What Influences Decisions on Digital Advertising for Insurance?

By Patrick Vice, Insurance-Canada.caNo Comments

Back in my hometown of Detroit, I learned that consumer advertising decision making by automobile manufacturers consisted of one part art, two parts science, and and some unknown parts corporate politics.   I’m thinking that there may be a similar formula in place for decisions on digital advertising by insurers.  I’d appreciate your thoughts on this.

“Digital Display Advertising Nine Times More Effective Than TV for Auto Insurance Brands”

… That was the headline of an announcement of results of a US based study conducted by media buyer, Rocket Fuel.  Key points were:

Source: Rocket Fuel Insurance Study 2Q2014

Source: Rocket Fuel Insurance Study 2Q2014

  • “Top of Mind awareness is highly correlated with market share for both auto insurance (0.83)  and homeowner’s (0.87) insurance….
  • “Cross-channel ad spend was a key predictor of top-of-mind awareness for auto and life insurance providers, with digital display ad spend being nine times more effective at driving top-of-mind awareness than TV.
  • “Nearly half (44%) of consumers only look at a single quote before making a purchase.”

The study was based on a survey of 1,026 consumers.  The study also included detail on the impact of various advertising strategies, including ad types, time of day impact, and ad content (e.g., “Human faces improve conversion rates”).

There is a lot of other data suggesting that consumers are going on-line to research their insurance needs.  These new data suggest consumers are heavily influenced by the results.

So, digital advertising is trending, right?

Perhaps … It depends on whom is reporting.  Separating digital from other spending is not easy to suss out, so I had to rely on proxies.

Kenshoo, which supplies technology to assist in placing digital ads. reports that the insurance industry – which they note are not often associated with “digital” or “innovative” – are making substantial strides.  Kenshoo notes that recent research has revealed that financial services – including insurance – is expected to increase digital spend by 83% between now and 2017 to respond to increased consumer interest in consuming digital information about financial products.

The demand estimate tracks with Rocket Fuel’s survey results.

However, a second report by Aite Group indicates that, within insurance, there is a digital divide impacting customer experience generally.  An analysis of the top 20 US auto insurers’ digital capabilities  found that “the top five U.S. automobile insurance companies by market share all have websites, mobile sites, and social media sites that are regularly updated, modern, and easy to navigate.”

However, “Farther down the list of top companies, fewer show involvement in social media activity, and some even lack accounts on major social networking sites.”  I may be wrong, but I’m guessing you can’t really have a Facebook advertising strategy without a having a Facebook account.

Where will insurers take digital advertising?  Do we need a Motown solution?

There is a consensus that insurers should embrace digital more aggressively in all parts of the transaction, including advertising. However, it takes a common vision of the digital future of the organization.  Not easy to do.  Which brings me to my Detroit story.

A friend of mine worked for an ad agency for one of the big 3 auto US makers (when they WERE the big 3).  For one new model campaign, the agency developed a bold, innovative approach, supported by massive amounts of consumer survey data.  The marketing department of the car company did a rigorous evaluation, including its own independent analysis, and concurred.

However, other members of the senior executive disagreed.   The executives discounted the data, promoting their approaches as “common sense”.

The marketing department and the agency got together and devised a strategy that ultimately received approval by the COO.  There would be two campaigns.  One ran in the Detroit area, focusing on the TV stations, radio stations, newspapers and magazines that were popular with the executives.  The other ran on various media using data-driven, segmented messages.

The dual campaigns were successful.  The first kept the executive team happy.  The second hit the marketing targets of the enterprise.

Where are you on digital advertising?

What do you think?  Are you seeing the need to move more advertising to digital?  Do you have a strategy in place?  Are there reasons that you are holding back?






Insurance Marketing, Social Business

Data vs. Data Governance? Chicken & Egg Dispute Resolved!

By Insurance-Canada.ca BlogEditorNo Comments

It looks like the egg comes second in one “Which came first?” argument. At least, that’s our read on a recent report by Celent, based on a survey of insurance companies on the topic of data governance. It seems that the Data chicken precedes the Governance egg by a long stretch.

Our question to you:  Will we ever see a perfect omelet before the landscape is overrun by clucking birds?

What’s what and who’s who…

The report:  The Importance of Data Governance: Current Practices, authored by Celent research director Karlyn Carnahan, sought to understand how insurance carriers viewed the value data governance in a world that is becoming increasingly data driven.  Forty one carriers, including 28 P&C and 13 Life and Annuity were included.  The results were differentiated between large and midsize, with the line drawn at US$1bn premium.

We are calling the Data initiatives the Chickens with the Egg representing the Governance.  Our view is that, in the perfect world,  the governance egg will contain the DNA and fundamental energy required for healthy chicken data projects.  (It’s just an analogy, so we won’t go deeper than that.)

Theory, Meet Reality…

Let’s cut to the chase.  The majority of companies see data initiatives as “mission critical”, with all of the remainder scoring them as “highly important”.  Enough said.

datagovernanceWhen it comes to data governance,  the report says, “although more than half of the carriers report governance as mission-critical or highly important, fewer than half have formal data governance initiatives in place.”  Actions do speak volumes.

Is data governance required?

The Celent report provides some important information about the requirements for governance.

When asked what the biggest challenges are with data, number 1 is “collecting and analyzing it quickly enough.”  Time to market is a critical success factor for many, right?

However  we see the 2nd and 3rd biggest challenges reported rest squarely in the governance wheelhouse:

  • A fragmented data environment (e.g., multiple definitions of the same thing in different systems)
  • Poor data quality

When asked why carriers undertake data governance initiatives, the top 3 reasons are clearly strategic:

  1. Improve the decision-making
  2. Gain unique insights
  3. Improved management planning

We’d say these sound like important requirements, so …

Why is governance playing second fiddle?

The Celent report indicates that data governance is an emerging discipline. Rules of engagement are not yet mature for:

  • who should be responsible,
  • what the ownership model should be,
  • which stakeholders are required to come to the table, and
  • how much data can, or should be governed.

This begs for more time to resolve these issues.  In this rapidly changing world, however, do we have the luxury of time?

The Celent report captures the conundrum well:  “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.”

The risk is that the data themselves will lose credibility.

Who needs to do what to whom?

Without saying that the CIO is responsible for plowing this field, the report outlines four steps for that office to undertake, to drive consensus and move towards informal and formal governance protocols that will address the organizations priorities:

  • Keep it realistic.
  • Develop a cross-functional approach to data governance.
  • Gain support by communicating the benefits of data governance.
  • Prioritize the development of formal data governance initiatives.

What do you think?

We found this report (which has more detailed analysis than we are able to outline here) to be an important contribution to an important topic.  But we’d like your thoughts.

  • Is data taking precedence over governance in your world?  If so, is this a bad thing?
  • Have you any governance principles that work in your environment that you can share?
  • What would help you in your role with data and their governance?

Don’t be chicken … share your thoughts.

Analytics, Data, IT Management

Learning from Leaders: Winning Strategies for Insurers

By Christian BieckNo Comments

For most of us, in our private lives, rapid change has become a given. How many of us had heard of Facebook or Myspace ten years ago? In 2008, you had to be extra cool or a geek to have a Smartphone – today you are almost seen as a Luddite if you don’t. We store our music and pictures on the Cloud. We stream our movies and shows. We expect our access to products and services to be tailored. We don’t want ads, we want to know what other people like us bought. Many of us have become part of the Sharing Economy. We have adapted to the changes around us.

Businesses, especially insurers, are having much harder time with these changes. How much harder? And what are leaders doing differently to adapt? That’s what the most recent IBM Institute for Business Value study, “Winning strategies for insurers: How industry leaders are excelling outside the comfort zone,” published in July 2014, set out to explore. We interviewed 80 insurers globally on their strategic choices and analyzed what leaders – either those that grew stronger than their markets, or those that were more profitable than their markets – did to differentiate.

The results in short: leaders are more focused, more proactive and more analytical.


Leaders know who they are and who they want to be – price competitor, quality competitor or any other of the five basic strategic archetypes we show in the study – and they focus their strategic capabilities to support their type. These capabilities come from defined strategic dimensions: customer, interactions, services and structures, which leaders tailor to fit their specific needs. For example, a price competitor will focus on cost; they will concentrate on price sensitive psychographic customer segments, will reach out to them through online and mobile interaction points, promote simple and standarized products and services and streamline infrastructure and operations.


Many insurers do not want to be leaders, but are content to be fast followers. Nothing wrong with that – as long as you take the „fast“ part seriously. That’s why is it important to be proactive – it is self-reinforcing. Creating flexibility frees up ressources; it allows you to stop worrying about legacy upkeep and start thinking about adapting to your changing customers.


No matter which of the four dimensions we look into, leaders invest in analytics. They want to understand customer needs, their interaction patterns, they develop claims analytics and use advanced analytics in their overall operations. The world has become too complex to manage it without analytics, and leaders recognize that.

What are you doing to differentiate? Are you a leader or a follower? Let us know in the comments.

If you would like a copy of the full report you can access it here:



Editors Note: Christian is the global leader of the insurance practice for the IBM Institute for Business Value. Christian has more than twenty-one years of experience in the insurance industry, working as researcher, consultant, project manager, and even selling insurance! His areas of expertise range across all parts of the insurance value chain, from product development through customer related front-office to process-oriented back office.

Analytics, Strategy

Technology as a Tool for Knowledge Worker Retention

By Patrick Vice, Insurance-Canada.caNo Comments

I am a big fan of continuous, broad-based skill development for employees.  A fair percent of my time as an IT manager was spent encouraging technical IT folks to learn about the business of insurance in order to provide a broader view of their jobs.

I recently saw some material that suggested that an inverse model – providing insurance professionals broad based IT training – might address skills issues facing the insurance industry.  I would be really interested in getting your feedback on this:  Would more exposure to IT training facilitate claims examiners, underwriters, agents/brokers, and finance managers?

Retention is a key factor now

The 2012 Insurance Institute of Canada (IIC)  Demographic Analysis of the P&C Insurance Industry in Canada revealed three major trends apparent in our industry:

  1. Substantial recruitment activity has taken place, despite the degree of economic turbulence in Canada since 2008.
  2. To date, the level of recruitment has compensated for the level of retirement.
  3. Going forward, the impact of retirement should increase substantially. Therefore, the level of recruitment (and retention) will need to increase substantially. [emphasis mine]

The situation was somewhat urgent for most roles.  However, the IIC identified the ‘More Urgent’ roles as:

  • All Claims Roles
  • Broker/Agent
  • Actuary
  • Commercial Underwriter

The IIC conclusion was: “Despite substantial recruitment across most occupations in the last 5 years, recruitment is perceived as ‘somewhat difficult.’ …   Retention is mitigated by high employee job satisfaction.” [emphasis mine]

So ….. What does technology have to do with this?

Virtually all HR professionals and most senior managers are aware of the impending Boomer Reverse Tsunami, but what could bits and bytes do to keep the fish in the bay?

The College for America, is a “nonprofit college built specifically to work for working adults and their employers—and to better connect workforce research, higher education, and labor market needs.”  It recently released an insurance strategy report entitled “Six Insurance Jobs affected by Growing Customer Centricity and New Technology” which draws the necessary lines.  Four of the six jobs are aligned with the urgent jobs identified by the IIC.  These, and the technology linkages, are:

  • Brokers/Agents – “Predictive analytics and customer segmenting technologies are informing lead generation rather than cold calls. Sales agents need to know how to use analytics technologies to identify prospective clients and what kinds of services they, as well as existing clients, will need.”
  • Claims staff – As clients become proficient in using technology and Apps to report losses, calculate damage, and monitor claims process, these tools “have increased customer expectations to have their claims settled faster. So claims staff must truly start to rely on the speed and automation of the modernized computer systems to maintain client satisfaction.”
  • Actuaries -  While predictive analytics and big data will actually help actuaries, these professionals will have to learn to use more complex analytic tools.
  • Commercial Underwriters – The college actually projects that the number of underwriters will decrease due to automation.  However, this will be more on the lower end and within personal lines.  The more sophisticated, tenured underwriters will have to rely more on technology rather than on processing.

And where do we learn about the technology?

The college suggests that workers in the various segments have responsibilities that are unique, and need training to meet the technology components of the jobs.  There are other elements of the roles, however, that cut across lines and are more foundational.  I would assume that basic analytic skills and social media proficiency would be among these.

It seems to me that training in these areas, with a focus on insurance, is not yet common place.  If that’s true, perhaps we could look to the IT folks that have been learning about insurance to return the favour by helping line business users with some basic analytic and data base skills.

One of the best courses I ever took as a manager was something called “Financial Management for Non-Financial Managers”.  The instructor was not great, but the outcome was perfect:  I could have intelligent conversations with the comptroller and CFO.

Perhaps there is room for “IT Business Analysis for the Non-IT Analyst”.

What do you think?

Does this make sense?  If so, are you seeing any of this happening?  If not, who should take this on?




Analytics, Big Data, Business-Technology Alignment, Human Resources

Are Insurers Facing More Threats or Opportunities with the Internet of Things?

By Insurance-Canada.ca BlogEditorNo Comments

The view of the Internet of Things (IoT) from the present moment is overwhelming for most mortals (present company included).  That said, we believe that insurance practitioners need to squint hard and try to get some things in focus.  A recent research brief from SMA – Strategy Meets Action provides one lens we can use.

It seems there are many more questions than answers about the impact of the IoT on insurable interests, on potential services and products, and on existing insurance technology.  Suffice it to say, there is no shortage of risk (some being existential) to consider.  We’d like your thoughts.

What is the IoT and why should I care?

The brief, “The Internet of Things: Creating a Connected World”, authored by SMA Partner Denise Garth, provides good context for discussion.  The report notes that the emergence of the IoT is happening quickly and is enabled by four converging forces: affordable, usable technology powering the sensors, cloud infrastructure allowing storage of massive amounts of data, mobile communications enabling ubiquitous connectivity, and analytics technology to consume and digest big data.

Citing some mind stretching stats (e.g., by 2020, there will be 50 billion connected things compared with 8 billion people), the report summarizes the risk of taking a limited view of the potential:

IoT creates a world where nearly anything can be connected and communicated, creating new information, insights, and intelligence to be used in new and innovative ways…. Companies focused on using IoT only in various or isolated parts of the existing insurance value chain will miss one of their biggest opportunities to re-envision and reimagine the business of insurance – and put their companies at risk competitively and financially.

It’s this last bit – changing the business of insurance – that is the core, and most challenging part of the report.

Ubiquitous data gathering

The brief provides a number of examples of sensors now in use that are impacting commercial risk profiles.  For example, sensors in farmers fields collecting data on irrigation, weather, soil composition, etc., which can be analyzed to help improve productivity, or mitigate risk.  Also, sensors in hospitals are monitoring the location of critical equipment (crash carts) and behaviour (hand washing); helping to lower risk and provide information in the case of claims.

On the personal side , the report provides a number of examples of useful, and frequently wearable devices that help monitor conditions in homes and on peoples’ bodies and supply underwriting and risk management information as by-products.

Progress: The two edged sword

There are positive and negative impacts for insurers.  The ability to monitor virtually everything from buildings, equipment, and the environment, to behaviour of individuals, provides data for risk management, underwriting, and claims.  However, this assumes there are tools and expertise to do the analysis and store results.

More significantly, the improvement in risk management combined with more sophisticated selection and more precise pricing methods could put additional pressure on prices generally and challenge basics assumptions inherent in spread of risk.  SMA’s call to action recommends that insurers be prepared to develop new products and services that focuses more on risk prevention than risk financing

That may be a little difficult to do and very difficult to do profitably, at least within the current business model.  And that is the final statement in the report: “Change is coming, bringing with it a connected world of everything. We either define the change, or it will be defined for us.”

And, when you have digested that,  the core systems need some help

The brief has a few references to applications technology generally and core systems specifically.  We were curious, and asked Ms. Garth whether current generation admin systems (policy, claims, billing) were capable of managing the data.

Her email answer should put IT managers on notice: “Not in their present form. The demands and characteristics of IoT, such as the constant connectedness, the volume and velocity of the incoming data, and the necessary embedded software and analytics, will require new platforms and applications to leverage the sensors and devices effectively.”

Her recommendation was to bring in new applications for the management and analysis of these new data and ensure the core systems can manage summarized information.

What do you think?

Our brains hurt.  We need your help here.  Are you looking at the IoT with an insurance eye?  In your mind, is it a threat, an opportunity or both?  What are you doing now?

Put your sensors on and let us know.


Analytics, Big Data, Internet of Things

CRM: Old Technology At The Eye of the Perfect New Technology Storm

By Insurance-Canada.ca BlogEditorNo Comments

Some of you have commented that we’ve been harping on Customer Relationship Management (CRM) for sometime now, without a whole lot of solid reasoning. Fair comment.

What we’d like to do on this almost perfect summer’s afternoon is to take a weather reporter’s view of CRM. We’ll look to the past for evidence of incorrect forecasts, look to the present to see how a perfect storm could be forming, and then make fearless projections about the future. In the calm eye, you might see tried and true CRM moving inexorably forward, in spite of the crazy winds around it.

As usual, we’d like to ask you, our expert prognosticators, to offer your own forecasts.

It sounded good at the time …

In the early days of this century, there was a surge in interest in the implementation of CRM systems for large and not-so-large organizations.  There had been a technology stall for a few years prior to the turn of the century to handle the nasty Year 2000 Bug, but with that out of the way, there was interest in getting ahead with the new internet driven business models.

In 2002, Steve Butler from eMarketer stated:

Multiple surveys from early 2002 confirm that e-business managers are continuing to prioritize the deployment of customer relationship management (CRM) solutions, as well as make enhancements to the customer-facing features of their websites. These trends serve as confirmation that businesses continue to see the value of building upon their earlier CRM implementations.

In 2005, Cathy Lone-Dawson, a recognized expert in CRM, wrote:

Many insurance companies now consider the development of a customer-centric focus crucial to building and retaining market share. Without a clear, articulated customer value proposition, each insurance company will be measured by its customers on lowest price.

This dire warning turned out to be true.  Hindsight being 20-20, there were obvious barriers.  First, and foremost in our minds, many insurers had a technical debt to pay.

In a post in this space last week, Patrick Vice noted that after the Year 2000 passed, many companies had ancient technology that had been patched just enough to print policies for the new century.  In order to accommodate new product, regulatory changes, broker demands, etc. there was a lot of work to do.  CRM just wasn’t a priority.

And CRM wasn’t that easy to do.  Clarence Smith, Assistant Vice President of Conning & Company, and author of a 2002 study of CRM in personal insurance, noted: “When CRM fails, most of the time it’s not because of the technology; rather it’s because of corporate culture, a failure to identify customers’ needs up front, and lack of a rigorous organizational assessment.”

Fast forward to now, plus a bit

CRM has progressed, and Gartner estimates that it will continue to grow steadily, but its use will be driven by different factors that are top of mind for the C-Suite inhabitants: “seek the ability to improve overall customer experience, profitability and sales.”  Moreover, it will be marketing, as much or more than IT, which will drive the use of CRM in the enterprise.

And what will the drivers be for the CMO?  The other technologies that Marketing has to adopt: cloud, social, mobile, big data, and the Internet of Things (IoT).  Joanne Correia, research vice president at Gartner, says, “These drivers are spurring a critical need for more traditional operational CRM … This further validates businesses’ focus on enhancing customer experience and consistent investment in CRM software.”

Gartner notes this is an opportunity for IT to prove its worth, using proven technology (CRM), to ‘tame the dragon’ of the new technologies.  Of course, if CRM fails, this level of risk could cause irreparable damage to IT.

What do you think?

Will the High Pressure of CRM create the calm centre of the wild winds of social, mobile, cloud, big data, and IoT?  Give us your best look at the future below.

And  join us at The Insurance-Canada.ca Executive Forum (#ICEF2014) on October 7, 2014.  There will be a concrete examples of the dynamic mix of technologies which will define the next decade.

Big Data, Cloud Computing, ICEF2014: Insurance 2024, Internet of Things, Mobile Technlogy, Social Business

Seriously, What is ‘Technology Modernization’ – and Why Should Business Managers Care?

By Patrick Vice, Insurance-Canada.caNo Comments

Since the early days of this century, strategic planning documents have referenced ‘technology modernization.’  For example, “In order for us to achieve our strategic goal of profitable, sustainable growth, we will need to include  technology modernization initiatives in the plan.”

Now, after a decade or so of use, we are getting some different perspectives on what this actually means.  We’d be interested in your perspectives on what ‘modern technology’ means in your environment.

Attacking legacy systems with modern technology

Going into the 21st century, many (perhaps most) insurers, and some brokers, faced a huge challenge.  Keeping up with needed changes to core application systems (policy, billing, claims) took a multi-year holiday due to the urgency of fixing the year 2000 problem.

The resulting  backlog was so large, and the methods of making the changes so difficult (due to constraints of the systems) that many organizations started to look at alternatives in order to ‘modernize’ the ‘legacy’ (read: old) technology, which would, in principle, fix the existing problems and allow for easier changes going forward.

There were two general approaches:

  1. Rip and replace.  Buy or build new systems with modern technology and take out the old. This was going to be expensive, and take years to implement.
  2. Surround and supplement.  Maintain the existing systems’ core functions (policy, billing, claims) and put modern technology front end pieces in place, such as user friendly screens, separate analytic/reporting tools (often Excel spreadsheets), new print tools, etc.  Cheaper than 1, but only a band-aid really.

Many insurers committed to large projects, set up steering committees, and got to work.  An unspoken assumption was that the modern technology platforms would ensure that we could go forward with certainty that we would never have to face this again.

Never say never

Turns out that ‘modern technology’ might be a bit fuzzy around the edges.  Ask.com says that the term ‘modern’ encompasses a time frame from middle ages until now,  and “‘modern technology’ is widely used to refer to the continuing development and advancement of electronic instruments.”

In other words, modern technology is a moving target.  This is not bad, but it does have implications, most of which fall on the business managers to recognize and address.

Today’s legacy was yesterday’s modern

Peter Symons, from Mariner Innovations, has penned several posts in this space looking at details of modernization in today’s environment.  Symons’ contends that the modernization decision is not a yes/no question, but, rather, a determination of the approaches required for specific situations.   Symons writes, “It is important to understand that one size of Modernization does not fit all customers – one size does not even fit all systems within one customer.”

Symons  provides details on how to evaluate requirements, breaking this into three discrete steps:

  1. Assessment – what is the state of the current software, and what does it do?
  2. Strategy – how is the software going to be modernized?
  3. Transformation – the process of Modernization.

The face of modernization is changing

SMA – Strategy Meets Action recently published a perspective authored by Karen Furtado, ‘The Changing Face of Insurance’, which is being distributed by NTT Data Insurance Solutions.  Furtado notes two changes in P&C insurance that are impacting modernization journeys:

  1. The insurance industry is more complex and its sense of urgency “is much greater than it was just five or ten years ago.”
  2. “Business capabilities that were considered to be leading or even bleeding edge in the insurance industry not too long ago are now in the mainstream. Many capabilities that were once considered advanced are now table stakes for competing effectively.”

This approach has everything to do with modernizing business capabilities, and engaging technology as an enabler.   Furtado stresses that strategies and tactics must be constantly reviewed: “In order to respond to the increasing demands of a fast-changing world and the marketplace that serves it, insurers must commit to changing too, especially in the areas of the customer, distribution channels, products, and data.”

 What does ‘modernization’ mean to you?

I’d appreciate your comments.  Does ‘modernization’  have real meaning in your organization?  Is it helpful in aligning business with technology?  Is there something better to facilitate the communication and alignment?

Keep me modern, please.

Business-Technology Alignment, Modern Technology

Will Insurers Help Consumers Get Ready for the Internet of Things?

By Insurance-Canada.ca BlogEditor1 Comment

We’re starting to hear real buzz around insurance and the Internet of Things (IoT). On the personal lines side, the only fly in the premium ointment might be the consumer, who may not be ready – or willing. However, insurers could have impact here by showing leadership (and perhaps improving results while grabbing a bit of market share as a by product).

There’s also an opportunity to learn more about the longer term direction of the IoT and insurance at #ICEF2014.

Consumers get excited, when they know ….

A recent article from eMarketer cites several sources suggesting that most consumers are not familiar with the IoT.  However, when provided with details about the IoT,  “67% said they were excited about the promise of greater connectedness.”

But this could change as products become introduced.   According to Noah Elkin, executive editor at eMarketer, “As more name brands get into the game, from Apple and Google to big-box retailers like The Home Depot, Best Buy and Staples, just to name a few, expect consumer awareness to grow.”

Unfortunately,  excitement is just the start …

eMarketer reports that a survey from SOASTA found 34% of consumers “highly anticipated” the benefits of smart home appliances.  However, another survey from AYTM Market Research found that 85% of US internet users did not own a single smart home device.

Insurers have lots of opportunities here to gather data for underwriting and rating purposes.  There’s lots to measure.  We just need something to measure it with.

Could insurer provide leadership?  What are the incentives?

So there is a gap.  If nature is just left to take it’s course, according to a survey of experts cited in the eMarketer study, it will be 2025 before the IoT has a widespread impact on consumers.

However, this may offer insurers an opportunity.  In a recent post we reviewed the recent announcements by American Family Insurance and Microsoft.  These organizations are establishing a business accelerator to help start up companies develop and introduce products to support smart homes.

According to American Family’s release, the investment will serve the needs of its customers for safer homes.  Presumably, this also serves the insurer’s interests as well: better underwriting results, improved market share.

 So, where to from here?

We’ve heard informally about some activities from insurers and suppliers, but nothing formal as yet.  We’d like your thoughts.

Will insurers see the Internet of Things as an opportunity?  If so, will we see leadership in from the industry in this area?

See how your thoughts track with one expert’s projections. Don Light from Celent will be providing his insights on the current status and future development of the Internet of Things and insurance  over the next decade at  #ICEF2014: Insurance 2024.






ICEF2014: Insurance 2024, Internet of Things

USAA and Watson: Defining the Standard for Customer Service?

By Patrick Vice, Insurance-Canada.caNo Comments

Some marriages are made in heaven; others are made in Las Vegas. It’s early days yet, but I think the marriage of IBM’s Watson technology with USAA’s insurance and financial services is made in customer service wonderland.  If implemented correctly (and I will tell you what I think about that), this could be the standard for others to beat.

USAA: service driving technology implementation …

USAA is not a well known player in Canada, primarily because its target market is active duty and retired US military personnel.  The company owns this market, making it the 5th largest homeowners insurer and 6th largest automobile insurer in the US.

It owns the market, primarily because it created it, and continues to nurture it through excellent service.  As the website says:

“USAA began in 1922, when 25 Army officers agreed to insure each other’s vehicles when no one else would. Today we follow the same military values our founders prized: service, loyalty, honesty and integrity.”

It has been ahead of the technology curve since at least the late 1960s when its then president declared that it must become paper-free in order to service its customers (referred to as ‘members’).  That wasn’t an easy objective, but over the next two decades, USAA persevered and became a model of how to implement document management.  I had the privileged of organizing a tour of its huge central facility in San Antonio in the early 1990s.  Attendees were impressed.

The innovation tradition continues to this day.  In 2010, MIT Sloan School did a case study on USAA’s organizational support for innovation.  One slightly geeky tidbit from that report: at the turn of this century, USAA was spending 29% of its IT budget on new projects (versus maintenance, ‘run the business’ activities).  Not great, but  not out of line.  By 2010, as a result of standardization and technology automation, the new development number was up to 50%.

Where does Watson fit in?

IBM’s supercomputer, Watson, can play Jeopardy, and win.  But it has yet to become a commercial success. earlier this year, this blog documented how IBM has been taking its investment seriously and learning from its mistakes.  There have been pilots and research initiatives.  The blog posed the question: “How far can we expect Watson and its colleagues to go over the next 3, 5, or 10 years?   What will this mean for the average insurer or broker?”

I believe the answer came in a release from USAA:  “WatsonTM, the IBM® computer … is putting its processing power toward answering questions from USAA members.”

The emphasis is on service first:  “USAA members can ask Watson questions about military separation. Eventually, members will be able to ask Watson about many of the products and services offered by the enterprise.”

I’ve had some experience working with military service personnel and their families.  Separation from service is a major life change.  As Eric Engquist, assistant vice president of Military Transitions says, the use of Watson’s cognitive computing capabilities “will enable USAA to provide relevant guidance during one of the most emotional and financially impactful decisions our military members will make during their career.”

There’s lots behind the curtain …

This will be the first commercialized consumer-facing implementation of Watson’s functionality.  The function builds on USAA’s model of on-line self-service.  According to the USAA release:  “Of the 700 million digital interactions members have with USAA each year, nearly 94 percent allow members to complete their transactions by themselves.”

A team from USAA worked with IBM for six months to train Watson how to address 2,000 questions relating to separation.  This will form the basis for the advice which will supplement personal transactions.  It will also allow USAA and IBM to learn how to train Watson further.

Let’s compare notes ….

I think USAA does right things the right way.  They plan well, and learn from mistakes.  And they are humble in dealing with their members.  I think the relationship with Watson will be a win for all concerned, and could define the standard for cognitive computing implementation in insurance.

So, what do you think?  I’m willing to buy you a drink at the Insurance-Canada Technology Conference 2015 to compare notes.




Analytics, Big Data, Cloud Computing, Consumer Facing Technology, Innovation

The Road to Digital is Paved … Sort of

By Insurance-Canada.ca BlogEditorNo Comments

We are hearing lots of enthusiasm for digital innovation by senior executives in insurance companies.  And for good reasons.  However, there may be some historical baggage that needs to be handled and some organizational issues that need to be addressed before progressing in the brave, new digital world.

What do you think?

The digital chain saw has insurance in its path…

An Accenture report, From Digital Wallflower to Digital Disrupter,  notes that there are significant disruptive influences within and outside the traditional insurance industry that will force change.  Research by Accenture found that “67 percent of insurance customers would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon.”

The authors use the term ‘sobering’ to describe the impact on insurers.  ‘Scary’ is another term that could fit.

Additionally, the report opines that there will be pressures from alternative risk financing options  that could take premium dollars out of the standard market.  The example cited is the advent of the self-driving vehicle, which might come with an ‘extended warranty’ that could replace some or all of the need for standard insurance coverage.

We have blogged on this possibility for some time now (see, e.g., What’s the Lifespan of Insuring Telematically?)  The topic will also be addressed in October at the Insurance-Canada Executive Forum 2014.

But the saw can cut two ways …

The Accenture report notes that this disruption brings opportunities for insurers: “With their deep resources, robust balance sheets, enormous scale, stockpiles of data and process discipline, insurers are primed to take a leading role in new ecosystems that connect customers to a range of products, services and vendors.”

The report makes specific recommendations for insurers, including:

  • Positioning themselves at the heart of the digital customer experience
  • Adopting collaborative technologies to develop a more flexible workforcs
  • Using data as a core product to drive ROI
  • Master Big Data using innovations in hardware
  • Providing smaller, useful apps to consumers
  • Ensuring nonstop business processes, services, and applications

But time is of the essence.  The report concludes:

“The choice for most insurance carriers is this: transform yourself into a risk manager, advisor and value aggregator at the center of a digital ecosystem that delivers high-value services to customers every day, or risk being pushed to the periphery as an interchangeable, commodity-service provider with limited control over your destiny.”

The head is ready, but is the body willing?

A recent McKinsey research note, “The Digital Tipping Point”,  makes similar points in respect to the business world generally. In our view, these findings apply to the insurance community.  Senior executives see the need to go digital in order to grow.  And CEOs and COOs are becoming directly involved in developing strategies and action plans.

Expectations are high in the C-Suite.  And the officers are prepared to spend on engagement.   But not so much on automation.  “Just 34 percent of executives say  it’s a top-three priority for their companies, even though automation may significantly help businesses in sectors that are undergoing digital disruption (by lowering customer transaction costs, for example) and improve their bottom lines.”

This attitude also found in human resource allocation.  McKinsey notes:  “Only one-third of respondents say at least one in ten of their employees spends any time working on digital projects.”

Further, there is no clear alignment plan:  “less than 40 percent of executives say their companies have accountability measures in place for their digital objectives, either through measurable targets, performance incentives for relevant employees, or an executive ‘owner’ of their digital programs.”

What we need to do is …

McKinsey recommends that organizations need to take two steps:

  1. Understand the value that digital can create and ensure that the investments are aligned with highest value initiatives.
  2. Focus organizationally “to ensure that their structures and business processes are set up to take full advantage of the opportunities that digital efforts offer.”

We see a few insurers taking these steps, but not as many as required.

What do you think?

Are insurers (and brokers) ready for the new digital world?  Can we continue to promote innovation without the necessary financial and organizational support?

We’d be interested in your thoughts, and any case studies you might be aware of that would illustrate how  digital objectives can be achieved.






Analytics, Autonomous Vehicles, Big Data, Digital Insurance, Innovation
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