Who has the best life insurance new business and underwriting system?

Celent has published a new report, North American LHA New Business and Underwriting Systems: 2016 ABCD Vendor View, in which Celent profiles fourteen providers of new business and underwriting systems. Each vendor responded to a request for information. Seven vendors met the criteria for inclusion as a potential Xcelent winner. The seven vendors eligible for the awards provided a demonstration and briefing of their billing solution.

Due to the ongoing economic conditions that continue to have an adverse impact on life insurance application volumes, insurers have strong interest in reducing the cost of acquisition, processing and issuing life insurance applications. Automating the new business and underwriting functions are critical components in reaching a level of straight-through processing (STP) for new business. Insurers hope that these systems will help reduce unit costs and improve margins. Celent believes that these initiatives are necessary to help the insurers address growth, service, and distribution mandates, in addition to reducing the cost per policy issued.

After years of development that started almost 30 years ago, automated underwriting systems have become highly flexible in allowing insurers to define and configure underwriting rules and workflow. Most systems include or integrate into eApplications. Data from the applications drive reflexive questioning and identify risk classes associated with application data. They offer high levels of automation when gathering third party medical requirements and flag risks when the third party data results are outside of the ranges set by the rules. They also can deliver decisions to the point of data entry or to an underwriter.

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The interest in new business and underwriting systems is on the upswing. Deciding the best new business and underwriting system is unique to each insurer. The goal of the report is to provide detailed information so that an insurer will be able to make an informed decision on which systems may be the best for them.

The secret to profitable organic growth? Deliver a customer experience that your competitors can’t match

Maintaining growth and relevance is more challenging than ever for carriers. It is a hyper-competitive market with new entrants, a poor investment market, and rapidly changing customer expectations.  
  • Customers are demanding a different relationship model from their insurers. They are increasingly demanding transparency and simplicity with simpler contracts, clearer pricing disclosures and tailored recommendations with extraordinary service.
  • They are more and more self-directed and using non-traditional third party advice. Clients are more financially literate and are increasingly relying on aggregation and comparison tools. They look more for concepts than for entities – diminishing the value of advertising.
  • They are demanding collaboration and participation in product choices, claims, and risk management. They expect proactive communications that demonstrate knowledge of the customer. They expect customer service to be fast, excellent, and available through any channel they choose.
  Whether you define your customer as a policyholder or an agent, (it’s a matter of religion in this industry), expectations are being driven by innovations by non-insurance players. Uber provides instant information availability without long waits on the phone, which gives control and transparency to the customer. Amazon recognizes their customers and provides product and service recommendations that come to the customers without any additional work. Apple provides variations on their products that allow customers to choose among the different value propositions and the flexibility to change those purchases with minimal hassle.   But limited customer interactions in insurance have pushed incremental innovation to focus on products rather than customer experience.   As ardent incrementalists, most players in the insurance industry look at the customer experience from the inside out by thinking about all the points where WE touch a customer. However, being good at the discipline of focusing on customer experience requires taking a broader view of customers’ lives and the context in which they are interacting with the brand. Those who excel at customer service are masters at looking from the outside in, understanding what is going on in a customer’s life when THEY touch us and then delivering unexpected signature moments across a broader expanse of experiences.   Certainly efforts have been made to drive effectiveness for insurance processes, nevertheless, there are still many areas where improvements are possible. The way forward requires a comprehensive digital view that goes well beyond process automation. By recognizing that customer experience is about more than designing a clean and friendly user interface (UI), insurers can move beyond the superficial and achieve real results.   The technology is there to support this. But what keeps us from moving forward? Surprisingly, few carriers have anyone who owns the entire customer experience. Customer experience is usually owned by organizational silos. When no one owns the experience, it becomes a low priority. If there are limited metrics, or metrics which don’t focus on the quality of service from a customer viewpoint, then there are too many competing priorities to drive investments here.   Digital makes possible a level of engagement that was never possible before. But beware – the democratization of digital technology is eroding competitive barriers. And to meet customer expectations in an increasingly digital world, carriers will be required to make both cultural and physical shifts to incorporate new systems and processes while harnessing data and using real time analytics.   Like it or not, customer and distribution partner behaviors and expectations are changing the business model. It is not just about reducing expenses and writing more business. Carriers have to look at new distribution models, new product types well beyond pure indemnification products, and revolutionizing the customer experience.

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 … ?

How to grow your book of business

Most carriers in North America work with independent agents. Although the majority of premium for personal lines is written direct, that is largely concentrated in a few large carriers. Carriers who use independent agents know that high production from agents is correlated with strong relationships. However, beyond encouraging a strong personal relationship with an underwriter, what else can a carrier do to systematically build a stronger connection with an agent and grow their book? Celent surveyed a group of agents to understand those areas most likely to make a carrier the agents’ top choice. The report addressed the following key research questions:
  1. When it comes to placing business with carriers, what criteria are most important to an agent?
  2. How are top carriers performing on those criteria?
  3. Where should carriers prioritize their investments in order to drive growth?
Key Findings
  • It is easy to think that price is the most important factor when it comes to where an agency chooses to place business. Competitive products and price certainly are important; however, even more important than products and price is the responsiveness of the underwriter. A fast underwriting decision is also quite important with over 60% of agents stating this is a must-have.
  • Money matters to agents although the specific components are not essential to all agents. The most important component is commissions. Interestingly enough, 40% stated that the commission rate does not necessarily have to be competitive. Only 30% said incentive compensation programs were must-haves – and 40% said they were nice to have or didn’t matter at all
  • Beyond that, agents also look for support in other areas. A strong brand is important, as it is easier to sell a company where the prospect already has an emotional connection. Marketing, training, and consulting support is seen as important by more than half the agents and especially younger agents who may benefit more from these types of services than older established agents may.
  • Mobile tools and social media support are generally not seen as important items to most agents – but there is a significant generational difference here. 25% of younger agents see mobile as a must-have compared to 4% of those over 60. Generational differences will become more important to carriers as baby boomer agents increase their rate of retirement and are replaced by GenX and Millennial agents.
  • Agents want carriers to invest in those tools that are most important in helping them perform their job of writing business and providing customer service to the policyholder. Most important to agents is continuing to build out both the integration with the Agency Management System and expanding the functionality of the Portal. Least important to agents are features such as mobile apps, online certificates of insurance, online commission statements, and access to marketing materials.
Looking ahead, the industry is likely to continue to experience increasing channel complexity and increasing regulation, which means there are opportunities both to improve the agent experience and to reduce costs along the way.  Carriers who are looking to drive growth by improving the agent experience should start by looking at their technology offerings and make sure they are delivering the functionality that is most important to their agents. This report presents the results of an online survey conducted during May 2015 of independent insurance agents. It contains 13 figures and 1 table. You can find it here: Driving Growth by Optimizing the Agent Experience

Pushing beyond apps

It struck me while I was driving this morning: First-gen mobile apps are fine, but virtually everyone is missing high-volume opportunities to engage with their customers. Allow me to back up a step. I was stuck in traffic. Not surprisingly, that gave me some time to ponder my driving experience. I found myself thinking: Why can’t I give my car’s navigation system deep personalizations to help it think the way I do? And how do I get around its singular focus on getting from Point A to Point B? I explored the system while at a red light. It had jammed me onto yet another “Fastest Route,” disguised as a parking lot. My tweaks to the system didn’t seem to help. I decided what I’d really like is a Creativity slider so I could tell my nav how far out there to be in determining my route. Suburban side streets, public transportation, going north to eventually head south, and even well-connected parking lots are all nominally on the table when I’m at the helm. So why can’t I tell my nav to think like me? I’d also like a more personal, periodic verbal update on my likely arrival time, which over the course of my trip this morning went from 38 minutes to almost twice that due to traffic. The time element is important, of course. But maybe my nav system should sense when I’m agitated (a combination of wearables and telematics would be a strong indicator) and do something to keep me from going off the deep end. Jokes? Soothing music? Directions to highly-rated nearby bakeries? Words of serenity? More configurability is required, obviously, or some really clever automated customization. Then an even more radical thought struck. Why couldn’t my nav help me navigate not only my trip but my morning as well? “Mr. Weber, you will be in heavy traffic for the next 20 minutes. Shall I read through your unopened emails for you while you wait?” Or, “Your calendar indicates that you have an appointment before your anticipated arrival time. Shall I email the participants to let them know you’re running late?” Or (perhaps if I’m not that agitated), “While you have a few minutes would you like to check your bank balances, or talk to someone about your auto insurance renewal which is due in 10 days?” What I’m describing here is a level of engagement between me and my mobile devices which is difficult to foster, for both technical and psychological reasons. And it doesn’t work if a nav system is simply a nav system that doesn’t have contextual information about the user. But imagine the benefits if the navigation company, a financial institution, and other consumer-focused firms thought through the consumer experience more holistically. By sensibly injecting themselves into consumers’ daily routines—even when those routines are stressful—companies will have a powerful connection to their customers that will be almost impossible to dislodge. Firms like Google have started down this path, but financial institutions need to push their way into the conversation as well.

Living with the Internet of Things (and crowd funding)

Earlier this week some users of the Wink smart home hub found that their smart home hub was more useful as a door stop or brick than as a hub. A fix is being worked on and rolled out to customers but for me this looks like the teething problems of the still nascent Internet of Things movement and one of the hurdles Apple is trying to jump with the Apple Watch. Earlier this month I received a portable handheld scanner from Dacuda. It’s not unusual for me to receive gadgets in the post but this one was particularly interesting to me as I had been one of the kickstarter funders of the item and have been following it’s creation with some interest. It piqued my interest particularly because I’d seen the technology almost two decades ago in a research lab but not seen it come to market at a reasonable price – a scanner that one moves over the page and software builds a picture of the underlying document. This isn’t the first item funded via crowd funding I’ve bought. My keys have a tile attached to them and I’m still wearing the original Pebble wrist watch (with e-ink display). I guess this firmly places me as an early adopter in the Internet of Things, wearables and crowdfunding space. I don’t have a Wink hub although it’s sort of appealing but not available in the UK yet. So far though it hasn’t been all clear pastures and dreams ideally realised. The Internet of Things has it’s teething problems. Let’s take the Tile for instance, a small device that emits a bluetooth and short rage wifi signal so you can track it’s location from a phone or tablet, thus, never losing it. I used to have 3 of them and now have 2, that’s right I lost one. I was rushing out the door, the school run running a little behind schedule and forgot my phone. Somewhere on the brief journey I dropped the Tile and what it was attached to. Had I had my phone with me it would have given me the location of the last place it connected to the Tile, as it was it told me the last time it saw the Tile was at home. No matter, in theory if I retrace my steps I will come in range and be alerted that it is found. This didn’t work either so I assume it was picked up. Since the battery lasts two years perhaps someone with the app will go near it and it may yet find it’s way home – but not yet. Part user error and part an unfortunate series of events perhaps, but another technology found fallible and a dream not quite realised. The Pebble has been more successful. The fact I answer the phone when it rings is largely down to my smart watch rather than the phone these days and the wrist-borne notifications are hugely helpful. I use the misfit app on it to tell me I’m not doing enough exercise and a Withings smart body analyser at home to let me know the end result of not having done enough exercise – all great fun! I may still invest in the Apple Watch. I have a standing desk so do stand, something misfit on my pebble doesn’t track and I feel I want to be recognised digitally for this at least. The little handheld scanner is more work in progress. My son’s somewhat fascinated when it works and hugely interested in the errors it makes and where they are made – such is life as an early adopter. More teething issues there. No doubt though we as a population are moving to a world where anything we buy could be connected, where we can buy a $50 hub that controls our lighting from an app and it’s failure is covered in the global (technology) press and where we can fund and follow the development of gadgets we’ve dreamt of owning for a couple of decades (even if the software needs a little more work). So what does this have to do with insurance? The fact is the Internet of Things appears to be running apace, smart homes are being tried out by the early adopters and bugs are being squashed. Did you know with the Wink hub, the app on your phone and this $40 quirky+ge water sensor you can get alerted in real time regarding escape of water events? Ever been out of the house and come home to find the kitchen, bathroom or basement flooded? Indeed just yesterday Karen pointed out this article suggesting insurers are getting involved with smart homes. There’s a lot of buzz around health and life insurance in part driven by the Apple Watch launch. I’m looking forward to Apple doubling down on the HomeKit API or someone credible getting there first; I’m looking forward to the same boom around the Internet of Things and insurers handing out moisture sensors to home owners. I’m looking forward to prevention and intervention products, rather than selling services after a loss. Perhaps we just need to squash a few more bugs first.

It’s no longer about “Why” innovate in insurance, but “how”

The opportunities and threats facing the insurance industry are forcing a change in the conversation around innovation in the sector. Celent has been tracking innovation in financial services for the last 18 months and we have detected a recent shift in interest. In 2014, insurers were exploring why they might need to invest in disciplined innovation practices. What is the next disruption that will change the industry? What can new technology offer regarding improved risk selection and pricing? Now the conversation is moving on to how to execute on innovation. How exactly are firms which are finding success in innovation executing their initiatives? What processes have they put in place that enable them to move beyond the theoretical and carry them into the realm of practical benefit? To respond to our clients’ needs, Celent is facilitating an innovation event in London on February 25, 2015: Making Innovation Happen in Insurance: Hedging Against the Future. The programme will focus on how to deliver innovation in an established insurance franchise. Our design team has developed an agenda which combines research and experience and will provide attendees with practical advice on how to make progress with innovation. The programme includes a mix of first-hand accounts from firms who have achieved success as well as hands-on activities that simulate typical decisions innovative firms face. In this and subsequent blogs, we will give you a look at the agenda in detail. The first portion of the day will provide a look at the current state of innovation in the UK market. This will include data from a survey to benchmark how insurers in the UK market are structuring their innovation initiatives. Celent research finds that success in innovation often entails establishing new types of partnerships that link emerging technologies with traditional insurance products. Sometimes, but not always, this involves direct investment in spin-off firms. In all cases, it involves a dynamic that extends beyond the usual vendor-customer relationship as companies co-develop new approaches to their markets. The second portion of the programme includes presentations from three start-up companies to explain how they are working with insurers to deliver successful innovation. In the final section of the day, we are very pleased to welcome Oliver Werneyer, the Head of Innovation at Swiss Re, to present a Practitioner’s Perspective. He will outline the journey his company has taken so far as they combine their company’s valuable experience with new operating practices. Oliver joined Swiss Re in 2012 and focuses on commercialising traditional life insurance concepts in the modern world of apps, social media and digital connections. His comments will detail how Swiss Re uses data analytics and consumer experience techniques to change the way people experience life insurance. More details are forthcoming on the sessions on measuring innovation and barriers to change, so stay tuned. Click here for more information and to register.

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.  

Board member to insurers: “Don’t get Uberized”

At the National Underwriter Executive Conference last week, a member of the Board of Directors at one of the largest life insurers in the world warned insurers: “Don’t let what happened to the taxi industry happen to us. Taxis thought regulation would protect them and you see where that got them. We can’t allow ourselves to be Uberized.” Beyond the fact that this was the first time I have heard the verb form of Uber (remember when Google was just a noun?), the statement represents a valuable summary of the disruptive threat for our industry. The public expression of this possibility by such a highly visible leader is another in a number of recent signals that insurance innovation is gaining real traction. A recent Celent survey provides the datapoint that innovation practitioners expect the probability of disruption to rise in 2015:   Disruption chart Note that no one responded that the threat would decrease. However, recent events demonstrate that the Uber effect is also an opportunity for insurers — the high level of trust that the industry has earned over the past 150 years. An Uber driver in India has been charged with assaulting a female passenger, reminding us of the dark side of the sharing economy. I am not suggesting that this is a reason for insurers to become complacent, or think that the need to invest in experimentation and to reward risk taking has lessened. Rather, I trust that our industry will heed the threat expressed by one of its most prominent leaders and leverage the positive relationships it has established with its consumers to deliver new solutions which increase its value proposition.