Archive

For January, 2012

Jan 30

Insurance Fraud in Prime Time

By Gordon Alexander IBM Canada LtdNo Comments

Is it just me or did you also notice the abundance of fraud news stories last year in insurance? It makes me wonder if there’s a TV show in the making; you know “Torn from today’s news stories, names changed to protect the parties” akin to Law & Order or CSI. I can see it now - Canadian Insurance Fraud: Special Investigations Unit (CIF:SIU).

Seriously, when I see headlines like RCMP arrest 4 in interprovincial fraud scheme and Toronto-area police bust 14 fraudsters and FSCO cracks down on fraud as examples of last year’s insurance industry stories, it makes me wonder: Why the increase? After some research and thinking about it, I’ve come up with three main reasons (near as I can tell):

  1. Economy: Insurers today need every penny they can get in this soft economy.  Thus, they can’t afford to lose their margins to fraud. Maybe in the past the cost of chasing and prosecuting fraud was more than the fraud itself. But not anymore.
  2. Legislation: There seems to be an increased focus and new teeth coming to help address fraud and increasing premiums. The prime example from last year was the establishment of Ontario’s Auto Insurance Anti-Fraud Task Force which has produced a number of recommendations that are meant to get tougher on fraud.
  3. Technology: Tools and technology to aid in detecting fraud that were once out of reach to the insurance industry (whether due to cost or complexity) are now more viable. With the advent of the internet, cloud computing, and social networks, the ability to share and collaborate among insurers and agencies has improved (okay I’ll admit that this has also made it easier for fraudsters to work together as well).

It’s this third point that interests me the most (hey I’m an Insurance Industry Architect by trade and also a technology geek at heart). When you consider that today most of us have smartphones that have a million times more memory, and are thousands of times faster and hundreds of times smaller, than the guidance computer used for the Apollo moon missions, it’s easy to see that technology has advanced. Question is then: how best to apply it to finding fraud?

The other thing that strikes me is that like the CSI crime lab, many techniques and tools need to be applied in order to help fight fraud. This is definitely not a one tool approach. Fraud must be attacked across the lifecycle of the claim process (even into underwriting in support of fraud prevention). A variety of tools need to be brought to bear in order to help transform/cleanse the data, to analyze and detect fraud using different techniques such as scoring, visualization, and predictive analytics, and to provide identity insight.

In some cases all your SIU might need is Google. The latest story from ICBC highlighted that the individual who perpetrated the fraud was bragging on his Facebook page about it. But that wouldn’t make for good television viewing, now would it? Maybe as a sitcom.

Editor’s Note:  Gordon Alexander is an Industry Architect, Insurance, with IBM Canada Ltd.  He likely watches too much TV, but will stop long enough to speak at the 2012 Insurance-Canada Technology Conference.

 

Jan 27

The Jury is Working … Hard

By Insurance-Canada.ca BlogEditorNo Comments

Earlier this week, the Insurance-Canada Technology Awards (ICTA) Jury met for the second time, to review the finalists prior to the actual vote for category winners.  One thing is clear:  The jurors are doing some tough work for a good cause.

To review the path to date:  Mid-year 2011, Insurance-Canada began accepting nominations for ICTAs to be presented in 3 categories:  Insurer, Distributor, and Supplier.  Details of the qualifications are available on the web site, but, to summarize, “The primary criterion for all awards is the positive impact that a specific technology or application of technology has had on business.”

Insurance-Canada received 50 nominations.  A jury consisting of practitioners, analysts, and industry experts reviewed the nominations before and during a virtual meeting, then cast ballots to select three finalists in each category.  We gave our impressions of the virtual meeting in a previous post.  The result were nine finalist nominees:

P&C Distributors

  • AP Reid for ZipSure, a customer-facing fully automated insurance service targeted at tenants of larger landlords;
  • Donovan Insurance Brokers for their overall use of technology, encompassing customer-facing and market-facing applications, and automated support for staff, allowing a focus on quality customer service;
  • Ingle International for the technology they use to develop and operate micro-sites used by school administrators and student customers.

Insurers

  • SGI Canada for the pioneering work implementing standards for downloading of broker copy of policy declaration pages and broker memos as part of their daily EDI download transactions;
  • The Economical Insurance Group for a business location intelligence platform allowing underwriters to map a location, analyze current in-force policies, recognize key exposures and evaluate aggregate risk;
  • Unica Insurance (formerly York Fire & Casualty) for their project to directly connect Broker transactions from the BMS to Unica’s systems.

Suppliers

  • Mondial for its implementation of an online claims portal resulting in a high level of adoptions;
  • RMS for iClarify, a validation and valuation tool that provides brokers and insurers with residential property intelligence;
  • Zycomp + MASTERCOM for the technology development and integration allowing downloading of broker copy of policy declaration pages and broker memos as part of their daily EDI download transactions. These are automatically filed at the broker without intervention.

Shortly after the finalists were announced, CI Top Broker Magazine began  interviewing each of the organizations for profiles to be included in its February edition.

The next step was a second meeting of the jury to review the finalists in preparation for the final vote for the category winners.  A virtual meeting was conducted and jurists are now deliberating and casing ballots for the category winners.

That takes us to now.  After all the ballots are cast, and while the results are being tabulated, we will introduce the jurors in this space.  We think you will be impressed with the quality of individuals who agreed to make the selections. The results of the ballot will be announced at the ICTA Luncheon to be held in conjunction with the 2012 Insurance-Canada Technology Conference on March 5, 2012 in Toronto.

Those are the facts, but here is an important sidebar.  The discussion at the Juror’s last meeting was not as lively as at the previous meeting.  It was clear that the jurors had taken their responsibilities seriously in preparing for the meeting, so the discussion was more for clarification than education.   But the mood was intense.  Towards the end, one juror, a very well respected insurance-technology expert, summarized the mood by a comment.  “I don’t know about the rest of you,” he said, “But it is going to be hard to choose the best out of nominations that are this good.”

We think this speaks to the quality of all the work being done to bring technology to bear on insurance in Canada.  And, we appreciate the hard work these jurors are doing, and look forward to celebrating the results on March 5th.

Jan 23

Insurance Telematics Reality Check: It Really is Gaining Momentum

By Insurance-Canada.ca BlogEditorNo Comments

We identified telematics – the use of integrated technologies in vehicles – as a trend for Canadian insurers in 2012.  Several recent reports are suggesting that the trend is gaining momentum, and a tipping point may have been reached.

Phil Gusman recently reviewed  a Celent report, entitled “Telematics-Based Insurance: Has Its Time Finally Arrived?” in PropertyCasualty360.  According to Gusman, the report suggests that insurers are not only overcoming concerns that have impeded implementation of the technology, the insurers are finding new potential uses that transcend risk selection and underwriting, such as fraud detection.

According to Gusman, this reinforces recent comments made by Moody’s that the implementation of the technology is progressing at such a rate that insurers who are lagging will “find themselves insuring shrinking pools of poorer drivers—who will appear to be normal drivers if traditional rating factors are used.”

Writing in Insurance & Technology, Stuart Rose, global insurance marketing manager at Cary, N.C.-based SAS, argues that the quality of the underwriting will increase substantially as telematics driven data allows more precise underwriting based on experiential data.  And this is increasing uptake within the industry. Rose concludes that “The technology is still in its infancy with regard to its application in the field, but its adoption rate is dramatically increasing and it has the potential to revolutionize the auto insurance industry.”

According to Gusman, Towers Watson thinks that uptake within this insurance industry passed a tipping point in 2011.  He quotes Robin Harbage, director of usage-based insurance for Towers Watson: “Until now, a few key players were pushing quite hard. Today, almost all major players have a public program or internal pilots.”

Gusman concludes from these elements: “True innovation is rare in the insurance industry, but telematics may be a genuine example. The technology is still in its infancy with regard to its application in the field, but its adoption rate is dramatically increasing and it has the potential to revolutionize the auto insurance industry.”

The 2012 Insurance-Canada Technology Conference will feature a panel of experts 2012 Insurance-Canada.ca Technology Conferenceentitled: “Telematics: Learning to Drive in the New Landscape”.

 

 

Jan 22

The New Landscape for Brokers: This Show is For You

By Insurance-Canada.ca BlogEditor2 Comments

2012 Insurance-Canada.ca Technology Conference

Insurance brokers in Canada are facing an unprecedented two-pronged threat:  competition from new distribution models is coming just as a stubborn soft market reduces profitability of business that can be retained.  Technology offers one of the few avenues to address both of these threats:  to allow competitive marketing against direct marketers while improving profitability through efficiency.

But the broker technology environment is crowded, and brokers have limited time and resources to explore solutions  Where can a broker turn?  The 2012 Insurance-Canada Technology Conference (ICTC), being held in Toronto on March 5, 2012, is a great near-term option.

The theme of the conference – “The New Landscape: Social Business, Mobile, Analytics, Modern Technology” – reflects a number of industry issues we hear brokers discussing today. The conference will feature industry analysts and practitioners bringing new research (including original Canadian research) to discuss such topics as 2012: The Age of Digitalization for Insurance (Kimberly Harris-Ferrante, Gartner)  and Creative Disruption in Insurance (Craig Weber, Celent).  There are also several sessions addressing social media, mobile, modern technology and analytics.

The conference has a number of elements of interest to brokers specifically.  Leading management system suppliers are sponsoring and will be exhibiting.  Also, several suppliers and practitioners will be presenting on topics of interest to broker principals and operations managers.  Topics will include Measurement of Transaction Costs vs. Revenue,  Challenges and Directions in Commercial Lines Processing, and Paperless Processing for Brokers.

In addition, IBAO, CSIO, and a number of broker companies (including Unica Insurance, The Economical, Intact, RSA, and The Dominion)  are supporting the conference and will be sending delegates to interact with brokers.

A focal point of the conference will the the presentation of the third annual Insurance-Canada Technology Awards (ICTAs) at a special luncheon.  Several of the award finalists are brokers and several others are either carriers or suppliers implementing applications supporting broker distribution.

Insurance-Canada has applied for RIBO credits in the Management category.  Registration information is available on-line.  Sponsoring organizations have arranged for special pricing for their brokers.

So, a cost-effective and efficient use of a day that includes an ‘award winning’ lunch with your carriers and colleagues … Why wait?  Register Now.

 

Jan 16

New Data Needs, New Data Views, New Data Jobs

By Insurance-Canada.ca BlogEditorNo Comments

The rapidly accelerating needs of organizations to better understand and predict consumer preferences and behaviour, using larger and less structured data sources, are causing these organizations (including insurers) to adopt new enterprise models and to appoint leaders with new titles and broad responsibilities.

As we recently noted,  management of data is a critical success factor for insurers in 2012.  We called it a ‘megatrend’.   Seems that this extends well beyond insurance.  A recent Globe & Mail article on big data reported that Scott Thompson, the newly appointed president of Yahoo, was pledging that data would be the key to his new company’s future just as it powered his last company (PayPal).  Thompson said, “I am certain that the battle of the next generation of Internet businesses will be made up of who has more data and who knows how to use it better than anyone else.”

Moreover, Thompson indicated that the data needs go well beyond traditional market segmentation and groups, extending to the individual level.  “I’m not talking about your classic segmentation stuff,” he said,  “It’s the segmentation of one and what the data of one tells you.”

Seems that insurers are coming to the same conclusion and are appointing senior managers at the enterprise level to take responsibility for consumer data and analytics.   As reported  in Insurance & Technology, Lincoln Financial has created a new group “dedicated to capturing quantitative and qualitative information about consumers that can better inform product design and distribution decisions.”

Kristen Phillips, SVP of Strategy and Marketing, noted that “Lincoln Financial recognizes the need and value of expanding our definition of the consumer to be more multi-dimensional – to include our end consumer. Clearly understanding the behaviors and decisions of consumers will be valuable to our advisors and partners, as well as driving product positioning and innovation, which will help ensure Lincoln’s solutions meet the emerging needs of current and future consumers.”

Recently, Chartis Insurance named Murli Buluswar to the newly created position of Chief Science Officer.  In a recent interview with Insurance & Technology, Buluswar noted that the creation of the role came from the Chartis CEO Peter Hancock.  “He has had extraordinary success by harnessing the power of data to drive results. He had the vision to build this team of top-notch business thinkers and research scientists to forge a path forward in strategy and business impact, while having a positive impact on society more broadly,” Buluswar said.

The CSO role has broad, pioneering, proactive aspects. According to Buluswar, “The use of data analysis in the insurance industry has tended to be focused on the actuarial side of the business, but the opportunity is much broader than that. It can be applied to how you manage marketing, distribution, customer experience, underwriting decisions — it has a place in every function of the insurance enterprise.”

These organizational appointments will likely continue.  In a recent blog post by Joe McKendrick in Insurance Network News, reports on a conversation that he had with Jim Kobielus, Forrester Research’s data guru:

The rise of “data scientists”: Having specialists that can help insurers make sense of all the data coming in – whether they’re called “data scientists” or merely “quants.” Jim sees more of these specialists in organizations, handling challenges from building multivariate statistical models to predictive modeling to developing data mining approaches to look for hidden patterns in historical data sets.

If nothing else, this megatrend will  reduce the unemployment rate of math majors.

2012 Insurance-Canada.ca Technology ConferenceAnalytics is a key theme at the 2012 Insurance-Canada.ca Technology Conference.  Join your colleagues on March 5, 2012 in Toronto.

 

Jan 12

Will You “Friend” Your CSR, And “Like” Your Renewal?

By Insurance-Canada.ca BlogEditorNo Comments

Attention brokers:  Do you think that  competition from direct writers and direct marketers is tough?  Do you feel the predatory breath of the banks on your neck?

Get ready for what’s next:  Facebook the Underwriter!

Scary?  Perhaps, but we see it as having opportunity for brokers with a conviction in their own worth.  But lets describe how the Social Network might become the next direct writer.

Blogger , writing in ReadWrite Enterprise reviews a recent report from  Gartner’s Predicts 2012 series.  Gartner Analysts suggest that changes in consumer buying behaviour have driven large players – including financial institutions and social media – to compete in a disintermediation contest for the mind- and wallet-share of consumers who want large measure of convenience with low levels of cost.

The scenario looks like this.  Banks are facing competition from social media sites which are introducing on-line payment and financial intermediation services in order to drive new revenue streams.  Gartner analysts Stessa Cohen and Peter Redshaw, write that, “Examples of recent activity include the social payments startup Twitpay, the virtual currency Facebook Credits and the acquisition of the U.K. price comparison site BeatThatQuote by Google.”

The banks, feeling squeezed, start to use social media sites, like Facebook, to market and conduct transactions as an alternative to the financial institutions proprietary websites.  The banks also use the social media to access ‘life events’, like new jobs, marriage, new child, etc. to trigger marketing offers for financial products.

The social media, in turn, accelerate introduction of their own  financial products.  These would likely be simple products, targeted at the social media’s market segment.  These could easily include basic p&c and life insurance offerings.

Fulton writes: “The Gartner analysts perceive this as a genuine threat to the existing insurance industry. In their report, they advise insurers to plan now for the commoditization of their products and services, implying that they should perhaps be sold through portals the way cloud service customers purchase bandwidth and virtual machines today.”

Here’s where the good news kicks in for the independent distribution system.  It has already seen “portals” for insurers selling commoditized products, supported by major marketing campaigns.  It has seen price focused consumers turn to Google, rather than a local representative, for advice.  Independent brokers – individually and through associations – have developed  strategies  to focus on the independent’s strengths – professional advice and quality service.  And independents using social media tools are seeing there is a market in the networked community that uses social media for more than pure price shopping (see our post on Ryan Hanley, for example).

While the banks and social media giants are competing on price alone, and accelerating a race to the bottom, wise brokers might look to a contrarian strategy which focuses on individualized service.  ACT’s recent report that we reviewed earlier this week would be a great starting point for anyone interested in this approach.

And we’d welcome your views.

2012 Insurance-Canada.ca Technology ConferenceBy the way, Kimberly Harris-Ferrante, VP and Distinguished Analyst from Gartner, who edited the report cited above, will be a keynote speaker at the 2012 Insurance-Canada Technology Conference, March 5, 2012 in Toronto.  Get Registered, Be there and Be informed!

 

 

 

 

Jan 09

Changes Create Opportunities for Brokers/Agents: Report

By Insurance-Canada.ca BlogEditorNo Comments

A new report suggests that independent insurance agents and brokers are well positioned to survive and thrive in the future – if they embrace customer service using digital tools, and utilize new approaches to proactive agency management.

The report entitled “Agency Opportunities in a Time of Profound Change” (available on the ACT website) is written by  Jeff Yates, executive director of the Agent’s Council for Technology (ACT), a unit of the Independent Insurance Agents & Brokers of America.  Yates notes that it is “an exciting time to be involved in ACT because we have so many future-oriented initiatives underway”  designed to assist agents and brokers to take control over their destiny.

These initiatives form the bulk of Yates recommendations for agents.  Here are some examples.

  • Agencies must develop skills in managing multiple communications channels with consumers, and Agency/Broker Management system vendors’ offering must support agents in this.
  • Agencies must be able to offer on-line,value-add services to complement, not replace, personal service. An example would be providing clients the ability to request and issue routine Certificates of Insurance through a secure web site.
  • A major advantage of independent distributors is the ability to have highly localized community presence.  Agencies need to take advantage of mobile technologies to “decentralize into very local offices to be even closer to consumers”.
  • Agencies must take advantage of all available tools – including Download, Real Time and electronic filing – to free staff for personal connectivity with clients
  • Agencies must get comfortable with outsourcing non-core  tasks including, but not limited to, IT functions in order to increase flexibility and agility.

All of these are presenting a strategic challenge to agency management.  Yates notes that one of ACT’s work groups has started to articulate critical attributes required for agency managers, which include: “leadership skills (managing a business, not just an insurance technician), strategic thinking, anticipatory, agile, knowledgeable, social, knowing your consumer, good marketing and sales skills, having a communications plan (clear brand positioning), efficient processes, and financial management.”

Yates believes that independent distributors are uniquely positioned to take advantage of a time of profound change.  He concludes the report:  “Creating that personal connection and relationship is becoming more and more important to today’s consumer, and independent agents excel in this arena. At the same time, agencies have more choices available to them as to how they organize, manage their staffs, create an effective online brand and establish enduring digital/personal relationships with their clients in order to thrive in tomorrow’s insurance market.”

Jan 05

What’s Past is Prologue: The New Landscape (Part 2 of 2)

By Insurance-Canada.ca BlogEditorNo Comments

In our last posting, we discussed four trends we see as forming contours of a New Landscape for insurance technology in Canada.  These are:

  • Social Media Becoming Social Business
  • Increased Penetration of Mobile Technology and Telematics
  • Broker-Carrier Connectivity Debate Increases (and maybe concludes)
  • Modern Technology Becomes a Firm Foundation (for further progress, not an end in itself)

We believe there is a megatrend that encompasses the others and is becoming a critical success factor for insurers and brokers.  And here’s what that is:

Megatrend:  Data and Analytics Become Critical Success Factors

As the soft market continues, leading insurance underwriters and distributors are pursuing intelligent data use as a high-priority competitive strategy.  Improved use of more data through improved analytics is the common denominator of all of the trends described previously.

  • Use of social media drives new and different data for insurance professionals from all disciplines; underwriting, sales/marketing, claims, strategy/planning, service, channel management.  The tricks include distilling information from large quantities of structured and unstructured data, then using analytic techniques to frame the results in such a fashion as to inform strategy and action.
  • Mobile technology and Telematics are all about data.  At a simplistic level, when a risk manager is conducting an inspection with a location-aware device, recording an address is superfluous.  At a more strategic level, the implementation of Telematics makes new data and information available – risk management, underwriting, pricing, and marketing – to improve insurance results.  (Note ACORD has formed a working group to describe data standards for these data.)
  • Broker-Carrier connectivity  allows the movement of data among trusted trading partners.  As data become more complex, proprietary, and time sensitive, the value of this connectivity increases.
  • Modern technology based systems replacement projects are typically driven by efficiency goals, with data analytics an after thought.  However, as we have noted, implementations which  incorporate analytics into the initial design are yielding longer term benefits derived from more effective capture and use of data.

But capturing and using data is no longer straight-forward.  As we wrote in August, the type, structure and amount of data from social media, location, etc., is overwhelming many data structures and systems.  According to a recent survey by data collection specialists, Connotate, cited in emarketer, “the top challenge with Big Data was the time and manpower required to collect and analyze it.”    New technologies combined with better employee understanding of statistical applications are required to handle and use this ‘Big Data’.

 

 

These four trends and the data megatrend are the core themes of the 10th annual Insurance-Canada 2012 Insurance-Canada.ca Technology ConferenceTechnology Conference, which will be held March 5, 2012 in Toronto.  An expert faculty will present information in business terms and leading suppliers will be available in an active exhibit area.

The purpose of the day is to  to help attendees determine where they stand on the New Landscape, and what strategies may be employed to further objectives.  Details are available now.  We hope to see you there.

Jan 02

What’s Past is Prologue: The New Landscape (Part 1 of 2)

By Insurance-Canada.ca BlogEditorNo Comments

Welcome to 2012.  As we move into the new year, we want to highlight some of the trends we see forming the contours of a New Landscape for insurance technology in Canada.

In this post, we will cover these trends.  In our next post, we will discuss a mega-trend which encompasses the others and is becoming a critical competitive factor in the New Landscape.

Here are the trends:

Trend: Social Media Becoming Social Business

Insurance organizations are all over the map on the use of social media for business.  Some have not started any formal initiatives.  For those who have,  the most common entry points are sales and marketing.   As we noted in November, some of the leaders are having impressive results with lead generation and conversion.  Leading organizations are going well beyond this, however.

Underwriters and claims professionals are seeing social media as rich data sources for risk selection and claims adjudication (see our October post on Maturing Uses).   As we wrote  in June, we think that the social business model is a natural fit for a relationship business such as insurance.

Trend: Increased Penetration of Mobile Technology and Telematics

Computing and data access has taken to the road, figuratively and literally.  Tablet and smartphone computing is not yet replacing deployment of laptop computers, however,  as we noted in September, the convenience of the mobile devices and the rise of mobile-only applications is accelerating the deployment of mobile computing. Gartner is projecting that “the installed base of devices based on new lightweight mobile operating systems like Apple iOS, Google Android and Microsoft Windows 8 will exceed the total installed base of all PC based systems.”

Mobile technology powers more than smartphones and tablets.  In August, we noted  that Telematics – technology embedded in vehicles – is driving (pun intended) a movement to Pay-as-you-Drive schemes in many parts of the world; including the USA and Europe, but not including Canada.  We see Canadian insurers  actively pursuing this in 2012.

Trend: Broker-Carrier Connectivity Debate Increases

ACORD is now 41 years old and CSIO just celebrated its 30th birthday.  Unfortunately,  implementation of the Standards for Broker-Carrier connectivity has yet to mature.  There are signs this may come to a head soon.

We have documented  increased activity by agent associations in the US and broker groups in Canada in promoting standards-based connectivity solutions with Carriers.  As, or more significantly, individual agents and brokers are putting financial and personnel resources to work to implement standards within their offices and with their supporting carriers.

In the last few months, however, a debate has started with respect to the level of support by brokers and carriers for standards based connectivity versus proprietary methods through carrier portals.  Neither carriers nor brokers can support disparate systems indefinitely.  We expect to see increased pressure to come to some common agreement in 2012.

Trend: Modern Technology Becomes a Firm Foundation

Numerous surveys and analyst reports have confirmed that carriers are investing heavily to replace legacy systems for policy administration, claims administration, billing, and accounting.  We found (see, e.g., our review of a recent IVANS survey) that the primary motivator for these investments is to improve competitiveness to support growth.

Modern Technology is becoming the rule, not the exception.  In reviewing applications for the 2012 Insurance-Canada Technology Awards, a juror noted that while core system replacement projects are challenging, having such systems is no longer strategic, but rather has become ‘Table Stakes’ in the game.

In a few days, we will post on a Megatrend which encompasses the above and could be the technology critical success factor for insurers and distributors in 2012.

Hope you come back then.   Meantime, we wish you all the best for 2012.

 

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