allow projects to fail
o Define your requirements well before working with a vendor; otherwise, they cannot understand what you want
The PNE confirmed to all the carriers in the room that they are all struggling with variations of the same issues. It also confirmed that you cannot face these new challenges with the old Insurance mindset or culture and provided practical steps that have been taken to make the needed transitions.
The next PNE is scheduled for October 26, at RSA Canada in Toronto. The two topics for discussion will be Insurance innovation and Big Data in insurance. The event is open to all carriers. Check the Celent site (www.celent.com) soon for event and registration details. Based on the last several PNEs, you won’t want to miss it!
The Celent webinar yesterday, Emerging Technologies in General Insurance, was very well attended and there were more questions than time allowed. Thank you to everyone who was able to attend and who contributed. If you didn’t get a chance to join us, the recording is posted at http://www.celent.com/node/29767
Below are the answers to the questions that were still outstanding at the end of the session:
Q: Is there such a thing as an Insurance Carrier Fraud Maturity Model?
· No, but great idea and don’t be surprised if you see one in the upcoming Celent report on fighting insurance fraud!
Q: For consuming telematics data, is this something that a carrier should do standalone or are there industry schemas such as IBM’s IIW that add value in this regard?
· We have observed a difference of approach between US carriers and insurers in the UK. Typically in the US larger carriers are building out the infrastructure and model themselves to capture, analyse, keep and use customer telematics data. In the UK the preference is to use partners or the vendors of the devices to gather the data and do the analysis on their behalf – sharing the results of the analysis for use by the insurer. It’s worth noting there are already efforts underway in the UK and German associations of insurers to discuss a common format for this data to allow the information to be shared between vendors at time of renewal, although I don’t believe they’re reviewing industry warehouse models such as IIW. There is no one size fits all approach and insurers using various approaches are meeting with success although Celent expects some common standards to emerge for sharing this data between insurers, agents, brokers and even customers should they request it.
Q: What carriers are best-in-class when it comes to Big Data? What technologies do they use?
· Big Data is still more of a buzz word for carriers than reality today. The larger insurers have Big Data programs/pilots underway due to the amount of data that they have. Smaller carriers are considering Cloud options and mid-size carriers for the most part are watching the results of the other two.
Q: Isn’t expense control closely associated with underwriting efficiency? What do you see adoption of emerging technologies wrt to underwriting?
· Expense control covers all insurance functions and processes, as well as the technologies that support/automate these solutions. Analytics have been used by a lot of carriers to create more effective and efficient UW decisions. We expect the use of social data to play a great role over the next 1-3 years with respect to UW, as well as the continued use and maturity of analytics in the UW process and decisioning.
Q: Why hasn’t the notion of insurance focused open source taken off?
· Open source has taken off in many carriers and is in use in varying degrees and levels (operating systems, libraries, ESBs, portals; and to a lesser extent applications). Analysts do not typically include open source solutions in their reports (as separate from other non-open source vendor solutions) for several reasons. First, the analyst process of evaluating solutions starts with a vendor, their profile, their implementations, customer references, etc. Second, vendors often use open source as a component or even a core of their applications that are included in most vendor reports.
· Many carriers prefer working with a vendor rather than developing solutions internally and thus select a vendor solution over open source.
Q: Many of the new data sources create privacy “surprises” when consumers intuit that a commercial organization knows what it knows and puts it to use, even if it benefits the consumer. Policy is of course lagging technologies but it will evolve unpredictably. California has limits on telematics data use, for example. How the insurance industry implements emerging technologies has a public relations component and potential for igniting a very fragmented state-by-state way that data can be used. What does Celent see as far as some uses being especially dangerous from a brand perspective and liable to be shut down by regulation?
· Pricing and eligibility decision rules must be filed with the states. Whether file-and-use or preapproval jurisdictions, all regulators expect that insurers declare these parameters with their organizations. Using any non-approved data source to price or determine eligibility should be strictly off limits.