November 20, 2009
Honor Roll: This Week's Top Insurance Blogs (Nov. 15-21)
Our favorite insurance technology-related blog posts from around the Web (November 15-21, 2009):
Tectonic shifts: HP Plus 3Com versus Cisco Plus EMC
Technology industry analyst Judith Hurwitz write that the implications HP’s planned acquisition of 3Com go further than what meets the eye. “It also pits HP in a direct path against EMC with its Cisco partnership,” Hurwitz suggests.
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AgencyPort’s Steve Hauck offer his perspective on the company’s recent acquisition by Sword Group. “AgencyPort management will remain intact and business will operate the way it always has,” he writes.
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‘Tis the Season for Overflow Help (look to the Cloud?)
This post is ostensibly about security risks related to cloud computing, but the real interesting bit is at the end, where Javed Ikbal breaks down the 67 days it (allegedly) takes to fix a cross-site scripting problem.
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Text Mining: The Intersection of Content & BI
“In most cases text-mining software is pointed at electronic documents, such as call center comment fields, e-mail-based surveys and online feedback forms, but there are still lots of paper documents out there,” writes Intelligent Enterprise’s Doug Henschen in this post about structured and unstructured text mining.
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November 17, 2009
Government Report: NY Fed Could Have Done More in AIG Negotiations
Apparently, the New York Fed could have done more last year when it was negotiating with AIG trading partners. At least that's what Troubled Asset Relief Program special inspector general Neil M. Barofsky suggests in a government report officially released today.
From the New York Times:
UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.
But UBS's good-faith gesture was quickly drowned out by Goldman Sachs and the top French bank regulator. They argued, with others, that it would be improper and perhaps even criminal to force A.I.G.'s trading partners to bear losses outside of bankruptcy court.
The banks and the regulator were confident that the New York Fed was not willing to push A.I.G. into bankruptcy, because earlier in the fall the New York Fed had stepped in with $85 billion to prop up the insurer.
The New York Fed, led then by Timothy F. Geithner, who is now the Treasury secretary, therefore had little leverage in the negotiations, according to a post-mortem of what has emerged as the most inflammatory episode in the rescue of A.I.G.
Read the full story here.
November 16, 2009
Mere Efficiency Insufficient for Securing Positive Return-on-Assets
With the announcement of the Deloitte Shift Index this morning, a recent I&T Blog contribution from Guidewire's Marcus Ryu gains credibility. Readers may recall that Mr. Ryu discussed diminishing returns from mere efficiency improvements, arguing that insurers should emulate the transition that occurred in manufacturing from efficiency/automation-orientation to precision-orientation, lean manufacturing techniques and just-in-time production/inventory approaches.
The argument about the limits of mere efficiency appear to be supported by Deloitte's report that despite major improvements in labor productivity over the last four decades, many US industries — including insurance — have experienced alarming decreases in their return-on-assets.
According to a Deloitte source, the insurance industry's average return-on-assets has dropped by 142% from 2.6 to negative 1.1%. The source further asserts that technology does emerge as a differentiating factor between insurers, with adoption of digital infrastructure the key difference between top and bottom performers.
Delioitte shared with me other factors affecting capital performance within the insurance industry:
— Insurance is labor intensive, which is not expected to be alleviated except by technology.
— Inability to grow market share – with gains generally at the expense of competitors rather than the opening of new markets – pressures profitability.
— Firms with the best return-on-assets capitalize on technology to generate higher returns.
— The rate at which companies lose their return-on-assets leadership is due to greater dependence on the a volatile stock market.
Low competitive intensity, mainly due to high barriers to entry, benefits insurance.
November 13, 2009
Honor Roll: This Week's Top Insurance Blogs (Nov. 8-14)
Our favorite insurance technology-related blog posts from around the Web (November 8-14, 2009):
The Role of the Modern Insurance CIO
Celent's Craig Weber shares his impressions of today's insurance carrier CIOs, having spent time with many of them at a recent industry conference. In a completely unrelated story, Craig Weber recently spent time with many insurance carrier CIOs at I&T's 2009 Executive Summit.
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Finally! Offshore Firm Buys McCamish
Novarica's Matt Josefowicz, who appeared in an I&T video earlier this week, expresses his lack of surprise regarding InfoSys Technologies' Acquisition of McCamish Systems.
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Bruce Temkin quotes Mahatma Gandhi in this post on scenario design and usability, and suggests that firms should place more value on improving ease of use. In a related post, he shares data from Forrester's Customer Experience Rankings, naming the Top 25 companies (including a couple insurers) in its Ease of Use Index.
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How MDM Helps Meet Data Warehousing Promises
Initiate's Lawrence Dubov discusses how the concept of master data management (MDM) co-exists with the data warehousing (DW) and operational data store (ODS) concepts developed in the 80s and 90s. "MDM takes the science and art of data warehousing dimensions and ODS development to the next architectural level," Dubov suggests.
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November 12, 2009
Accenture/Guidewire Battle Rekindles
The latest salvos in the Accenture/Guidewire legal battle have been fired, with Accenture filing a new suit on Nov. 10 in the Delaware District Court, adding to the exiting case before Judge Sue L. Robinson. Guidewire fired back the next day with a press statement alleging, in essence, that Accenture was engaging in what observers of the software industry and others have sometimes termed "competition by litigation." Accenture has now reacted to Guidewire's statement.
Insurance & Technology received the following response from Accenture this morning:
"Defendants typically attack a patent’s validity as a defense, however, we are confident that our patents will be upheld both at trial and by the patent office.
"The Accenture Claim Components Solution currently helps process 40 million property and casualty insurance claims globally, including approximately one-third of all insurance claims in the United States. It is recognized to be one of the most innovative technology solutions in the insurance industry, with eight US and 10 other worldwide patents granted since 1999. It was the first Web-based claims solution on the market, the first deployed to 20,000 claims handlers in a single implementation, and was the highest analyst-rated claims solution in 2009.
"When anyone violates our intellectual property, we will pursue all appropriate legal remedies to protect it."
We'll be reporting in greater depth over the coming days about the meaning of this latest development and the potential impact of the matter once verdicts in the specific actions are reached.
Esurance: The Differences Between E-Commerce Companies and Insurance Companies
The night before Esurance CIO Phil Swift teamed with his colleague, director of systems engineering Deepak Srinivasan, to deliver the opening presentation of the 2009 Insurance & Technology Executive Summit, he told me that one of his big picture goals was to get Esurance to operate and think of itself more as an e-commerce company and less as a traditional insurance company.
The notion was interesting to me because, at a macro level, I was easily able to wrap my head around the differences between the two approaches. However, I had trouble when I searched for specifics. In my head, there were differences between an e-commerce company and a traditional insurance company and the way each operates and approaches technology, but the differences were visceral. When it came down to details such as how each handled business models, project management, IT decision making and establishing business goals, I found it difficult to put the approaches of insurance companies in one column and the approaches of e-commerce companies in another.
In their presentation, entitled "Customers Versus Costs: Negotiating the Balance Between Service and Efficiency," Swift and Srinivasan laid out Esurance's approach to technology and innovation. Based on their presentation, I'd have to say that the most important technology virtue at the San Francisco-based carrier is flexibility. Swift described the carrier's project management strategy as a flexible process and one that allowed high-impact projects to jump to the top of the queue as priorities shifted.
This was most evident when the economic crisis hit last fall and Esurance's business goals shifted from growth to loss ratios, profitability and conversion rates, Swift said.
In addition, Srinivasan noted how the company was flexible and able to move quickly when it discovered in 2008 that its JD Power customer service rankings compared unfavorably to its competitors. The carrier responded quickly by prioritizing several customer service-related IT projects. By April 2009, those projects were delivered. In the most recent JD Power report, Esurance showed marked improved, moving to the middle of rankings with regard to its competition.
The question that I have is: Is flexibility and the value a company places upon it what differentiates an e-commerce company from an insurance company? It seems to be something that Esurance, an organization that fashions itself as an e-commerce company, values highly. However, it's also something that most traditional insurance carrier CIOs value as well. Perhaps what we're really talking about here isn't a specific e-commerce strategy compared to a specific insurance carrier strategy. Maybe this is just a case of two different states of mind.
November 11, 2009
Executive Summit Report: Controlling Your Destiny During Organizational Change
Among all the advice I've heard about how to undertake a successful merger, one of the most unusual recommendations comes from Russ Bostick, EVP, Technology & Operations, Conseco Services LLC.
In a presentation on “Controlling Your Destiny: Navigating Change from a Position of Strength” at last week’s Insurance & Technology Executive Summit, Bostick confessed, “I hang out with the smokers,” noting that this practice is an effective way to hear rumors and gauge what employees are thinking during times of turmoil. In fact, making sure that people don’t have too much time on their hands to gossip and speculate is critical, according to Bostick. “Keep idle hands busy,” he emphasized.
While cultural and workforce issues are among the most challenging aspects of a merger that the CIO must address, they are among many potential hurdles IT executives will have to address in the course of a merger, Bostick pointed out. Ultimately, whether an executive is on the acquiring or to-be-acquired side of the deal, it’s important to “be a leader,” rather than a follower, Bostick stressed. Essential capabilities include “flexibility, resiliency and [being] adaptable,” he said. “As CIO, you have to become Machiavellian” as IT often must “reorganize to prepare for a merger.”
If a CIO doesn’t have these skills, “you won’t be involved -– you will be marginalized,” Bostick said. “The CIO should have a strong role in negotiating outcomes –- that forms a common language to talk to the [people] you’re acquiring or being acquired by.”
The importance of shedding distractions when it comes to successful completion of a merger was also stressed by Mark Esposito, CIO, Hartford Life, who used the phrase “focusing forward” in describing IT’s role -– not only in a merger but also in today’s more difficult business environment. “Focusing forward means spending more time on delivering business value [versus] delivering technology services,” he said. The leadership team needs to refocus on growth, Esposito added, which includes “looking for differentiators and aligning innovation” as well as looking to “drive different business models and partnerships.”
At the same time, in an M&A situation technology leadership needs to be opportunistic, Esposito told the Executive Summit audience. Among his recommendations: Have a pre- and post-sale “playbook”; have clarity on the deal’s objectives and key performance indicators; set up a “disciplined” integration office that can handle “end to end” requirements; and, perhaps most importantly, “Finish the job.”
Esposito was equally emphatic about the need for CIOs and other technology executives to proactively face the requirements and risks of the current business environment. In fact, he suggested that the turmoil the industry has faced actually has created favorable conditions to “present business ideas and options,” adding that senior management and business executives “are more open to listening” as opposed to the “don’t mess with success -– my business is growing” attitude of more stable times.
Esposito challenged the Executive Summit attendees with this question: “How opportunistic have you been?” and exhorted them to “unlock areas that deliver value.”
AIG's Benmosche Threatens to Quit
Today's Wall Street Journal reports that AIG CEO Bob Benmosche told board members that he was "done," having reached a high pitch of frustration over government constraints, and in particular compensation limits. After shocking the board, he said he would think it over but doubts remain as to his continued tenure. The article reports:
Last week, Mr. Benmosche and other AIG board members met with [federal "pay czar"] Mr. Feinberg in New York. During the three-hour meeting, board members discussed difficulties of complying with pay policies and retaining talent at the company. Mr. Benmosche's frustrations "hit a crescendo," said a person familiar with the matter. "Bob feels he is in an impossible situation," the person added. Mr. Benmosche didn't respond to a request for comment.
The article also notes that this isn't the first time Benmosche has threatened to quit, and that he has a reputation for making incendiary remarks calculated to motivate others to adopt his recommendations.
That may be, but this is surely the Mother of All Incendiary Remarks, the "nuclear option" of threats. A correspondent of mine argues that one "can't shake the devil's hand and then say you're kidding." Another argued that perhaps the meaning of the story is that Benmosche is a big personality chafing at what he should have known: that this situation requires a kind of submission to a higher authority that previous positions have not. Some question whether Benmosche is just in it for the money.
No doubt an ego such as Benmosche's chafes at having to submit to AIG's new federal overlords. But maybe he is sincere in his complaint that he's been put in an impossible situation. And even if the threat is a maneuver to trigger a policy change, surely we can appreciate that he is earnestly worried about the effects the policy may have on AIG's chances for success. The charge that Benmosche's antics reflect that he's in it for the money strikes me as absurd. Even if he were just in it for the money, then his behavior would indicate his genuine belief that government policy was going to undermine AIG's, and therefore his, success.
Let's say your brother-in-law nearly drove his business into the ground. You step in as an investor for the sake of the family, pouring in a significant portion of your own money into the enterprise. To punish your B-in-L for being such a good-for-nothing, you proceed cut the salaries of all the company's sales reps, even though they can command a better salary at competitors. No one in his right mind would do this, including the decision-makers of the federal government. But then they're not investing their own money in AIG.
November 09, 2009
J.D. Power: Insurers' Service Can Trump Price
Like the children of Lake Wobegon, it turns out that P&C call centers as a class are above average. That piece of information was shared by Jeremy Bowler, senior director, insurance practice, J.D. Power & Associates, speaking at Insurance & Technology's 11th annual Executive Summit in Phoenix last week. That level of performance is just as well, given that a slight edge in customer satisfaction can make a significant impact on a company's bottom line, according to Bowler.
Customer service expectations are "industry neutral," Bowler noted, saying that as a consumer "every service experience informs your expectation of the next one." That being the case, it has become common practice for companies to closely track customer experience across other industries. That means that insurers wishing to increase customer sat need to keep a close eye on the best practitioners of customer service, regardless of industry.
These insights constitute reinforcement rather than news, when bolstered by survey data from J.D. Power, but Bowler shared further insights, some counterintuitive. Providing customer service has a defensive aspect, especially for an industry as challenged in its public image as insurance. However, good customer service can give a significant edge to companies in the areas of retention, reduced acquisition costs and increased pricing power, according to Bowler.
High customer satisfaction is a critical brand-builder for an industry that depends on a perception of trust. Brand perception drives customer acquisition and ensures high rates of retention. For example, Bowler noted that nearly half (46 percent) of customers reporting high levels of satisfaction will not switch their company for any price. Critically, Bowler observed, a relatively minor improvement in service, such as a tweak to a Web site or call center, can drive an improvement in an insurer's overall customer sat score.
Happy customers are more likely to stick around, and when insurers take trouble to communicate their value proposition, those customers are more likely to stay customers even when premium prices are raised, Bowler reported.
November 06, 2009
Best Practices: Replacing Legacy Policy Production Systems
By Jerry Driscoll, HP Exstream
Insurance companies are inherently dependent on document-intensive processes. From quotes and policies to billing statements and claims, it is easy to see why it is so crucial for insurers to have the most reliable and efficient document automation solutions to streamline these processes. The recent announcements regarding some of the older policy production systems being discontinued has flooded the market with conflicting messages concerning next steps and which document solution is best. Whether your current policy production solution is outdated, inefficient or sun-setting, there are a number of factors to consider before replacing it.
Reasons to Change
Before you decide to change to a new document automation solution, it is important to evaluate the drivers within your organization for making such a change. Key drivers include:
• Risks to mission-critical functions. Policy issuance is a fundamental function for insurance carriers and any disruption would be considered, by any CIO, to be a catastrophe. This risk has greatly increased in the last 12 months with the announcement that many popular solutions will no longer be supported or enhanced in the near future. Without someone to call when the system goes down, organizations are exposed to significant operational and financial risk.
• Pressure to reduce operational costs. Insurance companies incur significant costs associated with customer communications and policy production, including document development time. By continuing to utilize a legacy system, tasks ranging from integrating, extracting and normalizing data from back-end systems to implementing new lines of business are time-intensive and expensive. Adopting a modern enterprise document automation solution allows you to streamline processes and significantly reduce document management and development time so you can focus on capturing more business rather than operations that support the business.
• Need to simplify the IT environment. Using one system to produce policies, another to generate claims correspondence and yet another to deliver annual statements is an inefficient use of IT and financial resources, and prevents consistent communications to members. When evaluating new document automation solutions, find one that supports policy production as well as member communication needs from a single platform, scales for future business requirements, and supports collaboration on document creation.
• Market pressures to become more competitive. By upgrading legacy policy production and member correspondence systems, insurers can eliminate bottlenecks, reducing costs and enhancing the member experience. An effective enterprise document automation solution allows insurers to create policies and other member communications that are relevant and personalized to their needs, consistent in look and feel, and easier to understand, allowing insurers to more effectively combat competitive pressures.
Finding the Right Solution
Now that we have established the drivers which necessitate upgrading your policy production systems, knowing what to look for in a new solution is vital.
1) A reputable supplier. North American insurers need to look beyond the software itself and select a technology partner who is reliable and committed to continued innovation. Consider factors such as the size of the vendor, how long they have been in business and their presence worldwide.
2) An enterprise platform, not just a point solution. Look for an enterprise platform that supports design, creation, delivery, and management of all member communications, regardless of type (e.g., billing notices, claims, quotes, proposals, etc.), complexity, or delivery channel.
3) Compatibility with your environment. A solution that fits well into your existing IT environment is a must for any solution that you consider. It should allow you to utilize your existing hardware, printers and data files, and should not force you to change these. Often, companies can get bogged down with simply converting their data to make it ready for the new system. Insurers should look for a solution that can easily access and leverage existing content in its native format without having to transform or manipulate it.
A Strategy for Conversion
Much like a new homebuyer can get lost in the excitement of the new features and amenities of their future home, overlooking the necessary steps they must take in order to actually make the move, it is important for insurers replacing legacy policy production systems to consider vendors with a proven conversion strategy in addition to attractive software features. Insurers should also look to peers who have already made a conversion to better understand what they can expect. Lastly, insurance companies should look for a document automation solution with features that promote ease-of-use (backed by industry analysts), minimal IT support, higher productivity, and the ability to create complex documents.
It can seem overwhelming to consider migrating to a new document automation solution; however, selecting the vendor with the right solution and notable experience in conversion can alleviate this anxiety. After you have made the move to your new document automation platform, the ease of use, increased productivity and agility it provides will ensure you are well prepared for the future.
About the Author:Jerry Driscoll is Sales Director, Financial Services and Insurance Division, HP Exstream. He is responsible for directing HP Exstream’s business development for all North American financial services and insurance markets.
Celent Research Finds Carriers Optimistic
As ominous economic indicators continue to financial services horizon, insurance technology officers remain remarkably optimistic, as measured by recent Celent research findings shared by Craig Weber, senior vice president of the analyst firm's insurance group, at Insurance & Technology's Executive Summit earlier this week during a session entitled "Taking Stock: Coping with the Crisis and Looking Ahead."
Celent surveyed several hundred respondents across different insurance sectors during the first, second and third quarters of 2009. When asked to assess their company's outlook from present to third quarter to a year from responding, respondents consistently reported a stable outlook growing rosier with time. While enthusiasm for the future moderated somewhat by the third quarter survey, optimism remained intact.
Similarly, when asked how the financial crisis would affect IT projects, only small percentage thought the impact would be high, while roughly half saw a moderate to low impact over the three quarter iterations of the survey. Drilling down into areas of investment, Weber reported that there was high activity in a number of areas, including analytics. That area, he remarked, "is hot, hot hot. People seem to be investing in this area up to 20 percent more than a year ago, and about 45 percent said it was an area of high investment."
These recent findings more or less confirm the outlook that has prevailed since budget season 2008: the insurance industry hasn't been hit as hard as other financial services sectors, and despite a very uncertain economic outlook, well-capitalized insurers are moving forward with transformational initiatives.
Weber's presentation also inadvertently called out the differences between the insurance sectors. During the question and answer period, the CIO of a major life insurer expressed skepticism about optimistic budget predictions. Weber explained that he was averaging the results of all responses, a significant proportion of which were from P&C insurers.
As bad economic news continues to arrive — such as unemployment cracking 10 percent — its understandable that optimism faded in Celent survey respondents, if only a small amount. No one knows what the future will bring, but as insurers finalize their budgets, Celent's information confirms the pattern set last year: insurers remain cautious about discretionary spending, they are exercising greater financial diligence and slowing their technology investment decision-making, but in terms of larger modernization efforts, they are staying the course.
November 05, 2009
Honor Roll: This Week's Top Insurance Blogs (Nov. 1-7)
Our favorite insurance technology-related blog posts from around the Web (November 1-7, 2009):
The CIAB/LexisNexis Insurance Exchange: Who Owns The Data?
AgencyPort's Mason Power takes a closer look at the CIAB/LexisNexis insurance exchange. "...carriers must sign an agreement to be part of the exchange. A pivotal part of the agreement is data ownership," Power writes.
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Lightyear Capital buys 3 ING Broker-Dealers
Novarica's Robert Ellis provides some perspective on Lightyear Capital's acquisition of three ING broker-dealers. "Even without the urgency of having to raise the cash, this deal makes sense as product manufacturers continue to separate themselves from their captive distribution channels to avoid any perceived bias toward proprietary products," Ellis writes.
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Infuse Emotion Into Experience Design
Forrester's Bruce Temkin suggests that it's time for companies to make emotional connections with customers and potential customers online. In this post, he shares bits of a report he worked on with primary author Ron Rogowski, comparing the virtues of functional Web site design with those of Emotional Experience Design.
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The Brittle Nature of Data Warehouses
"I think you'll agree that, for many reasons and by many measures, data warehouses haven't fully delivered on their promise. Let's examine the four main issues that traditional data warehouse ecosystems have struggled with," begins Marty Moseley of Initiate's Mastering Data Management blog.
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Customer Service and the Economic Crisis: What Changed?
During his presentation at the 2009 Insurance & Technology Executive Summit, AXA Equitable EVP and CIO Kevin Murray discussed the major impacts of the economic crisis on his organization.
In the presentation, "Managing in Crisis: Adapting to Changing Enterprise Priorities," the 2009 Elite 8 honoree recalled that, as a result of the crisis, AXA Equitable was impacted in three way main ways: products (especially those that had annuity guarantees), capital constraints and customer service.
The customer service impact was felt almost immediately. When the financial news really started to sound ominous last fall, AXA Equitable's customer service areas experienced increased call volumes and calls that lasted two to three times as long as usual. To get a better idea of what was happening, Murray used the carrier's call center technology capabilities to listen in on incoming calls. What had changed, he discovered, wasn't simply that more people were calling in or that people were staying on the phone longer. The nature of the calls had changed.
Here are some examples of what customers were saying, according to Murray:
"Oh good, you answered the phone. My money is still there."
"Thanks for talking to me. Would it be OK if I called back tomorrow?"
"I'm driving down there. I'm going to take my money and put it in my mattress."
The crisis had significantly changed the kinds of customer service interactions the carrier was having. AXA Equitable's customer service team, temporarily at least, had to change its approach. Problem solving wasn't as important as reassuring customers, on a very basic level, that the company was stable and that their money was safe.
