A Delicate Balance In Commercial Underwriting Technology

By Patrick Vice, Insurance-Canada.caNo Comments

Is effective commercial lines underwriting technology an oxymoron?  There are enough graveyards filled with projects that have arrived DOA to make this seem true.  But hasn’t modern technology had an impact?

Perhaps, but not on its own.  There is increasing evidence that technology solutions need to be blended carefully with business wisdom to balance efficiency with effectiveness.

I’d like to know what  you think.  Is there an issue with commercial underwriting technology projects?  If so, what needs to be done?  We have an opportunity to pose some questions to an expert at next month’s Insurance-Canada.ca Executive Forum.

What do underwriters say?

In mid 2013, Accenture conducted a survey of over 550 North American underwriters on the expectations and challenges of their work and the impact of the introduction of new data sources, modern analytics, and automated systems.  The report, North American Commercial Insurance Underwriting Survey, contained some sobering findings.

The top three challenges to achieving results were:

  1. Maintaining underwriting pricing and discipline (72% of respondents)
  2. High operating costs/expenses (55%)
  3. Lack of quality UW information (47%)

The underwriters see their companies addressing some of the issues with the introduction of:

  • Process automation (57% of respondents)
  • Predictive models for risk evaluation and pricing (51%)
  • External data for risk evaluation (51%)
  • Collaboration tools (49%)

Sounds like IT is aligned with UW needs, yes?

Efficiency gains only fill half the glass …

The problem the underwriters see is that effectiveness of the solution is lacking.  Only half of respondents felt the technology currently in use is very effective.

Worse, as the report says, “This lack of effectiveness rating is even greater among frontline underwriters.”  Over half of the respondents said that their workload  increased with the introduction of new technologies.

Consulting firm, Cognizant, came to similar conclusions in an analysis of performance impediments for commercial lines underwriters, writing:

Commercial underwriting is unlike other processes in the insurance industry in that it has an extremely complex and non-standard process, requires different types of skills, uses mostly unstructured data and is highly dependent on human judgment.

According to Cognizant, this underscores the historical common wisdom that the commercial insurance process is “not conducive to technological intervention.”

So, have the luddites won?

No. In fact, the opportunities are large.  Cognizant notes, “Compared to other core insurance processes, small improvements in underwriting can lead to tremendous benefits both on the top line and bottom line of the insurer.”

But technology improvements must carefully balance effectiveness and efficiency.  And be respectful of the knowledge workers’ changing requirements.   According to the Cognizant authors:

The work profile of underwriters is changing as market volatility has become the new normal and is something that they have to deal with on a daily basis. This change will cause underwriters to spend less time on their traditional submission management tasks and more time on relationship management and fulfilling the role of a risk consultant to their key clients. Systems need to quickly catch up to enable underwriters to shift gears.

Speaking of Change …

Both consultants’ reports stress the importance of delivering data and analytics to commercial underwriters in an effective manner.  Micheal Costonis, executive director of Accenture’s Insurance practice for North America, has developed best practice steps for analytic success, several of which seem to be specifically targeted at commercial lines initiatives:

  • Integrate analytics into the business processes. Data, technology and business must work as one team, and from the beginning of any effort.
  • Build a solid business case. Analytics should be used to solve defined business problems and answer specific questions.
  • Face up to the technology challenge. Insurers need to keep up the pressure, focusing on upgrading systems, digitizing processes and capturing data.
  • Leverage big data. Insurers deal with large amounts of unstructured data, but tools are getting better at dealing with this. And don’t forget about external data that is now available, including social media, telematics and data from external providers.
  • Initiate pilot projects to test concepts. Data and analytics lends itself to a test-and-learn environment, which can minimize sunk costs and enable faster innovation.

Michael will be presenting at the Insurance-Canada.ca Executive Forum, focusing on how insurers can effectively respond to the changing environment. I’ll be interested in hearing comments on commercial lines.

What do you think?

If you’re an underwriter, what have you seen that has worked for you?  What hasn’t worked.  If you are a technology supplier, do the challenges above ring true?  What approaches do you take?  If you are an executive, how do you create an environment that balances effectiveness and efficiency?

 

Analytics, ICEF2014: Insurance 2024, Modern Technology, Underwriting

Can Brokers Manage the Next Wave of IT?

By Insurance-Canada.ca BlogEditor1 Comment

As we look over the topics we have covered in this space, it occurs to us that the brokers might be getting hit with more IT than they expect over the next little while.  We’d like to know what you think, and, if you are part of the broker distribution value chain, what, you think needs to be done.  We do have one suggestion.

Our bias here…..

We are big fans of brokers.  Brokers tend to punch above their weight when it comes to creativity, resilience, and business savvy.  And, in spite of their fierce independence, and competitiveness, they can come together quickly and effectively to defend their own interests as well as those of their customers, and (yes, really) their insurance company partners.

And they can be a lot of fun.

That said, it’s not easy being purple* ….

In a hard market (if you don’t know what this means, ask someone with grey hair),  brokers have to work hard to maintain coverage for their clients at reasonable prices.

In the current market, brokers have to work to maintain their client base from competitive attacks by direct writers, captive agents, and fellow brokers.  And do so with a revenue stream that ranges from steady to decreasing.

Meanwhile, brokers have to retain talent (good producers and CSRs are always in demand), deal with non-revenue generating activities (endorsements, claims), and meet the demands of insurers and shareholders/partners/other stakeholders for ROI and (yes, really) growth.

Good brokers do all of this and more.  Many product enhancements and new covereages are broker driven.

Where does IT fit with brokers today?

Driven by client service and internal efficiency,  leading brokers were early adopters of office technology.  By the end of the 1970s, a critical mass of brokers had purchased large (for the time) turn-key broker management systems (BMSs) to handle client and accounting management.  By the end of the 1980s,  these systems were into their second and third generations.

Brokers also drove development of standardized connectivity between their offices and multiple insurance companies.  We’ve written extensively on the history of broker connectivity and our thoughts on next steps.  Suffice it to say that while no-one is really satisfied, there has been a lot of progress.

So, in addition to running the business, the broker has to commit cycles to using/supporting/maintaining/replacing complex systems.  In general, when a broker’s staff count gets to 10 or more, someone in the office will be spending more than 50% of his/her time on technology.

The next generation of technology doesn’t fit in easily ….

Here’s some of what’s happening now and what could be coming for brokers:

Social Media – This is more than a fad.  And it’s more than Facebook and Twitter.  Increasingly, consumers want to use they media they are most comfortable with and expect that suppliers will keep up.  Earlier this year, we posted on this.

Telematics and the Internet of Things – Most brokers have heard about Telematics/Usage Based Insurance.  The Insurance Brokers Association of Ontario is developing a broker owned facility – IBRI – which will offer brokers an option.  However, other insurers will have their own solutions and other risks (property, commercial) will be increasingly monitored by electronic sensors.  This “Internet of Things”  will drive underwriting/rating, claims, marketing data.  One outcome is that brokers will have a decreasing ability to supply quotes from their existing technology.

Big Data/Analytics - Insurers are expanding use of sophisticated analytics engines to work with Big Data for claims, underwriting, marketing.  While most brokers will not have the need or ability to have parallel systems, they will be required to understand and speak the same language as the insurer.

Customer Relationship Management (CRM) - Previous generations of customer database tools focused on the individual/family/business at the centre, with other elements – including insurance – as relating to one entity.  The more modern approach – required in our more complex data driven world – puts no one at the centre, but describes links based on relationships.  This is critical for the more sophisticated personalized marketing that is becoming a competitive differentiator with organizations such as Amazon.com and Google.

What to do?

For many brokers, the principal will be increasingly challenged to be the Chief Information Officer for her brokerage.  This requires a working (not necessarily technical) understanding and an ability to sort out the real opportunities, and attendant costs/efforts, for the brokerage.

We think that targeted education is key.  Insurance-Canada.ca is hosting Insurance2024, an executive forum on October 7, 2014 in Toronto which will bring experts to help insurer and brokerage executives understand trends for the next decade, and focus on key elements.

Take your future in your own hands. Reduce the overload.  And get back to having fun.

 

* Purple is the colour used in the Broker Identity Program

Analytics, Big Data, Broker-Carrier Connectivity, CRM, Data, Education & Training, ICEF2014: Insurance 2024, Internet of Things, Social Media, Telematics

Pragmatic Telematics: Reality Trumps Theory in Chicago

By Patrick Vice, Insurance-Canada.ca2 Comments

I detected a noticeable change in tone at the Insurance Telematics USA conference held in Chicago last week. In prior years, much of the discussion was prognosis and guesstimation.  This year, the majority of presentations and conversations dealt with real-world issues relating to development, implementation, promotion, and utilization of telematics-based usage-based insurance (UBI).

I think this portends a solid future for UBI in Canada as well at the US. Here are a few examples, including my own personal experience.

Not if, but when and where …

As in the past, the kick-off keynote was presented by Robin Harbage, Director at Towers Watson.  Harbage noted that there has been a shift in attitudes by US consumers; with 52% of consumers interested in UBI, and another 27% who may be interested.  This could double the uptake in UBI from 4% to 8% sometime in the next 18 months.

According to Harbage,The primary concerns by consumers are:

  • Possibility of premium increases in future 48%
  • Privacy 39%
  • Denial of claims (based on telematics data 33%

Harbage noted that proxy implementations will continue, as most insurers will not invest heavily in big data infrastructures before some proof of concept.  However,  Harbage recommends insurers to move from proxies, increasing the granularity of the data used and adding contextual information, such as road conditions, weather, etc.  Failure to do so reduces the value of the UBI program as a strategic predictive modelling tool.

Not why, but how and who …

Progressive Insurance continues to be the recognized UBI leader in the US.  David Pratt, Progressive’s General Manager of UBI, focused on Progessive’s  evolving marketing strategy, outlining the data-driven campaigns the company has used to drive uptake.

The first phase was simple awareness of the program, ‘Snapshot’, using Flo, the popular Progressive spokeswoman, who stressed the benefits of good driving, and the simplicity of installing the device.  (This blog noted the theme  in an August 2012 post.)  Phase two was more direct, challenging good drivers to test drive the product.

For phase three, Pratt noted that consumers had expressed concern that poor drivers were forcing increased premiums for everyone, regardless of driving behaviour.  As a result, Progressive changed the tone of the ads, showing Snapshot as a cure for ‘Rate Suckers’  (bad drivers portrayed a leaches sticking to the windshields of good drivers’ cars).

Pratt gave the audience a preview of some of phase four material, coming out this month.  To address interest expressed by customers, Progressive describes what the Snapshot device does, using cartoon character to emulate the device, riding around in the car as a companion.

Pratt was careful to point out that its marketing/advertising is data driven, and encompasses all media.  In addition, it focuses on training for its employees and its agency force to ensure that there is consistent representation of its products.

Progressive’s track record now includes $2 billion in Snapshot driven premium and 11 billion recorded passenger miles, which is used to refine the rating algorithms.  Pratt noted that their big data structure will allow for addition of variables in future as experience evolves.

Consumer Rights and Data Portability

I had the privilege of moderating a panel of practitioners discussing impacts of consumer rights and data portability have on  UBI adoption.  Panel members were:

The panel noted that common standardized scoring data will promote efficiency and effectiveness, and can protect privacy of data for consumers as well as propriety of algorithms for insurers.  However, there could be challenging side effects.  For example, as the penetration of UBI expands,  drivers who elect not to utilize telematics based UBI may find that insurers are less interested in the business.  This could result in digital ‘redlining’, if carried to an extreme.

Canadian Content

I was very pleased to see participation at the event by Canadian insurers and Canadian-headquartered suppliers, including IMS, Baseline Telematics, and IMETRIK.  In addition, a number of  participants are actively following developments with the IBAO IBRI initiative.

What do you think?

My sense is that telematics based UBI is now entrenched with the US insurance market, and that this will further encourage Canadian initiatives.  Does this make sense to you?

 

Big Data, Telematics

Can You Say ‘No’ to Driverless Cars?

By Catherine Kargas MARCONNo Comments

In July, I attended the 2014 Automated Vehicles Symposium in San Francisco. Over the last three years, attendance at the event has grown significantly. This important increase in attendance mirrors the tremendous rise of interest in the subject of driverless technology as well as the rapid pace of technological advancement necessary to bring driverless vehicles to the consumer in coming years.

I’ll be exploring this at the Insurance-Canada.ca Executive Forum: Insurance 2024 in October, but here are some highlights I took home from San Francisco.

KargasSearchAug2014

Interest is up … who’s saying ‘no’?

I recently did a quick Google Trends search on the word DRIVERLESS and as you might assume, the increase in the popularity of the technology is reflected in the  number of individuals researching the subject (see diagram opposite).

As the technology becomes better known, its opponents are starting to take position. These naysayers include those who drive as a profession (understandable as driverless vehicles would obliterate the driving profession) as well as those whose business model (in fact, the very existence of their business) depends on the current inefficient mobility system continuing on the same path. Numerous businesses are part of this latter category, including automobile manufacturing, auto repair, driving schools, many in the legal profession, etc, etc.

Instead of acknowledging that the commercialization and adoption of this technology is inevitable (for safety, environmental and congestion reasons to name a few – discussed in previous articles and blogs on Insurance-Canada.ca) and preparing for it, many businesses are instead choosing to belittle the technology in the media and lobby government groups to delay changes in regulations legalizing the circulation of these vehicles on the jurisdiction’s roads and highways.

Does ‘no’ mean ‘not’?

While numerous presentations and speeches were made at the 2014 Automated Vehicles Symposium, one presentation and in particular one slide (and accompanying comments) stuck in mind. Here is the slide that Ralf Herrtwich of Daimler presented to a standing room only audience:

KargasSlideAug2014

Herrtwich asked if anyone recognized any of the names / brands on the slide. No one did. Well … they are all brands of the leading horse carriage manufacturers who went out of business with the arrival of the revolutionary technology known as the automobile.

Businesses can either accept that the next revolutionary technology – driverless vehicles –  will be among us and prepare for its commercialization and adoption or suffer the fate of so many forgotten brands / companies.

One car manufacturer is saying ‘yes’ …

Daimler has chosen to adapt. All while continuing to manufacture its various automobile brands, the company, recognizing the opportunities afforded by the shared economy, has vertically integrated forward into the car sharing space with car2go. Daimler is also one of the leading developers of driverless technology. The Mercedes S class is equipped with one of the most advanced autonomous drive systems currently available on the market.

How can you prepare?

Are you preparing for the upcoming driverless revolution?  Join me at the Insurance-Canada.ca Executive Forum: Insurance 2024, in Toronto, on October 7th, and determine how this technology may be impacting your business model in the foreseeable future.

Autonomous Vehicles, ICEF2014: Insurance 2024

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 who 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 Bieck2 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.

Focused

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.

Proactive

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.

Analytical

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:

http://www-935.ibm.com/services/us/gbs/thoughtleadership/winningstrategies/

 

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
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