John Hancock introduces Vitality in the US – will it transform the industry?

John Hancock introduces Vitality in the US – will it transform the industry?
Bold words, perhaps. Transform the industry? It just might. If you did not see the announcement, you can learn more about the program at the John Hancock Vitality website. If you participate in their program, you can receive rewards and premium savings. The program rewards healthy activity, regular exercise, regular checkups and even reading about topics John Hancock offers. It is a program that will feel familiar, as it works similarly to other retail rewards programs, but is focused on your life style. That’s one of the benefits – it is simple and easy to use. The rewards partners are quite extensive as well. In other words, a win-win. The insured lives a healthier lifestyle and is rewarded for it. The insurer benefits as their customers live longer, which is to their financial benefit. I love a good win-win. The program is not actually new. It’s been in existence, in earlier forms, for a number of years. It began in South Africa, with Discovery Vitality, then moved to the UK and to Asia. What makes it even more interesting now, is the intersection of an innovative program with technology. We have all seen technology in the fitness space. You cannot walk around a mall without seeing a Fitbit. For those that think this is a phenomenon only focuses on youth, look when you go shopping. Wearable tech is on the wrist of every age group. Celent certainly expects that to grow quickly, given the upcoming release date for the Apple Watch in the US. Today is even the day you can see one in your local Apple store. The Vitality program integrates this information directly into the rewards, giving you credit for the exercise, just by virtue of reporting it. There are some questions, and I was asked some of those on CNBC’s Nightly Business Review program on Wednesday night. You can view the interview here. Some are fairly obvious – such as security. We don’t see that as an issue here, as the information shared is very limited and not information of interest to a hacker. How much I walk and my heart rate is just not valuable information to anyone. Let’s also not forget that programs with similar components are in place today in the health insurance world. Many companies offer discounts to their employee’s insurance if they complete some basic steps. Our parent company does and my family saved a significant amount of money by participating. One better known program is Humana’s Vitality program – yes, there is Vitality again. Another could be concern that this would limit Life insurance, or even subject you to cancellation, if you didn’t meet your fitness goals. Again, that’s not really an issue. The contractual obligations of an insurance company are very clear and neither this program, not the contract, allows that to occur. The program is also entirely optional. In fact, what industry should we trust more than the Life insurance industry? The basic premise of life insurance is spreading risk. We pay our premiums, for years or even decades, and expect our loved ones to be taken care of in their times of greatest grief. And they are, and have been for centuries. It is one of the reasons I like being in this industry – we help those that have just been stunned by loss. Readers of earlier blog posts know that I enjoy technology and own and wear a very high-tech watch. I am all set for this program and many of you are too. One of my reports from last year explored this very topic, and referenced Vitality as an example. I’m pleased to see movement on the topic, particularly by a company as strong as John Hancock. I encourage those that are interested to follow some of these links, and check out my interview, to learn more about the program. I am sure we will have more soon.

Seeing claims and risks in 3D : Might HoloLens succeed where Google Glass didn’t?

Seeing claims and risks in 3D : Might HoloLens succeed where Google Glass didn’t?
There have been radical changes in user interface and computing technology over the last decade or two. The Nintendo Wii propelled a new style of gaming to the forefront and touch enabled smart devices have done wonders for Apple, Samsung and Google’s Android platform. All of this seems to have made Microsoft’s old WIMP based Windows platform less relevant, despite moves to touch enabled interfaces and Windows mobile in recent years. Perhaps now though Microsoft has found the key to the next generation interface with HoloLens. With a tip to Google Glass this is a wearable headset based system more focused on enabling the holograph interface to interact using augmented reality to undertake various tasks. Perhaps Microsoft have found the killer App Google Glass was missing? Or perhaps the high end 3D gaming style interfaces are better at capturing our imagination than the simpler, untilitarian mobile interfaces we find on todays phones…. What might this mean for the Insurance industry? The interfaces and augmentations imagined for loss adjusters and those in the field apply equally to this new technology, albeit the headset is much more intrusive. Leveraging this technology to engage with people on the ground and share a common visualisation, to direct loss engineers to the right items and help provide data about clients in catastrophe affected areas in a rich and useful manner are all possible. Augmented reality and chunky headsets aren’t new, but the experiences previewed by HoloLens have sparked the imagination of those who have seen and played with it. With the response to HoloLens being very positive so far I wonder if we will see a relaunch of Google Glass or it’s successor sooner than one might have expected. For those who are interested the technology appears to have it’s origins in big data, as this article from April last year talks about leveraging the Holograph interface for visualising large datasets.

Choosing a New Claims System?

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.  

For Halloween: The Tricks to Get Innovation Treats

For Halloween: The Tricks to Get Innovation Treats
Innovation is not witchcraft but, when done successfully, there is a touch of magic. The magic happens when innovation becomes “part of the way we do things around here” (read: corporate culture). When people across the firm approach their jobs constantly through the lens of “how do I change my job so that I deliver more value to my customers?”, magic can happen. We discussed this in a webinar this week (Innovation in Insurance: Differences across Continents). The point was made that there are specific actions (tricks!) that prepare a corporate environment for magic. Specifically:
  • Establish a common language around innovation; what is it? what is it not?
  • Revise reward systems, especially around encouraging “fail fast” behaviors
  • Develop a communication plan around innovation – leverage Corporate Communication expertise to sustain a messaging effort around innovation
  • Tune existing governance structures to handle innovation initiatives differently than run-the-business projects
The message coming through in Celent research is that innovation is more process, sweat, and political capital than black art. So, try these tricks in your organization so that you (and your customers and teammates) can enjoy some innovation treats!

Keys to Successful Policy Administration System Upgrades

Keys to Successful Policy Administration System Upgrades
All IT professionals have a horror story about a system upgrade gone wrong. Since most policy administration systems (PAS) have a 12 – 18 month upgrade cycle for major releases, there are plenty of opportunities to misstep. To address this dynamic, a consistent claim of modern PAS vendors is that multi-tiered architectures and other technical designs ease the pain of upgrades as compared with legacy environments.   However, up to now, objective data concerning upgrade metrics was difficult to collect. How long does it really take to upgrade a PAS? Do modern systems live up to the levels of ease that vendors cite? Historically, have insurers experienced any difference in outcomes when using vendor or third party system integrator staff versus internal staff to execute the upgrade?   In order to close this gap, Mike Fitzgerald and I surveyed 44 North American insurance carriers to provide answers to these questions as well as to understand major challenges faced and overcome. The report reviews carrier’s experiences in policy administration upgrades. It examines reasons for doing upgrades, staffing strategies, scope, time and budgets inherent in upgrades and provides advice from carriers on challenges to prepare for and advice to assure a smooth successful process.   Here are some of the key findings from the report.
  • Most carriers doing upgrades do a point upgrade and generally, these are successful.
  • All upgrades to modern systems in the survey group were successful, supporting the expectation that these platforms reduce the pain related to ongoing updates.
  • The most frequently reported reason for taking an upgrade is “to gain new functionality” and the second most common driver is “current version no longer supported”.
  • Only 10.7% of insurer respondents used their own employees without assistance from vendors or third party companies. The most common uses of vendor services for upgrades are for coding, configuration and testing.
  • Most upgrade projects (64.3%) meet their delivery deadline.
  • Some carriers actually came in below budget on their upgrade, but the vast majority, 60.7%, came in on budget.
Many carriers report that they have not upgraded their PAS either because they are homegrown, or, more frequently, because these are new installations. This places a particular importance on the lessons that can be learned from other carriers’ experiences as the new installations prepare for their first upgrades.   For many carriers upgrades are a big deal. They take months of effort, tie up a lot of staff, and can frustrate business partners. However, done well, they go smoothly and can add new functionality, upgraded configuration tools and deliver significant benefits.

Data Governance in Insurance Carriers

Data Governance in Insurance Carriers
Data initiatives abound in the insurance industry. Most carriers have some type of data initiative in place. They focus their efforts on implementing reporting tools, analytic tools, and repositories — with all the tools that go with them.   Data governance, on the other hand, is an emerging discipline. The discipline includes a focus on data quality, data management, data policies, and a variety of other processes surrounding the handling of data in an organization. The purpose is to assure carriers have reliable and consistent data sets to assess performance and make decisions.   As the insurance industry moves into a more data-centric world, data governance becomes more critical for assuring the data is consistent, reliable, and usable for analysis. Analysis and reporting issues are more often related to data governance issues, not technology issues.   Data governance initiatives are generally designed to assure the data is accurate, consistent, and complete in order to maximize the use of data to make decisions, to find unique insights, and to improve business planning. It assures that your data capture mechanisms are set up to capture what you need to capture and assures there is alignment between analytics tactics and strategic goals.   But carriers face governance challenges. Data is spread across a wide variety of applications, and data ownership is most often shared across the business and IT. Carriers report cultural resistance to understanding data issues, which makes it harder to find sponsors for data governance initiatives. Consequently, a large number of carriers deploy informal data governance initiatives — especially larger carriers.   I’ve just published a new report that surveys carriers around their attitudes, challenges, and initiatives related to data governance. Some very interesting findings. Check it out. http://celent.com/reports/importance-data-governance-current-practices

The Blame Game

The Blame Game
Kathleen Sebelius resigned on Monday, and I’m betting that she is hoping that her next role does not include a major IT project.  As Secretary of the Department of Health and Human Services (HHS), Sebelius was responsible for overseeing the rollout of the troubled healthcare.gov website whose launch was tainted by serious technical problems. 

Initially the technical problems were thought to be confined to scalability issues given the large amount of traffic.  But it was found that there were a variety of other issues.  The site rejected valid passwords, served up blank drop-down menus, and crashed repeatedly.  There were challenges with the database, issues with integration, and after millions of visits on the first day, only six people got all the way through.  New contractors were brought in to fix the problems which added to the cost overruns.  The cost ceiling began at $93M, was raised to $292M, and today, it is estimated that the site has cost around $500M.    To be fair, this was an extremely complex project consisting of 6 complex systems, 55 contractors working in parallel, 5 government agencies were involved; it is being used in 36 States, and covers 300 insurers’ 4500 insurance plans.

There were a number of contributing factors to the technical problems.  No single contractor managed the entire project and there was a lack of coordination across the multiple vendors.  There were a number of last minute changes – and the project was managed using a waterfall methodology – which can make it difficult to respond to the changes quickly.  Testing was inadequate.  Not only did the system not perform according to design, but it didn’t scale to the level anticipated.  Clearly they knew what the load would be – but the load testing didn’t meet the capacity plan. 

However, Sebelius had little direct oversight of the project and certainly wasn’t responsible for the day to day project management.   The website design was managed and overseen by the Centers for Medicare and Medicaid Services, which directly supervised the construction of the federal website.   Regardless, Sebelius is likely updating her resume today and considering alternatives. 

What does this mean for a CIO?  If you’re going through a large scale project – and many carriers are – you won’t know everything that the project manager knows – even though your neck is on the line if the project fails. Large scale projects require a different level of management than day to day operations.

Areas to focus on include:

·         Set realistic time frames.   Don’t underestimate the amount of time it will take to implement the project.  A lot of carriers want to hear that implementation of a policy admin system can be done in 6 – 12 months and while there are some examples of that being true, it’s more likely that your solution will take longer.  Plan carefully,  add contingencies, and if you end up with a choice between launching late or launching with less functionality that was initially planned,  you’re usually better off taking the time to do it right.  People are much less forgiving of a poorly executed project than a late one.

·         Manage the project with multiple, aligned work streams.  Large projects generally will require multiple work streams.  We often see carriers who divide the project into streams such as data, workflow, rating, documents, etc.   This allows the team to focus their efforts.  However, you have to continuously monitor that the streams are aligned.  Communication across multiple work streams is critical

·         Communications is a key success factor for large projects, yet is often an afterthought – or worse – not planned.  Communications across project teams is necessary to assure the functionality is aligned as planned. Communications is also critical when it comes to managing scope creep.  When the team clearly understands the priorities, they’re better able to make tradeoffs early on.   Clearly setting expectations around the deliverables and then continuing to manage those expectations as the project moves forward is an important piece of the communications – especially if faced with optimistic delivery dates, changing requirements, or staffing constraints. 

·         Focus on the worst case scenario.  Be skeptical when all is going smoothly.  Insist on regular checks on the project and take red flags seriously.  Realistic monitoring of the project progress and analysis of the underlying factors impacting the use of contingency will help identify issues early on.  Make sure not to just look backwards at what has occurred – but focus on readiness for future stages.  Some carriers benefit from having third parties come in and conduct project health checks – looking objectively across the project for subtle indicators of potential issues.

In the end, Sebelius is responsible for the results of the healthcare.gov implementation and her resignation should be seen as a red flag for carriers in similar situations.  Take a look at the governance you’ve put in place for your large projects.  Now may be a good time to consider adding some additional oversight. 

Customer segmentation, fad or future?

Customer segmentation, fad or future?
Traditionally insurers have been structured by line of business and some have grouped those around personal lines and commercial lines to differentiate businesses from people. With the opportunities of varied distribution channels and more sophisticated technologies insurers are starting to be much more granular in their view of the customers. Insurers have now the chance to move from their traditional top notch markets and be able to create an offering to attract the different segments. Some of these moves include Microinsurance targeting people in the base of the pyramid and Small and Medium Business (SMB) insurance products. Microinsurance products are being launched almost every month in different parts of Latin America. Most recently it was announced that Asomi and Redcamif will be launching an initiative in El Salvador with life insurance policies written by Pan American Life Insurance Group (Palig) with premiums as low as $0,68 per month. Some brokers, large ones, are moving into the SMB market but using its affinity platforms instead of their commercial platforms to support this business. While originally SMB should have fallen into commercial, they realize that it requires processes and the agility expected also in their affinity business. In another interesting move, Metlife Mexico announced yesterday the creation of a new division that will sell to socio economic segments C and D and to young people, those that are not the usual target of insurers. According to the classifications developed by AMAI, a Mexican association, the country’s population is divided into five segments: AB (people with high purchasing power and income), C+ (people with higher-than-average incomes, whose families are headed by someone with a college degree and have at least two cars), C (people with middle incomes, whose families are headed by someone with a high school degree and have both a car and the ability to take one trip per year), D+ (people with incomes slightly below average, some secondary education and no family vehicle), D (people with low income levels and a fairly austere way of existence, who have a primary school education and who lack access to traditional banking services). Metlife Mexico will be offering simple and flexible products while also developing better distribution channels, with emphasis in the use of technology. Software vendors are coming in also to provide solutions towards being more granular. Solutions around analytics to better understand your customer, digital to better serve them and master the points of contact, core processing and BPM to adjust your products and processes accordingly, just to mention a few. Last year Guidewire presented its vision on how a core system will be able to support customer segmentation already delivering some required functionality. Core systems are just another gear in the engine and it’s important that vendors acknowledge how they need to integrate into other solutions for the insurer to be able to deliver a customer segmented value proposition. While I believe customer segmentation is where the industry needs to go, it is not without huge challenges. Insurers need to address the differences and purchase attitudes of those different segments.  Omni-channel is one of the aspects, but also dealing with channel conflicts and regulation. Products need to be tailored in a way that can be flexible but capable of scaling massively, and this means looking into pricing, packaging, marketing, distribution and servicing. Processes need to be adjusted in order to provide the correct value to each segment. At the end of the day you don’t want to be perceived as under-performing and not providing the required value, but neither you want to over deliver if this means excess of cost and important cuts in your margins. My final thoughts for you. How will your structure look as you move into serving segments? How will this affect reporting and statistics by the way, which today is seen by line of business (even by regulators)? Are you ready? Are we ready?

Celent Predictions for 2014

Celent Predictions for 2014
It’s clear that my colleagues and I see 2014 as something of a tipping point, a water shed for established and new technologies  to take hold in the insurance industry. I’ll try to summarise them succinctly here. Expect to see reports on these topics in the near future. Celent’s 2014 prediction focus on:
  • The increasing importance and evolution of digital
  • The rise of the robots, the sensor swarm and the Internet of Things
  • An eye to the basics
The first topic area is labelled digital but encompasses novel use of technology, user interfaces, evolving interaction, social interaction (enabled by technology) and ye olde customer centricity. Celent predicts vendors would market core systems as customer centric again, but this time meaning digital customer centricity. Celent expects to see core system user interfaces to acquire more social features along with a deeper investment in user interfaces leveraging voice, gesture, expression and eye movements. A specific digital UI example was the wide spread adjustment of auto damage claims (almost) entirely done through photos. In addition, gamification use for both policyholders and brokers will be adopted or increase in use for those early adopters. Celent further predicts greater investment in digital and that comprehensive digitisation projects would start to drive most of the attention and budgets of IT. The second topic I’ve called Robots and Sensors, while digital there is a significant amount of attention and specificity. The merger or evolution of the Internet with the Internet of Things accelerates with devices contributing ever more data. Celent predicts this rise of the Internet of Things or the sensor swarm, will push usage based insurance policies to other lines of business, not just telematics based auto policies that UBI is currently synonymous with. Celent further predicts that the quantified self movement and humans with sensors will in 2014 yield the first potentially disruptive business model for health insurance using this data. As an aside the increasing use of automation, robotics and AI will see broader adoption in the insurance industry. For those reading my tweets, Celent predicts 2014 will see drones used for commercial purposes. I hope we won’t have the need, but wonder if we’ll see drones rather helicopters capturing information about crisis stricken regions in 2014. The final topic I’ve called the basics. Celent predicts insurers will continue to focus heavily on improving performance of the core business – a good counterbalance to the hype around digital and a good pointer to where to focus digitisation efforts. At Celent we have noted a pragmatic interest in the cloud from insurers and we predict increasing complexity in hybrid cloud models, to the benefit of the industry. A little tongue in cheek but finally, Celent suggests that industry will finally find a business case for insurers adopting big data outside of UBI. Avid readers of the blog will be happy to see we haven’t predicted an apocalypse for 2014.   A special thanks to Jamie Macgregor, Juan Mazzini, Donald Light and Jamie Bisker for their contributions.  

Thoughts from Insurance Technology Congress 2013, London

Thoughts from Insurance Technology Congress 2013, London
Insurers and vendors met in London to discuss insurance technology on the 24th and 25th of September this year. The audience mostly consisted of those with an interest in the London market and Lloyds although there were representatives from general insurers in the UK too. I was glad to see that the tone of the meeting had shifted. In years past there has been a theme of technology and modernisation being necessary but too difficult. This is a market that has seen some high profile and expensive failures in IT along with successes. This week I heard again the call to action, the need to modernise but there was a much clearer sense of optimism, a way forward. There are still very large, expensive projects in the market with Jim Sadler, CIO of XChanging giving a colourful view of the latest deployment on behalf of the market. Alongside these are independent initiatives, demonstrating the value of standards and cooperation amongst competitors in the market. A panel discussing the eAccounting initiative, Ruschlikon, led by XL Group’s Simon Squires, gave a surprising engaging and transparent story of how a group of insurers and brokers collaborated and delivered to market technology that fundamentally improved their operations and speed of response to the insured. Genesis offered another example of a group of insurers coming together and collaborating to fix an issue that again, slowed down the market and affected customer service. In the course of the proceedings the architect of Genesis mentioned the best thing for the project would be that it is superseded by something that worked better, but that wasn’t a reason not to do it. Throughout the discussions there was a theme of automating where human interaction didn’t add value, but not automating for the sake of automation. There were discussions about delivering smaller projects, doing it quicker, collaborating and adopting standards where this didn’t affect competitive advantage and not doing so harmed customer service. Themes I expect we’ll see repeated at next weeks Celent event in San Francisco. As before and for the last few decades, there was a sense of a need to modernise, to attract new talent, to move the market forward. This year there was a real sense of optimism, sample projects that have moved quickly and gained adoption, a way forward.