Archive

For August, 2011

Aug 29

‘Plug and Play’ Insurance Technology: Data Standards Connect the Dots

By Gregory Maciag ACORDNo Comments

Editor’s Note:  Greg Maciag, CEO of ACORD came across several of our posts, including Lost in Translation, and Living in the Past.  He offered some comments we thought readers would find interesting .  Greg agreed to put these into a blog post for us.

During the 1980’s, each piece of software was an independent entity. Spreadsheet, email and word processing were self-contained products.  Later, a few vendors attempted to combine all sorts of functionality into a single product, but the whole became less than the sum of its parts.  Basically, buying a single software product that was the “be all end all” was doomed.  Today, we have a few suites of related products from single vendors.  We enjoy the integration and accept the limitations and lack of innovation that result.  Most innovation tends to come from the “add-on” products from other vendors.

The insurance industry is very complex and keeping a single source of truth across all systems is extremely difficult.  It seems unreasonable to me that anyone can expect a single vendor to provide every single solution or innovation to brokers and insurers.  All vendors will admit that the name of the game is the ability to integrate with other software products.  They cannot be experts in every facet of the insurance business.

When you buy a stereo system for your home or any technology product for that matter, one of your main concerns is that it will work with whatever else you have installed.  This is where industry standards come into play. When vendors agree to become ACORD (or CSIO) Standards compliant, they look to a future where they can provide the best products and that they are open to integrate their products from other vendors.

We are on the cusp of a plug and play insurance world as we broaden the base of insurance data standards, but we are not there yet.  The 1980’s notion that a single vendor is all that a broker or insurer will ever need is not a forward thinking view.  It’s all about open industry standards for integrating disparate insurance systems.  In fact, this is why ACORD and CSIO exist.  If the broker has the “Truth”, the broker system needs to be able to spread the Truth to other systems, platforms, portals and mobile devices that brokers may need to use today and especially in the future as innovative solutions become available.  Industry standards connect the dots.

Greg Maciag is President and CEO of ACORD, a global, nonprofit standards development organization serving the insurance industry and related financial services industries.  With almost 40 years of industry experience, more than 30 at ACORD, Greg has developed a broad knowledge and understanding of the role technology plays in the global insurance marketplace today.

Aug 25

Insurance Use of Social Media in Canada

By Insurance-Canada.ca BlogEditorNo Comments

Insurance-Canada.ca presented results of two surveys on insurance practitioners’ use of social media in Canada during a webinar on Tuesday, August 23.  Results tracked with some information from elsewhere, but provided a few surprises as well.

The open surveys were conducted earlier in the summer.  The first, focusing on how much different groups were using social media, attracted 311 responses.  Three major groups within the insurance community – insurers, brokers, and suppliers – were equally represented in the results with 25% each.  The remaining 25% classified themselves as ‘other’.

The survey results  suggest that less than 50% of the community are using social media for business purposes at all.  Within the community, brokers had the lowest utilization level for business at just over 40%.  This tracks with a survey we reported on, conducted by IVANS earlier in the year.

With respect to which media are being used, the Insurance-Canada survey found that LinkedIn was the preferred medium for business use, which tracks with results from other sources.   A bit of a surprise came from  a look at personal use,which indicated that for insurers LinkedIn came a close second to Facebook, especially for insurers and suppliers.

 

The second survey attracted 100 respondents, with a similar distribution among the three major groups  The focus of the survey was  with whom the respondents communicate with using social media.

Insurer respondents had an equal propensity to communicate with other employees of their own company and others in the insurance community.  Brokers had a higher percentage of use with the community than with co-workers.  50% of both groups reported using social media to communicate with customers.

Webinar presenters Doug Grant and Patrick Vice presented additional information on business use of social media generally and within the insurance community specifically, and supplied considerations for organizations going forward.  The Webinar attracted over 100 attendees, who provided questions and comments suggesting there is substantial interest in using social media in the insurance business.  Some participants reported they had projects that had been underway for several years.

A page on the Insurance-Canada.ca web site contains a summary of the webinar, including links to the slides and the report on the survey. Insurance-Canada.ca plans additional informational activity on Social Media and Insurance, and will provide information through this blog and the Chronicle newsletter.

The next scheduled Insurance-Canada webinar,  What’s Your Risk? Improving Aggregate Risk Exposure, sponsored by Pitney Bowes Business Insight, is scheduled for September 15, 2011 at Noon EDT.  The webinar will feature industry leaders discussing how they identify and manage their aggregate risk exposure, and conduct strategic catastrophe management planning.  Details and registration information is available here.

 

Aug 21

Claims 1.0 to 2.0: A Shift in the Marketplace, Mindset, and Requirements

By Karen Furtado SMA Strategy Meets ActionNo Comments

Recent research on property and casualty claims by Strategy Meets Action paints an interesting picture of insurer plans for the next three years. The transformation that will take place over this time period will move insurers from what SMA calls Claims 1.0 to a more evolved state – Claims 2.0. This transformation will encompass a shift in the marketplace, a shift in mindset, and a real shift in requirements. While change in the claims area is not new, today insurers are showing an increased sense of urgency about improving the effectiveness of the claims handling processes and enabling their organizations to deliver needed capabilities in the areas of efficiency, service, and information.

Efficiency

  • Workflow and Rules – make it possible to automate the handoffs within the claims process. Most insurers are now achieving some degree of straight thru processing (STP) for the more transactional claims, allowing time for adjusters to focus on those specific claims that require their knowledge and judgment. According to SMA survey respondents, managing the workflow to improve claims efficiency is the number one business driver for IT investment. Investment in workflow and rules provides significantly improved customer service with very quick turnaround for the most simplistic claims. Proven superior customer service during the claims process can win business.
  • Electronic Claims Files – provide the capabilities to access information virtually. Today, in our world where efficiency is everything, access to claims files in a virtual space is a necessity. Electronic paperless environments working in conjunction with automated workflow capabilities get the right information to the right people at the right time.
  • Advanced Correspondence and Payment – bring speed and accuracy to the forefront. What was once a maze of documents and forms management is now being streamlined with electronic and paperless processing.

Service

  • Interfaces with Users and Customers – are being customized to meet customer wants and needs as well as facilitate productivity inside the organization. As the population of Gen X and Gen Y insurance customers and users expands, the bar for what constitutes a positive customer experience and a productive work environment is being raised. Changing customer expectations place new demands on two fronts – the interface itself and the data used during the exchange. Customers are asking for current, accurate information about claims status and settlement that is available when, where, and how they want it. Transparency is a key requirement for today’s claims operations. Inside the insurance organization, intuitive systems that have a modern user interface are replacing many of the green screen environments that have been sitting on desks for years. Insurers are able to attract more highly qualified personnel, and processors are able to deliver better service in less time with higher levels of customer satisfaction.
  • FNOL – reporting is being automated to help the customer and the company. There is a win-win to implementing electronic self-service and real time reporting. Not only is the efficiency of the reporting process improved, there is a greater opportunity for early fraud detection. The ability to detect fraud from the onset of a claim can substantially reduce the claims payout, preventing loss payments for fraudulent claims that, in the past, were typically not recognized until it was too late.

Information

  • 3rd Party Connectivity – eliminates duplicate steps. The goal of single entry with real time upload/download is being realized in the area of claims. Claims download is one of the fastest growing transactions in the download process.
  • Modern Claims Management Applications – meet the needs of a modern world. Modern claims management systems that provide capabilities to handle both traditional transactional claims as well case managed situations are being deployed to automate processes and connect with external data providers. By using predictive analytics and business intelligence, information is having a meaningful impact on both the effectiveness and efficiency of the claims process.
  • Claims Recovery – improves the bottom line. By using predictive analytics, data tools, and shared services, insurers are able to more proactively pursue subrogation. The ability to identify subrogation opportunities early in the claim handling process and the power to aggregate similar claims related to other insurers have the potential to make big dollar differences. Advanced tools for auto and property damage estimation are assisting insurers in the identification of salvage potential.

Urgency Surrounding Claims Modernization

With the soft market still at the forefront of challenges for insurers, retention remains a critical focus for insurance companies. Every encounter an insured has with a company presents an opportunity. How each individual touch point is handled can make or break the relationship and impact others. Each interaction opens the door to shine with superior customer service or closes the door with the loss of a customer. Companies that are top contenders in the marketplace today are providing more automated, rules driven, collaborative, and transparent claims environments. The reality is that Claims 2.0 is a mandate in the current competitive marketplace.

About the Author

Karen Furtado, a Partner at SMA, is a recognized industry expert in the claims systems space. With exceptional knowledge of core systems, Karen is the go-to person for all things related to how advancing technologies impact the insurance industry. Karen can be reached at kfurtado@strategymeetsaction.com.

Aug 18

The Curse to an Independent Broker May Be The Cure

By Insurance-Canada.ca BlogEditorNo Comments

We have noticed a spate of surveys and commentary on the decline of the independent agent/broker system.   But people who know brokers suggests that the good ones are very  resilient and have a history of turning adversity to strength.  And, in these times, technology plays a critical role.

We recently posted on research by the US Independent Insurance Agents and Brokers Association which suggested that between a quarter and  a third of consumers believe that it is easier, faster, and cheaper to purchase insurance over the Internet or through a toll free number than through an independent.  A Candian survey sponsored by TD Insurance , and reported in Canadian Underwriter, found that “when it comes to making significant decisions regarding insurance products and services, 63% of Canadians don’t go to an insurance provider, but instead ask their friends, family or colleagues for advice (25%), rely on searching the Internet (33%), or simply go with their gut.”

So what can independents do, besides wait to die?  Well, Steve Doucette, founder and lead executive of the Great Northwest Insurance Company, penned an article in PropertyCasualty360 which places the responsibility  for the challenges with the independents themselves: “First, agents no longer provide customer service, companies do. This has led to the devaluation of the agency. Second, the ability to brand the agency name has disappeared because agency service has disappeared. Third, agents have allowed the Internet to be claimed by the direct-to-consumer companies.”

Doucette then examines each of these challenges and offers the agents a prescription for turning them into advantages by doing what they do best:  “First, agents must reclaim customer service. Second, they must build on their customer service to brand their agency and focus again on practical techniques for agency branding.  Third, agents must develop interactive Websites capable of providing all elements of interactive service such that all sales and service emanates through and culminates at the agency Website.”

But the agents need support from carriers as well for this to work.  Doucette’s advice is for carriers to focus on what they do best:   “First, they (carriers) must re-engineer themselves for low overhead. Second, they must recognize the strength of the Agency system is service, and that customer service done locally is superior. Third, they must build the technology to move all customer service back to the agency level, by providing technology that works through, and not around, the agency interactive Website. The company portal must become the agency portal.”

All of this has been said before, but the challenges have never been as great for agents.  And, we believe, social media tools are provide unique leverage points.

It could be very interesting.

Aug 15

Illumination vs. Support: Analytic Understanding in Systems Replacement Projects

By Insurance-Canada.ca BlogEditorNo Comments

One of our favourite quotes comes from the Scottish poet,  Andrew Lang:  “An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts – for support rather than for illumination.“  This seems to summarize a problem with current systems modernization and analytic initiatives.

Numbers geeks (present company included) are attracted to titles such as the following which recently appeared in PropertyCasualty360:

Building Predictive Models that Estimate Differentials for P&C Claim Risk

As good as it was, it was the opening 2 sentences of the article that took our breath away:

“Building predictive models to estimate claim risk is not revolutionary. We all know that the techniques of using multivariate analysis and regression to predict a given outcome or behavior have been around since the end of World War II. ”

Actually, not everyone  knows that.  The problem is that many people who don’t know, act as if they do, and make decisions on business data analytic systems that would best be left to others.   Rachel Alt-Simmons, from SAS, points this out in a recent article in Information&Technology   She writes:  “Over the past decade, insurers have made significant investments in their operational systems, but very few have used that opportunity to capitalize on the new wealth of information or capabilities that those systems enable.”

Alt-Simmons notes that modern  policy and claims administrations systems frequently include data warehouse and analytic components at the outset which are later scrapped or deferred to keep the overall project on scope.  The assumption is that these can later be fitted in.  Unfortunately, as Alt-Simmons notes:  “post-implementation, the data isn’t in a format that’s easily consumed, or needed data elements may not be persistent in the system,” rendering the analytical components infective or useless without costly system changes.

About 10 years ago, courses started to emerge with titles such as ‘Financial management for non-financial managers.”   The concept was to provide sufficient skills for underwriting, marketing, and event IT  managers to be able to read and understand corporate financial statements.  Perhaps this concept could be extended to analytic concepts.  Here’s a suggested title: “Regression analysis for non-regressing managers.”  Well, maybe that needs work ….

 

 

 

 

Aug 11

Social Media Insurance Strategies – A Tale of Two Insurers

By Insurance-Canada.ca BlogEditorNo Comments

As insures and agents/brokers think about how to use social media in business, there is an interesting compare and contrast of two approaches that is materializing in the real world.  This is articulated nicely in a recent post by Terry Golesworthy, President of The Customer Respect Group, in Insurance Networking News.

On the one hand, there is Farmers Insurance which recently attracted significant attention by collaborating with the authors of a Facebook game, ‘Farmville’, to attract new fans by offering virtual gifts.  Over the  24 hour period the promotion ran, Farmers attracted over two million new fans on Facebook.  Farmers is planning to extend its partnership with Zynga, Frameville’s authors to other on-line games.

On the other hand, there is USAA, an insurer which has take a different approach.  According to Golesworthy, “they have attracted fans with whom they actively engage, discussing products and relevant subjects such as the potential government shutdown. They trust fans to publically rate and review their products and services.”  The result has been a steady increase of 6% to 8% month over month for the past two years, resulting in 172,000 fans to date.

It looks like a classic Hare and Tortoise race, but Golesworthy does not wish to play Aesop and offer a moral to the story, and we would not want to do so either.  First, the two different approaches are clearly targeted at different goals  USAA is well known within its primary market, and may be using social media as another channel to reaffirm its relationships whereas Farmers is obviously seeking a larger audience, likely to grow awareness of its brand (among other things).

Second, and more importantly, this is still very new territory, and the cause-effect relationships are not fully understood.  what is clear is that both organizations have sketched a path that they wish to test and support.  Golesworthy summarizes with a rhetorical question:  “So is social media about transparency and creating a dialogue with customers; is it about changing the way we do business or a relatively inexpensive way (to date) to reach large numbers of potential customers?”

In this respect, they are both winners as they will have gained knowledge that only experience (combined with aggregated response data) can teach.  We wish them both luck and will be following results with interest.

 

Aug 08

Pay as You Drive Gains Traction; Insurers Offer Incentives

By Insurance-Canada.ca BlogEditorNo Comments

We have written about the benefits accruing to insurers who adopt Usage-Based Insurance (UBI) schemes, including competitive advantages of better underwriting data and marketing advantages derived from micro segmentation. But why should a driver use it?  A recent announcement in the US market offers instruction on how insurers want to increase the uptake of this approach.

State Farm has just introduced a new service called”In-Drive”.  According to Insurance & Technology the service “provides a device connecting vehicles to safety and diagnostics options, including one-touch emergency response, roadside assistance, stolen vehicle location, vehicle diagnostic alerts and maintenance reminders, location services and speed alerts. The service also includes a dedicated website and smartphone app for remote and mobile access.”

The service was developed in partnership with Hughes Electronics and essentially extends the benefits of On-Star (widely promoted by GM as a unique feature of its vehicles) to a significantly wider population.

Towers Watson in a recent article has noted that consumers’ concerns about privacy are a major source of resistance to UBI schemes, and is a reason why all insurers to date have offered it as a voluntary program.  However, the insurers are best serve by attracting as wide a population as possible (to have the largest amount of data to correlate to claims and other costs).  The solution is to offer incentives, such as the In-Drive program.

It also is an entree to what Towers Watson refers to as the major opportunity to “to significantly alter the insured’s driving behaviour to help lower loss costs.”  This type of behaviour modification has worked well with commercial fleet management (We noted Zurich’s approach in this space in January) , and has the potential to be a win-win for private passenger as well.

This sounds like a real win-win.  Now, when are we going to see Canadian insurers joining the movement?

 

Aug 04

Is Canada Living in the Past with Broker-Carrier Connectivity?

By Insurance-Canada.ca BlogEditorNo Comments

Earlier this year, we received an email from a broker who retired a few years back. He had just read one of the Canadian trade magazines which focused on recent efforts to establish industry standard interface between broker and carriers.  His comment was:  “Didn’t  we settle these issues 20 years ago?”

To be clear, our friend has the credentials to ask.  During his working days, our friend was very active in using and promoting what we all called SEMCI (single-entry, multi-carrier interface).  He went so far as to undertake an expensive system conversion to effect this for his own office,  And, it worked to improve workflow for the carriers in his office that supported it.  Not perfectly, but it worked.  And that was in 1990.

So, here we are in 2011, and what are we talking about?  A recent thread on LinkedIn’s Canadian Insurance Brokers Strategy Group informs.  Here’s some quotes:

  • “a broker who’s business is concentrated with two major insurers both with portal systems…. pointed out that refusing to use the portals as some brokers do results in clients waiting weeks or even months for policies to be issued”
  • “Having to log onto multiple portals to get a single quote is an inefficiency that is a disservice to the client”
  • “once companies build the portals they are 80% of the way to real-time transaction. It is this last 20% that is killing us now in Canada.”
  • “IBAC, Orbit, CSIO and (IBAO) need to make sure everyone speaks with one voice  … They need to champion the ideal workflow and educate brokers, vendors and companies on the merits of developing and getting them working”

Change a few words (swap ‘dedicated terminals’ for ‘portals’, e.g.), and it’s the same discussion as occurred in 1990.  The reality is that there will not be one solution for the industry.  Not because of technology, not because of mis-alignment, but because of the highly competitive and fragmented nature of the industry.

Several writers on the thread posited that the US is ahead of Canada in implementing technology to benefit independent agents.  In our mind, the jury is still out on this.  One thing that is clear, however, is that US agents have been working (with the help of organizations such as IIABA/ACT, that we commented on recently) on optimizing their own workflows with the technology that is currently available, while continuing to push for better technology from carriers and suppliers.  They are not waiting for perfect anything before proceeding.

Brian Bartosh, a US agent who has been a leader in a number of initiatives in the industry,  describes one of his operations in a comment in the same group:  “We have streamlined the workflow where we, the agency have control and then pass this information to our carriers …. Some companies return rates, others provide a bridge, both we find efficient. Because we are partnering with our carriers and moving data to their portal …, we can then issue with a quick turn-a-round to our clients.”

As well as advocating perfection, Brian is pragmatically using the available technology with carriers,  which have differing capabilities, to streamline his workflow and improve service to his customers.  Much like our friend did in 1990.

We think this was, and will always be, the way forward for those who wish to move in that direction.  So, we will have to adjust to living in the past to some extent.

As Jethro Tull would say (or sing):

Oh, we won’t give in,
let’s go living in the past.

 

Aug 01

Doing Social Business Right: Being Effective and Compliant

By Insurance-Canada.ca BlogEditor1 Comment

Recently LIMRA hosted a webinar which contained some valuable tips on how to be both effective and compliant while using social media for business.  At the heart of the presentation were two key points:  First, whether you know it or not, you ARE on social networks, so there’s nothing to be gained by waiting.  Second, the heart of compliance is management driven policies and procedures designed to empower employees.

Webinar leaders were Edgar Rodriguez, EVP, Distribion, Inc., Chad Bockius, CEO, Socialware, and Stephen Selby, Director of Regulatory Services, LIMRA.  The opening section emphasized the point that we have made elsewhere that consumers are using the new media to put themselves in control of marketing and  customer service.  Further, whether and organization is involved in social media or not, it is highly likely that both its customers and employees are using social media to discuss business related issues and possibly the organization itself.

With regard to employees, the webinar leaders point out that under current regulations, the employing organization is likely liable for employees’ posts on social media regarding its business.  Further, the webinar leaders stress that the environment is likely to get more complex.

So what should an organization do?  First, it is important for senior managers to realize that if the organization is not part of social media conversation, it has no chance to control it. This relates to the impact of  corporate culture and the alignment of strategies to actions we have discussed before.  Senior management have to be fully engaged to get this done right.

Next, the organization needs to put policies, procedures and training in place to help it employees understand the importance of proper social media use.  For insurance brokers,  the IIABA/ACT website contains sample policies and procedures for social media use.

Of course, setting policies is just the beginning, but engaging employees is a good beginning.  And being open to the conversation can open new doors.  Insurance-Canada.ca plans to offer additional resources on this topic.  Stay tuned.

 

 

 

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