For sustained innovation, it is not only the “What” but also the “How”

I read an excellent article recently by CoinDesk on John Hancock Insurance Company’s testing of blockchain in insurance. This is one of the early, public declarations that insurers are exploring the potential of this technology. Jamie Macgregor and I also explored this subject recently in the report: Blockchain in Insurance: Use Cases

There is another important angle to the John Hancock story that lies beyond the technology. In our approach to innovation at Celent, we separate the “what” of innovation (blockchain, artificial intelligence, analytics that personalize the customer experience) from the “how”. How companies execute on innovation involves building repeatable processes, incentive systems, and cultures of experimentation that establish a new “way we do things around here”. Note that John Hancock’s LOFT program provided the mechanism through which the insurer could test blockchain. Next week, month, year it will be a different “what” to feed into the “how” machine.

Beginning in the Q3 of last year, Celent research observed the pattern that leading financial services companies which have invested in the "how" of innovation are beginning to gain fast mover advantage over those that have not.  We expect to see an increasing, widening gap between those insurers which have investe in the how of innovation and those that have not. The leaders will use their innovation machines to more rapidly and effectively figure out how to make the “what” of the possible real in their organizations.

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.  

 

Blockchain in insurance – who needs it, anyway?

Interesting feedback from Celent’s What If… Conference in London last week. We were fortunate to have both Leanne Kemp and Pascal Bouvier present on blockchain in insurance. Surprisingly, the extensive treatment of the subject received mixed reviews. Some attendees were pleased and stated that discussing blockchain was valuable and that these conversations, in insurance, are rare and are just beginning to take place. Others felt that the time could have been better used reviewing a subject which has more relevance to insurance. It was mentioned that the technology was for payments, banking, and securities trading. The comments reminded me of the early 2000s, when online retailing began to impact business. I recall insurance industry veterans’ comments about the opportunities for the internet. Summarizing generally, it was something like: “Well, it is a great way to sell plane tickets and books, but it won’t catch on in insurance. Insurance is different.” We see how that has worked out. In 2014, our Celent colleague, Zilvinas Bareisis, positioned blockchain this way in his report, The Disruptive Potential of Bitcoin: Why Everyone in Financial Services Should Care: “Just like HTTP became a protocol for information exchange, Bitcoin, Ripple, and other decentralized ledger-based solutions might be seen as the protocols for value exchange, promising exciting possibilities, some of which are difficult to imagine at this stage.” However, evidently there are insurers that are not only paying attention, but are investing significantly. Allianz announced work with six startup companies in their accelerator in Nice, France. Also, just this week, AXA made public their USD$55million investment in a blockchain technology company. So, is this the “new internet”? Without a doubt, there are huge challenges to blockchain in insurance. The technology still requires maturation around scalability and latency. Additionally, regulatory aspects are yet to be determined. However, it is clear that, right now, some insurers are placing some hefty bets and others can’t even find the casino.

One prediction for 2016 is about to come true – our event on February 3rd

With just under a week to go until our event at The Magic Circle in London is on February 3 I though it worth reflecting on 2016 and the folly of predictions in today’s world. One of the key challenges for any organisation trying to respond to an unpredictable future is the hockey-stick graph or geometric growth that is increasingly describing adoption and the impact of technology on our society. That is to say that the figures stay relatively flat and predictable and then grow out of all proportion to what went before. Adoption of the Internet is a good example, the rise of the smart phones and that of tablets is another. Some may still argue that wearables as a fad has passed, citing them being around for a while but not really seeing the growth one would expect. Perhaps though, this is the false sense of security brought by the flat bit of the graph? The same is true of self-driving cars, a concept that’s been alive and well in Hollywood and on TV shows for decades (anyone remember the Hoff and Kit?) and is only now starting to creep onto real world roads. If the trends of cheaper and ubiquitous technology continue then these trends could at some point see that hockey stick moment, that massive growth in adoption and impact. For insurers – just reacting may not be good enough, instead perhaps it is worth spending time thinking: it is only a matter of time until it is ‘normal’ for clothes and accessories to be internet connected, for cars to drive themselves and for people to live longer through better management of their health. This is precisely the type of thinking we’re hoping to bring to our event, which will be a mix of folks who are on the curve of some of these changes and also some tools to help insurers plan and respond. So while I’m waiting for my Internet connected suit to come along (not that fanciful, you can already get connected yoga-pants and nappies that tweet) and the car that drives me to work – I look forward to spending some time those of you can attend our event next week to discuss the future of insurance and to ask the question, What if … ?

Will your next insurance administration system be on the Blockchain?

Policy, claims, and billing administration systems have not fundamentally changed since their inception. Yes, there have been technical improvements, but the basic model remains the same as originally designed – each insurer buys (or subscribes) to a version of code to use against their own database and (hopefully) integrate with external sources to service a client. This is about to change with the advent of Blockchain 2.0. With an appreciative nod to material developed by our parent company, Oliver Wyman, here is a brief summary of this technology (Celent subscribers will have access to a full report on this platform in the very near future):
Blockchain is built on a series of innovations in organizing and sharing data. The objective is to create a single version of the truth, used by all participants, which contains a much richer dataset than exists in any one system today. This, in turn, enables new industry processes to be developed based on the use of transparent real-time data, immediate settlement of transactions and the expansion of auto-executing “smart” contracts with business logic encoded into the ledger. The technology incorporates two facets, a blockchain (lower case) which is the process of adding blocks of cryptographically signed data to form perpetual and immutable records, and distributed ledgers – a database architecture where all participants in a system collaborate to reach a consensus on the correct state of a shared data resource. Applying business rules to this infrastructure, called smart contracts, drives transactions immediately. Real time data exchange, increased security, and more efficient settlement of transactions and processing are some of the benefit areas waiting to be realized. Before this though, the platform must solve hurdles including scalability issues, regulatory concerns, and common standards and governance.
To this last point, our brethren in the banking industry have joined the R3 consortium to begin to address the challenges. Founded in New York City in September last year by nine founding banks, it now has 42 members spread across multiple geographies. It is led by a startup organization and is in its very early stage — the technology team is being built and initial use cases have not been completed. But what of insurance? Celent is aware of insurers who are active in this space. Most are leveraging the investments made in an innovation infrastructure (Innovation Labs, Centers of Excellence, co-development partnerships, accelerators) to conduct limited experiments with Blockchain. However, these efforts are individual and not connected. Is there a similar group of 9 insurers that want to work together to explore the opportunities and coordinate on standards? Or is there a policy, claims, or billing technology provider who is going to fill this void? We expect movement in these areas in the first half of the year with some possible ways forward identified by year-end.

US patents in 2015 – who are the leaders?

I thought this chart from the firm Statista was interesting and topical given my post from last week. What particularly caught my eye was their observation that IBM is number one for the 23rd straight year. In addition, over 2,000 of their patents focus on cloud computing and cognitive computing, both areas of particular interest to insurance and the broader financial services industry. And for those that wonder (like me), Apple was in 11th place, just 18 patents short of 10th.   Infographic: Top 10 U.S. Patent Recipients | Statista You will find more statistics at Statista

You are the Magic!

Our event at The Magic Circle in London is on February 3 and it is approaching fast. Our external speakers are set to tell us how their companies are challenging long-held assumptions about the way insurance works. But, part of the programme will also involve the participants. We plan to invest a portion of our time together letting you, the attendees, run the meeting. With so many talented, skilled insurance professionals in one place, we want to tap into that brainpower! Of course, we can’t go into too much detail about what is planned, as magic depends on surprise, but…here is a short preview. We will ask attendees to provide their perspective on a number of scenarios and then break into groups to exchange perspectives. We are in the process of finalizing the scenarios now, but to give you an idea of what we are considering. What if…
  • Cars don’t crash?
  • People don’t die?
  • Insurance products are service contracts, based on the avoidance of loss, rather than on indemnity?
  • Pricing is determined by activities and instead of basing rates on rating categories, they are based on behaviors?
  • Technology and social norms allow individual risks to socialize their coverages and seek partners to share in deductible / low loss payments?
Our goal is to give everyone an approach that they can take back to their company, modify appropriately and use to gain some consensus on the way forward. We also plan to have some fun! If you have not registered, here is the link: See you soon!

What if… the insurance industry didn’t innovate?

As a techy with long hair and a beard when I stand up and speak on technology an audience generally expects a futuristic view of the world and a call to action. Of late I’ve been more tempered in my view. Having talking about IoT, telematics and drones for five years now Armageddon hasn’t come, the sky above the insurance industry has not fallen and to be honest, many insurers are still running as they did five years ago with little challenge to their bottom line. In short, in many parts of the globe, insurance hasn’t changed. Have I changed my mind? Only regarding the timescales. For those that are looking – the proverbial canaries are falling. The signs can be seen in multiple countries globally that real change is coming, whether it’s the rise of price comparison websites, the rise of data aggregators, the rising population of connected sensors – whilst the industry hasn’t changed, the world it is sitting in is gently coming to a boil. Whilst the timescale of change to the industry itself is uncertain the possible impacts to the insurance industry won’t be random. That is the driver behind our What if event in February. A key part of event is to inform the audience about the possible scenarios that might befall the industry, to offer tools to consider the impact of these scenarios on their business and current investments. Our hope is to invite the attendees to consider how they would respond and if their current investments are preparing them adequately. Back to the title of the blog – what if an insurer didn’t innovate? An innovation agenda is one response to change and opportunity – whether that’s a change in competitor activity, customer expectations or change in distribution. Other responses could be to increase the agility of the organisation, finally address those legacy niggles or to simply improve the companies research capability to better keep an eye on what changes are coming. What if isn’t solely about innovation, but rather a look at likely scenarios and ensuring your organisation is prepared. If you haven’t registered yet, the event is in February in London and you can view the agenda and register here. For a list of other benefits have a look at Mike’s blog from earlier in the year, along with a reveal of the magical venue.

$13 million investment in social insurance signals disruption

Will a sharing economy model work in insurance? The announcement about the start up Lemonade highlights the challenges that social insurance (also called peer-to-peer insurance) faces. A Celent colleague, Jamie Macgregor attended a panel on social insurance propositions at FinTech Connect Live in London this past week (see Jamie’s blog post). On the panel were leaders of three such companies, Sebastian Herfurth, co-founder of Friendsurance, Steven Mendel, CEO and co-founder of Bought by Many, and Louis de Broglie, President and co-founder of Inspeer. These companies operate as brokers, managing the transaction between the end consumer and insurers. They offer either a deductible sharing scheme or a pooling mechanism to gain price discounts. The panellists spoke about their common challenges — sustaining growth and educating the consumer about an alternative approach to insurance. It remains to be seen if any can achieve critical mass. Of the three, Friendsurance is further along having started (way back!) in 2010. (See Celent report: Friendsurance: Challenging the Business Model of a Social Insurance Startup — A Case Study) Similar brokerage models have also been adopted by Guevara and Tongjubao. These companies seek to apply social insurance to more complicated lines of business – automobile (motor) and life, respectively. The Lemonade announcement stated that it will expand the social insurance model beyond sales and service by taking on risk on its balance sheet. They report that they have applied to be an insurer in New York. This will be an early, significant test given that state’s past regulatory reputation. However, the company has some strong arguments to make. They can point out that sharing increases transparency and aligns the interests of an insurer with their consumers. Additionally, the sizable initial capitalization will positively influence regulators. These alternative approaches are good news for the industry as they challenge the traditional, sometimes adversarial, relationship between insurer and insured. The ability of Lemonade to secure $13 million in initial funding from veteran venture capitalist firms (Sequoia Capital and Aleph) is a serious indication of industry change.

“Hamilton” the hottest ticket in town – great timing!

CBS’s 60 Minutes ran a story recently about the hottest new Broadway musical – Hamilton (go to the 14 minute mark). It turns out that some of the research for the show was conducted at the site our Innovation and Insight Day – The Museum of American Finance. This biography underscores why we chose the Museum for our next Insight and Innovation Day (to be held April 13, 2016). The segment talks about Hamilton’s numerous accomplishments:
“…a penniless, immigrant, orphaned kid who came out of nowhere and his achievements were monumental…he creates the first fiscal system, the first monetary system, first customs service, first central bank…”
Without these innovations, the modern economy as we know it now would look very different. Anyone working in financial services today is aware of the challenges we face responding to changing customer expectations and new technology opportunities. Vast sums of money and time are being spent on innovation, looking for answers. However, Celent’s research shows a widely held view that the financial services industry cannot innovate very effectively. Hamilton graphic nov 2015 So how do we improve? The theme of our Insight and Innovation Day event this year will take inspiration from Hamilton’s work and use it as a guide for our future efforts. By the way, if you want to go to Hamilton while at the Celent I&I Day, I suggest you get your tickets now. It’s the hottest ticket in town.