Archive

May 17

Can IT Be Aligned with Turbulence?

By Insurance-Canada.ca BlogEditorNo Comments

Within the IT management community, “alignment” has been a hot topic for some time.  If, as some suggest, the insurance industry is on the edge of some fundamental, possibly existential challenges, the question might be, “align with what?”

What is ‘Alignment’, Anyway?

A frequently cited review of literature by Chan and Reich, ‘IT Alignment: What Have We Learned’, notes that there have been three major themes developed in studies on IT/Business alignment:

  1. linking the business plan and the IT plan,
  2. ensuring congruence between the business strategy and the IT strategy, and
  3. examining the fit between business needs and information system priorities

The authors note that case studies have found that alignment produces results: “the findings support the hypothesis that those organizations that successfully align their business strategy with their IT strategy will outperform those that do not. Alignment leads to more focused and strategic use of IT which, in turn, leads to increased performance.”

So, alignment is a desired state, right?  Perhaps, or it might be more situational.

Can You Align with Turbulent?

According to the Chan and Reich, “Tightly coupled arrangements can have negative outcomes especially in turbulent times. That is, if the business environment suddenly changes and alignment is too tight, businesses may have difficulty adjusting to their new environments.”

If you find yourself saying, “That sounds like the insurance industry these days,” you are agreeing with several leading insurance-technology thinkers.  At the Analysts Panel during the recent ACORDLOMA Forum, Kimberly Harris-Ferrante, VP and Distinguished Analyst at Gartner said that CIOs are becoming keenly aware of all the pressures in the industry, and are seeing the need to adapt.  Insurance Networking News quoted Harris-Ferrante saying that Insurance technology leaders “are becoming very keenly aligned with the need to change.”

Matt Josefowicz, Managing Partner at Novarica noted that there were evolutionary and revolutionary changes facing the industry now.  The evolutionary involve changes to  process, product, data, and core systems.  The revolutionary changes involve structural changes facing the industry.

As an example of the latter, Josefowicz cited the ability of capital markets to access risk (cat bonds would be an example).  This challenges the current configuration of insurance companies, including information systems, which were set up to manage information. According to Josefowicz, the structure, including regulatory oversight,”was developed to meet an absolute necessity, and the absolute necessity that it was developed to meet is no longer there.”

If not Alignment, Then What?

Citing work by Henderson and Venkatraman, Chan and Reich write: “The business environment is constantly changing, and thus there may be no such thing as a ‘state’ of alignment. Strategic choices made by one organization frequently result in imitation by other organizations. Thus, strategic alignment is a process of change over time and continuous adaptation.”

The authors conclude that time lag is a fundamental problem with alignment theory:  “given that the business environment and technology change so quickly, once an IT plan is enacted, there is a high probability that the plan and the technology are already obsolete.”

Perhaps the state of play today is such that alignment by itself is less important than facilitating communication and ensuring a robust, flexible environment which supports change.  At the Analysts Panel, Chuck Johnston from Celent used the example of the introduction of Obamacare in the US which created massive change and disruption for providers of voluntary health coverage.  He noted the reaction from the insurers: “people are shrugging their shoulders and saying disruption is happening, now it’s something to manage.”

What Do You Think?

We’re interested in your thoughts about alignment. Has this been a part of your strategy?  Is so, how does it work for you, especially in turbulent times?  If not, what do you use to link IT and business strategies?

Apr 26

Are IT People Starting to Look Like Regular Employees?

By Insurance-Canada.ca BlogEditorNo Comments

Some recent employment-related data suggest that IT professionals have similar employment experience as other members of the working class. In fact, some IT professionals are actually reporting directly to business unit managers. Is this scary or does this offer opportunities?

Hiring Flat, Participation Down

As reported in Insurance Networking News, analysis by Janco & Associates find that hiring for IT jobs has come to a ‘standstill’ due in large part to the uncertain economic climate.  Moreover, some job seekers have actually left the job market.  INN quotes Janco CEO, M.V. Janulaitis, “The true unemployment rate would be over 11 percent,” if it included those people who have dropped out of the labor market.

Raises and Bonuses Normalizing, Outsourcing Cited

In conducting its 16th annual salary survey of IT professionals, Information Week found that “compensation for staffers is flat compared with last year and up only 3% for managers.”

Moreover, there are decreases in related benefits, including training.  Information Week comments:  ” And people are our most important asset?”

One of the main causes for the downward pressure is the use of outsourcing.  The fact is that IT people are getting accustomed to the use of outsourcing as part of the normal environment.  Information Week notes that the level of outsourcing has remained the same since 2004 and “IT pros aren’t quite as discouraged about outsourcing’s impacts as they were a decade ago.”

Situation Normal, With a Twist

For most workers,  low participation and downward pressure on wages is nothing new.  This might be the case of IT professionals joining the rest of the population.  And that might be a good thing.

One unique result is the movement of IT professionals into business units.  Information Week found that “One-third of the IT managers in our survey report to someone outside of the IT organization for at least half of their time, and one in five IT staffers do.”

This synergy has the benefit of exposing IT to the real world of business as well as offering the business benefits of the IT professionals.   And it helps the employee personally.  Information Week concludes, “For anyone looking for a spot as a highly valued, well-paid IT pro, combining a deep understanding of the customer with sharp technical skills is a strong place to start.”

What Do You Think?

Do you see IT moving towards the business environment more?  If so, is this a good thing?

Employee your talents, and let us know.

Apr 07

Predictive Analytics: Are Winners Becoming ‘Embedded’?

By Insurance-Canada.ca BlogEditorNo Comments

While predictive analytics for insurance has become a hot topic in the last year, implementation of analytic tools has been mixed. Some suggest that successful insurers will be those who not only embrace predictive analytics, but embed them in their technology and process. We’d like to know what you think.

What are Predictive Analytics and Why Are They Important?

Wikipeadia describes predictive analytics as encompassing  “a variety of techniques from statistics, modeling, machine learning, and data mining that analyze current and historical facts to make predictions about future, or otherwise unknown, events.” The most obvious implementation is Amazon.com which uses knowledge of its customers’ buying habits to offer suggestions of products which might locically follow other choices

We have used this space to cite examples of analytics’ uses by insurers, as well as by agents/brokers.  These include the ability to help simplify the on-line quotation process, help identify potential fraud, and target specific offerings based on social media data.

Why Has The Uptake Been Slow?

In spite of real success stories, there has not been a stampede to adopt predictive analytics.  Based on recent research on claims, Accenture reports on its blog: “34 percent of insurers currently use predictive modeling, while 32 percent would like to use it.”

The primary reason appears to be the difficulty in aggregating data from the insurers’ existing systems. The Accenture report, North American Claims Investment Survey: A Foot in Today, a Leap into Tomorrow for P&C Claims Functions, notes  “insurers with core claims systems more than 5 years old (more than half of the survey sample) saw themselves as much less able to deal with the problems of responding to changes in business processes, addressing consumers’ evolving needs, integrating with other systems and allowing changes in systems behavior and business processes without IT intervention.”

What are the Implications?

There is urgency here, as competitors are realizing benefits from the use of analytics now and are planning for Phase 2 – embedding predictive analytics into processing systems.

In a recent article in Insurance Networking News, Chris Mcmahon documents examples of several insurers who have adopted the use of analytics for claims and underwriting and are now positioned to leverage these investments in further automation.  He writes:  “These second-generation predictive analytics applications are accessing core systems, data marts and warehouses, external data and synthetic data, and disappearing from view as they become more integrated with core applications, business intelligence and workflow or migrate to the cloud.”

In regards impact of this on others, Mcmahon quotes Brian Stoll, senior consultant and director of Towers Watson’s P&C predictive modeling practice, saying “One of my former bosses once said, ‘Our greatest competitive advantage is that our competitors are other insurance companies.’  They haven’t changed and don’t see any need to change.”

Back in January, we noted that a several insurance experts in the Insurance 2023 Study Group had identified the use of analytics generally, and predictive analytics specifically, would be a differentiator for insurers and brokers alike.  One of the brokers in the group noted insurers use of predictive analytics will advantage brokers, allowing them to be more competitive against direct marketers and allow the competition to move beyond price alone, to incorporate service and product features.

What Do You Think?

I f you are an insurer, are predictive analytics part of your current environment or are they on your radar screen?  If you are a broker, would you like to see more analytics used by your carriers or are you putting these into your own environment?

Leave a comment below and make your view count.

Oct 07

Innovation and IT: Are We Planning for Failure?

By Insurance-Canada.ca BlogEditorNo Comments

There is tremendous demand for growth and innovation in the industry these days.  And there is a lot of emphasis the the critical role that modern technology plays in meeting this demand.  Is the reality bearing out the demands put on technology?  And, if not, what can we do to improve our results?

Theory and Reality of Policy Admin Systems Replacement

Policy Administration Systems replacement projects are frequently sold on the basis of supporting growth and profitability by:

  • reducing time to market for new products,
  • improving underwriting results, and
  • reducing costs by creating internal efficiencies.

A recent survey conducted by Novarica suggests that Policy Administration Systems projects are not producing some of the benefits that might  be anticipated by our plans.

Justin Stephani, writing in Insurance Networking News, notes that the Novarica survey found that improving speed to market was the only category where mid- and large-sized insurers found improvement as a result of the implementation. Other areas, including underwriting results and maintenance costs did not show improvement for the majority of insurers.  Moreover, the report suggests that there are potentially hidden costs, with about 50% of total project costs coming from internal services.

It seems that the reality is not aligned with the expectations.

Better Estimation and Requirements of Growth

So what, if anything, can we do to improve alignment?  A recent post on the Harvard Business Review’s blog offers some interesting insight.  The author, Scott Anthony, from global strategy and innovation consulting group Innosight, suggests that demands of our planning processes might be subverting our final plans.  Anthony writes “To get through the corporate approval gauntlet you have to project big numbers. Then early results disappoint.”

This sounds like the pattern that is described in the Novarica survey.  So what can be done?

First, Anthony suggests that we take available data into account.  Certainly the Novarica data will benefit us there.

Further, Anthony also suggests that growth, derived from innovation,  requires unique consideration.  He advises that there are three critical questions that need to be addressed:

  1. Are we following best in class approaches to ensure that we identify and accelerate our best ideas?
  2. Do we need to increase the amount of resources (both human and financial) we are investing in growth?
  3. Do we need to increase focus on acquisition as a growth strategy, at least as a way to “buy time” for organic efforts to develop?

This looks more like business transformation than systems replacement.  While we see modern technology as important basis for supporting growth, it may not be the only critical element in the equation.  We may need to fund innovation and growth as a separate initiative.

What Do You Think?

What’s been your experience?  Are we putting too much emphasis on systems as we look for improvement and growth?  Leave your thoughts below.

 

Sep 16

Social Marketing Reaching Saturation; Insurance Leaders Differentiate Through Content

By Insurance-Canada.ca BlogEditorNo Comments

Two recent reports show some import trends in the use of social media for marketing generally and within the insurance community specifically.  The short summary:  Social Media are recognized components within the mix of marketing activities.  Question:  Have you established your desired position in the new mix?

Use of social media for marketing seems to be reaching within the business market.  eMarketer reports that “Nearly nine in 10 US companies with at least 100 employees will use social networks for marketing activities this year.”

Not surprisingly, the eMarketer reports that Facebook remains the most popular vehicle.  However, Twitter is gaining in terms of the number of companies using the media for marketing.  A virtual tie is expected by 2015.

A second report, by Corporate Insight,  focuses on the insurance industry and finds that penetration  looks similar to enterprises in the larger market.  The report goes further in noting that several insurers rise above the pack. As reported in Insurance Networking News “three insurers stood out on the most popular platform, Facebook, in Corporate Insight’s latest report: State Farm Nation, Flo the Progressive Girl and Allstate Mayhem.”  (Note: We recently posted on how State Farm is providing an interesting twist by  complementing its Social Media Strategy with bricks, mortar, and caffeine.)

The penetration of different media for insurers is similar to the population as a whole.  Facebook has held the lead in the past, but Twitter is gaining rapidly.  Justin Stephani, author of the INN article,  writes: “Twitter has surpassed Facebook in terms of the number of firms with a presence and the number of pages per firm, Facebook remains the most popular among insurers.”

INN’s analysis suggests that success in the social media comes from a light touch.  Stephani writes: “success is found when firms provide information that the viewing audience wants, rather than strictly relaying the information your firm wants to share.”

It seems that within the business community generally, and the insurance industry specifically, use of social media is now a recognized component of marketing.  Differences are now coming from the use of the media to add value for customers.

So, how do you feel your company is doing?  Have you hit maturity with social media?  Are you just embarking?  What have your experiences been?

Be social.  Share your thoughts with your colleagues below by adding your comments, concerns, questions.

Sep 13

Is Data Quality Too Important To Be Left To Data Managers?

By Insurance-Canada.ca BlogEditor1 Comment

With all the buzz around ‘big data’ and the proliferation of new data sources – social media, event tracking tools – combined with the residual issues relating to legacy system data, it is important to remember that the value of data needs to be measured by quality as well as quantity.  The old adage:  ‘Garbage in, garbage out’ has never been more important.  And,  the issue is the domain of business, not IT, management.

So what’s the problem?  Simply put, different systems collect data in different ways.  Some systems  rigorously edit and filter data during input.  However, modern social media sites, as well as older legacy systems leave lots of room for free-style data input.  Compounding this, there are compelling business reasons to bring diverse data sets together into a common data source, e.g., converting legacy systems, mergers and acquisitions, providing a single client view for marketing and sales.  As the number of sets increases, the possibility of compromised data quality rises.

How important is data quality?  That depends on its business use.  If data are used to help accent reports with anecdotal references (example tweets, etc.), quality may not be as important.  However, if the data are being used to provide information to regulators or during due diligence, the quality will have a higher degree of import.

There are a wide variety of technical tools and techniques to do data matching and consolidation.  There are also an emerging discipline in data testing (see Syed Haider’s recent blog post in Insurance Networking News, for example).  However, data quality remains a business issue, not a technical issue.  This has two implications.

First, there needs to be a business structure to address data quality issues.  In mid- to large-size organizations, there may be value in establishing a data governance structure.  This could be a committee that includes representation from business units, Finance, and IT that meets as required to address data issues, approve data remediation projects, set data quality standards and establish responsibility and accountability.  In smaller organizations, this might be set our as a responsibility within a specific business position (e.g., COO, CFO).

Second, any organization examining a data cleansing effort – as a project itself or as part of a larger project – needs to make a business decision about the amount of effort to address the issues.  We recently were reminded of a  2006 white paper from Informatica, The Data Quality Business Case: Projecting Return on Investment.   It is reasonably short, and written in business terms.  It’s purpose is straight forward:

Even though everyone fundamentally understands the need for high quality data, technologists
are often left to their own devices when it comes to ensuring the high levels of data quality.
However, at some point an investment must be made in the infrastructure necessary to provide
measurably acceptable levels of data quality. In order to justify that investment, we must be able
to articulate the business value of data quality in a way that will show a return on the investment
made.

 To paraphrase French Prime Minister Georges Clemenceau, “Data are too important to be left to technologists.”

What do you think?  Is Data Quality an issue with you?  What are the business impacts?  How are you addressing the challenges?

 

May 05

Implementing Mobile – User Assumptions and Security Realities

By Insurance-Canada.ca BlogEditorNo Comments

An increasing amount of data suggests that consumers and employees are assuming that mobile technologies – smartphones and tablets – will become integrated in insurer offerings  and accepted as normal business tools.   And a number of insurers hare moving from pilot projects to production applications.  One outstanding question is: are security methods and procedures keeping pace?  The jury is still out, but the necessary action plan seems straightforward.

We have noted that the movement to mobile is not restricted to large insurers, and many smaller insurers are finding this is becoming a competitive equalizer.  We have also seen that regulatory organizations in the US and Canada are developing guidelines to encourage the use of mobile devices for financial transactions.  The result has been an increase in expectations.

In a recent opinion piece in PropertyCasualty360.com, Edward Cammarato, John Cantwell, from Verisk Insurance Solutions, noted: “In the near future, customers will ask for mobile solutions to be included in their offerings and demand them at no additional cost. Just as today’s customers have assimilated online payment of policy premiums, they’ll also expect to upload possible claims data (with photos) using their mobile applications”.

At the recent NetVu User Group Meeting, Vertafore President and CEO Euan Menzies in his opening address , indicated that Web 3.0 will have the same level of impact as the original move to the Web with mobility, collaboration and insight driving the transformation.

Continued expansion will be contingent on appropriate security.  So where are we?  First, it needs to be noted that constructing mobile security for the insurance industry is complicated  because of the number of touch points that the insurance industry has.  Quoted in Insurance & Technology, Sadik Al-Abdulla, senior manager in CDW’s security practice, said, “Data loss prevention in the insurance industry is particularly challenging because you must follow sensitive data every step of the way.  … There is more opportunity for data loss because the insurance industry handles more data than other industries, and because more employees touch the data.”

In an accompanying piece, Chad Hersh, from Novarica, was asked how the industry was doing, indicated  that he felt it was not that far along.  However, he provided some advice:  “The security requirements for mobile aren’t necessarily novel, but rather are extensions of the security needs of the desktop, the Blackberry, the laptop, and the cell phone.  … That being said, they need to be taken as seriously as those other platforms.”

At the end of the day, business managers and IT staff need to examine the exposures, and the options for providing security.  There are resources to help.  Recently, Insurance Networking News summarized a report by advisers Janco Associates, Inc. on techniques to manage employees’ personal mobile devices, and the results – a combination of technical and procedural recommendations – look like applied common sense, such as: ‘Include remote device wiping’, ‘Provide simple workable solutions that even novices can use.’  The slideshow on INN is worth a look.

The first step needs to be to acknowledge the need, then gather the appropriate resources.  Given the trend, it seems worth the effort.

Apr 16

Bring Your Own Device Movement Gaining Momentum, Providing Lessons for Insurers

By Insurance-Canada.ca BlogEditorNo Comments

Bring Your Own Device – aka BYOD – is gaining momentum for all the right reasons, even with a customer that would be the most concerned about the scheme.

Last October,we noted that the trend for employers to allow  and even encourage employees to connect their own personal devices – smartphones, tablets, laptops, etc. – to corporate networks and resources was picking up speed.  The primary driver seemed to be cost savings for the employer.

However, according to a recent Insurance & Technology article, improvement in employee productivity is become a major driver as well.  The article notes that allowing users to select among a variety of devices with which they are familiar provides tremendous flexibility for the employee at a low cost to the employer.  As we noted in our October post, employees are willing to underwrite some or all costs for the devices in exchange for freedom of choice.

Of course, the major issue with providing ‘foreign’ devices into corporate networks is security.  A recent study of one of the most security-focused organizations in the world is informative in this regard.

CDW – a major technology provider to business and government in the US -  recently completed a report on BYOD implementation in the US Federal Government.  It found that a large proportion (62%) of federal government agencies in the US allow workers to bring their own devices, and approximately 40% of employees have taken up the offer.

Writing in Insurance Networking News, Joe McKendrick  commented on the security findings of the report:  “As with many things related to technology, security is a vexing issue. While 82 percent of the IT professionals in the survey said their agency deployed encryption for mobile devices, far fewer said their agency protects mobile devices with multi-factor authentication (54 percent), remote lock and wipe (45 percent), or data loss prevention software (39 percent). Agencies are providing a good security baseline for mobile device use, however, as the majority are establishing mobile data security policies (85 percent) and requiring data security training for mobile device users (84 percent).

“One answer to mobile security management as well as administration is mobile device management (MDM) – which is the over-the-air distribution of applications, data and configuration settings for all types of mobile devices. About 71 percent if <sic> federal agencies are employing MDM at least in a limited way.”

Other findings from the CDW survey include:

  • 99% of Federal IT professionals report they have deployed mobile devices – such as laptops, smartphones, tablets and e-readers – to their agency workforce
  • 89% of Federal employees who use a mobile device for work say it makes them more productive, and 69% of Federal employees say increased mobility will improve service to citizens

McKendrick’s concludes that the movement at the US Federal Government level provides important lessons for insurers on BYOD.  We would concur.

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.

 

Jul 14

Modern Claims Techonology Benefits Run Deep and Long

By Insurance-Canada.ca BlogEditorNo Comments

There is increasing evidence that investments in modern claims technology may be one of the best strategic decisions insurers can make.

We recently wrote on the competitive benefits that can accrue from the improvements in customer service derived from modern claims systems.  Not only are customers more satisfied (improving retention), but, as Celent’s Donald Light commented recently, the process can be shorted for everyone.  “The claim handler or adjuster has to rely on technology to see the whole process and where the claimant is in that process, and whether he or she might need to push a certain part of the process along,” Light commented.

CNA found that modern technology allows a comprehensive view  of the process and data  can be extended to the whole portfolio of claims, to ensure that the right people are handling the right processes at the right time.  Moreover, the same, correct information can be provided to all interested parties (including underwriters, actuaries, and marketing staff)  in a timely fashion.  According to Becky Nelson, VP of IT, (reported in Insurance & Technology) “This will be accessible to many more people than in the past, when we have had to gather the information in different ways through different channels.”

Analytics offer increased opportunities to not only react to claims, but determine proactive strategies to address complex problems.  There are a significant number of variables in fraud management.  New techniques, such as link analysis and visual analysis of large data sets are allowing detection and penetration of fraud rings.  It’s pretty esoteric stuff, but it is showing promise in addressing complex, previously insoluble problems.

Last, but not least, modern technologies in the claims department fast tracks people on the systems learning curve.  For smaller organizations such as  Narragansett Bay Insurance Co., a Rhode Island based specialty insurer, this can be especially important in handling spikes in activity due to events such as hurricanes.   Quoted in Insurance Networking News, Bob Khosropur, chief claims officer credits modern technology for  allowing causal users to become proficient in gathering information during these periods:   “We have to ensure that our phone lines never get choked-that they’re able to take in as much as the demand calls for in terms of service, and have someone at the end of the line who can take all that information from the policyholder and populate our claims systems with every bit of information needed to begin the claims process.”

 

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