Voice recognition access means one less password

If you are like me, you have at least 15 passwords or PINs that you must remember. Passwords are a necessary evil of the digital world. I have a user ID and password for everything from accessing my child’s homework assignment to checking my bank balance. Most annoyingly, the passwords never have the same expiry date so they are never synchronized. I, like many others, ironically keep my passwords in an app that requires a password.   One financial services company, Manulife Financial, has come to the rescue by providing the ability to access your accounts by using only your voice. I say ‘hallelujah’!   Celent is often asked by insurers about voice recognition IVR and will now be able to point to a working model. Nuance Communications is providing the voice recognition technology. The software stores the customer’s unique voice patterns and characteristics. When accessing the account through the call center, the caller repeats a passphrase and access is granted when the voice is matched to their stored ‘voiceprint.” This is an optional service, but I am sure everyone will want to take advantage of having one less password to remember.   Insurers continue to look for ways to increase customer loyalty, improve the overall customer experience and reduce call center costs. With the introduction of the voice recognition IVR, Manulife has addressed all three salient points. New uses for biometrics will continue to lead the insurance world into the future one innovation at a time.

The turn for Brazilian IT companies to march upstream?

Most of the discussions around the potential of Latin America are related to how insurers can take advantage of a relative immature market, with a growing young population and increasing wealth and investment. The other side of the coin is how vendors can take advantage of a more attractive market as insurers interests grow in the region. You might not all be aware that there was a booth in the exhibit hall at recent Acord Loma trade show showcasing some Brazilian IT companies such as i4PRO which is starting its internationalization program, others such as Stefanini which already has presence beyond Brazil and other that are just in the initial phase of feasibility analysis for their internationalization programs. The offering of the Brazilian IT companies is based on a large and developed internal market that stimulates the generation of creative solutions and a talented human capital pool, that will enable them to compete in more mature and larger marketplaces. In this initiative they have the support of SOFTEX. Founded in 1996, it is the Association for the Promotion of Brazilian Software Excellence, which is priority program from Brazil´s Ministry of Science, Technology and Innovation (MCTI). The focus of this program is the development of markets and the sustainable expansion of the competitiveness in the Brazilian Industry of Software and IT Services. This program has a nationwide scope and comprises SOFTEX itself coordinating a broad network of Regional Agents with around 2,000 software and IT services companies. These companies receive support through a series of initiatives conceived and executed by SOFTEX. Among these actions and projects deserve special mentioning: PSI-SW (Exports); MPS.BR (Best Practices); PROSOFT (Funding); PAEMPE (Best Practices) and Observatório SOFTEX (Qualified Information). Brazilian companies have another vital aid when aiming for internationalization: The Brazilian Development Bank (BNDES) which has played a fundamental role in stimulating the expansion of industry and infrastructure in the country. The BNDES also finances the expansion of national companies far beyond the borders of the country and seeks to diversify the sources of its resources on the international market. These market development initiatives, that receive full attention from the government, are one of the reasons why Brazil is a leading case in the Latin American region not only as a receptor of foreign investment but also as a serious player in the global marketplace as they enable local companies to compete worldwide. While it will take some time until these companies can pose a serious risk to established North American players I would keep a close eye on them, especially considering the successful cases of Brazilian players in other industries that have gone the path of internationalization under similar programs.

Auto Insurance Vanishing? Don’t Hold Your Breadth and Don’t Close Your Eyes

On January 17 I&T posted a story about an exchange that took place at the Property/Casualty Joint Industry Forum between State Farm’s CEO, Edward Rust Jr., and an industry analyst, Brian Sullivan. Mr. Sullivan said, “It’s impossible for anyone to look at the data and say there won’t be fewer accidents than before. The technology is getting better and drivers are getting safer. I think this business is shrinking: Fewer accidents means fewer exposure.” And Mr. Rust responded, “I don’t see the risk being mitigated so much that the premium falls significantly,” Rust added. “The cost to repair a vehicle that has been in an accident is much greater. It’s not your Grandpa’s Olds.” I will judiciously say that both Mr. Sullivan and Mr. Rust are correct—but the real question is the timeframe during which each of them is correct. This year and next year and maybe the year after, there won’t be much technology-driven reduction in auto losses (and associated drops in premium). But inexorably collision avoidance technology is going to get better, and even more importantly, it will become more pervasive among the vehicles on the road. And while insured losses depends on severity (i.e. the cost to repair partial losses or replace total losses), it also depends on frequency. As collision avoidance technology (and automated traffic law enforcement, and yes eventually driverless cars) advances, frequency will drop. And in all likelihood severity will also drop—for example when an automatic braking system reduces the speed at impact from 15 mph to 5 mph. So losses will drop and insurance premiums will follow. The big questions are how much and how soon.

Emerging Technologies in Insurance

Insurance companies have always been risk averse to quickly adopting new technologies. It is not uncommon for technologies to be mature in other industries and still be low on the adoption scale within insurers. However, as the rate of change has rapidly accelerated over the last decade, carriers are in the uncomfortable position of having to determine much faster which new technologies to invest in, and which to continue to watch. Unfortunately, the window to watch has dramatically shrunk before an insurer is playing catch up and has lost market opportunities. Celent recently hosted a Creative Disruption workshop which focused on how insurers can more quickly adopt and leverage new approaches to solving existing problems, basically changing the behavior in thinking about, solving and implementing new solutions to existing and novel opportunities. It was highly recommended that insurers include in the their project portfolio projects that included some of the less mature, emerging technologies, as well as the changing roles and organization structures that would be needed to gain the maximum benefit of the new paradigm shift. (See “Stirring the Creative Disruptive Pot” In order to help Insurers better understand which emerging technologies have the greatest potential, it recently released its inaugural Emerging Insurance Technologies report (http://www.celent.com/reports/emerging-insurance-technologies) which provides a snapshot of the adoption rate of 24 technologies that insurers are implementing or evaluating. It breaks down the emerging technologies into 4 quadrants, namely, Growth and Retention, Risk and Compliance, Efficiency and Expense Control and Claims Indemnity Control. While many of these technologies will have impact on several of these business areas, each has a primary impact on one of them. In addition to the Emerging Technology Report, Celent has also just published “Big Insurance Data: Drawing Lessons from Amazon, Google, and Facebook” (http://www.celent.com/reports/big-insurance-data-drawing-lessons-amazon-google-and-facebook), which is one of the fast growing technologies and potentially largest impact to insurers as the amount of data continues to grow exponentially. As more data is machine generated, as opposed to human generated data, through mobile appliances, third party data, web logs, etc., the ability to mine the data and find useful business insights becomes very expensive and/or time prohibitive. This report looks at three leading big data users, Amazon, Google and Facebook, to provide learnings and benefits to carriers through their successful use of these technologies, such as MapReduce and Hadoop. Celent claims that the game has changed and the old ways of looking at issues and opportunities will not work going forward for insurance technologies. The rate of change has progressed to uncomfortable levels, forcing carriers to react faster than they are used to. In addition, the technology changes are affecting roles, such as more configuration changes and setups to applications being done by the business instead of mostly or totally by IT and affecting organizational structures as well. Knowledge is the greatest asset going forward as it has always been – it’s just the use of it is on hyperdrive.

Stirring The Creative Disruption Pot

One of the great things about being an analyst is that you’re expected to challenge the status quo on behalf of the companies you work with. The analyst-as-gadfly model was on display at Celent’s Creative Disruption workshop in Boston last week. Someone later told me, “You looked like you were having fun!” I surely was.

Celent’s message of “healthy discomfort” as a driver of positive change seemed to resonate with attendees, both carriers and their vendors. It came into virtually every conversation in some way. Here are a few nuggets I noted throughout the day.

  • Disruption is generally respected but only lightly pursued. Like “change” and “agility,” disruption is a term with positive connotations for most people. But when you ask companies what they are doing to make it a reality, you mostly hear the sound of crickets.
  • Agile methodologies are enabling change. And they’re not all about technology. They seem to serve as a signpost that corporate cultures are changing, giving staff a reason to rethink their traditional behaviors.
  • Vendors have an important role to play in driving change. This is well understood, by players on both sides of the vendor/carrier relationship. But it’s easy to revert to old models, where vendor and insurer interests are in opposition rather than being aligned.
  • Leadership will determine where disruption can thrive. Front line staff are thirsty for productive change. Being part of something bigger and more exciting is on most people’s wish lists, even if they don’t know it yet.  But absent some passionate vision from the top, “big D” disruption projects are doomed.

You can expect more coverage from Celent on this topic in the coming months, as we think it is vitally important. Your ability to keep operational concerns and creative, disruptive thinking in a healthy balance will be essential for you to get to the top of a competitive heap.

The Long and Short of Your IT Portfolio

A lot of interesting ideas emerged during Celent’s CIO Roundtable and Model Carrier Summit last week. (See Mike Fitzgerald’s excellent synopses of both events here.) One of my favorites came from a CIO panelist, who framed his rationale for IT project investments in terms of their intended payback periods.

“You’ve got to have some long projects in your portfolio, or eventually you’re going to find yourself hopelessly out of contention for the affection of your customers and agents and brokers,” he said. “But you need some short ones too—things that have a six or nine month payback period, where you can make some progress that will show up on your bottom line in a hurry.”

In the context of the current financial crisis and the microscope that many insurers live under, this idea has never been more important. If you made the 9-month payback your sole project approval criteria, what would you be left with? Cleaning up commission reports, making subtle tweaks to your portal, and maybe improving minor flow issues on your customer service UI. All good ideas, but hardly enough to get you on the radar of independent agents/brokers, especially. And certainly not an effective long-term lever if your goal is to double back office productivity.

On the other hand, should you be betting the farm on $100 million, 5-year policy administration replacement projects? In the words of an old boss of mine, “We could all be dead in five years!” I think his point was that anything beyond the 12 month mark is suspect because, well, stuff happens. Not “might happen,” but “happens.” It just does.

In the perfect world, you can cycle the gains from your “short” investments back toward your “long” portfolio. Those nine-month projects should be delivering savings just in time for your next budgeting cycle.

But we expect that scenario to get harder this year, for two reasons. First, CFOs are getting wise to the game. When you send them a business case with a payback starting in month six, many now expect to actually capture those benefits from month seven forward. Unlike the good old days, just because you save the company some money, don’t expect that it will become your division’s slush fund.

The second reason is that most companies are committed to an SOA vision, where reusability is key. This means that the field of play for short projects is shrinking, or at least morphing toward longer projects. One-off solutions—no matter how smart they sound or how much money they save—are on the path to rarity, if not extinction. Of course there are still savings to be found as SOA infrastructure is developed. But those savings are probably the cornerstone of your larger projects and shouldn’t be double counted.