In early 2011, we interviewed Karen Furtado, partner at Strategy Meets Action (SMA), on the “Top 10 Imperatives for Insurers in 2011”. The imperatives included everything from seeing an increase in the usage of data analytics and metrics, shifts in buying trends and IT spending, and a higher demand from agents to provide different ways in which to interact and collaborate with insurers. I followed up with Karen several weeks ago to discuss the outlook for 2012 and if the imperatives have changed since 2011.
Karen has over 25 years of technical and business experience within the insurance industry. Her specific areas of expertise include application development, complex system implementation, vendor selection processes, project management, and business process outsourcing and technical outsourcing, always focusing on delivering high-value solutions for core issues facing insurance carriers. SMA offers strategic advisory services to both insurance companies and solution providers.
Annie George (AG): What has changed since last year in terms of what insurance companies are focusing on?
Karen Furtado (KF): “There have been several changes from last year, some more significant than others. Data is still at the heart of the equation for insurers.
“Last year market development was one of the top imperatives. Now we’re seeing additional focus on the customer – particularly in relation to addressing consumer demands. This applies to both insurers and brokers. Insurers are much more focused on providing a holistic experience in the way they deliver customer service. It’s still a very tight market, retention is absolutely critical, and the customer is more demanding in terms of what they expect from carriers and brokers. Therefore, there is a heightened focus among companies on service as it relates to all the activities that somehow touch the customer.”
AG: “When you say providing a more holistic experience to the customer, what do you mean by that?
KF: “Companies are looking at how they can get information to clients, how they can do a better job so that their customers don’t always have to call to get an update on what’s happening. They are looking for ways to stay ahead of what the customer might need. Let’s say, for example, you are an insured and you are in the middle of a claim. Can the information be provided via the web? Could the company or broker be more proactive at the time of the first notice of a loss? Are there ways that a customer’s transaction might be handled more seamlessly? The same proactive approach can be applied in billing and other areas.
AG: What else has shifted since 2011?
KF: “In terms of product management and configuration, insurers are looking at how to get product out to the market faster and more efficiently. We’re seeing more demand for technology to enable the creation of a product in an integrated fashion from a rating, rules, and forms perspective. Insurers are pushing for product configuration so they can move away from the silo’d development taking in place in different areas. They’re looking to technology to answer this problem for them.
“This evolution is impacting P/C insurers particularly. The move from just the line of business thinking to ‘product’ views is a shift in insurers’ mindset as well as the methods used to develop products and the tools they need to support this initiative.
“As far as distribution, we haven’t seen much change here. The channel between the agent/broker and the consumer is really fluid. The bottom line is that you have to provide communication any way that the consumer wants to receive it, not in the way you want to deliver it. For instance, email doesn’t work for everyone; it works for some. Having information on the website works for many, but it doesn’t work for all. It’s not a one-size-fits-all market anymore, which makes it more complex, but it’s reality.”
AG: In 2011, underwriting smarts was important. Where does it fall now?
KF: “Applying smarts to underwriting is still important and on the list of top imperatives, and it is becoming increasingly important. It’s about effectiveness, efficiency, insight, and collaboration. We see more people allocating IT expenditures in this area to beef up their capabilities. Agents and brokers who are dealing with more complex commercial risks are looking for easier ways to do submissions. They’re still submitting over 80% of the information in pdf format and via email. The issue here is how to make this more efficient. How do we make the collaboration between the underwriter and broker easier? How do we make sure the information is correct, fix any that isn’t, store it, and make it more available to everyone?
“Another shift is in moving communication and content from paper to digital. How can we transform what we receive digitally? For example, why not have the insured receive his or her policy declaration digitally and not in paper form? Electronic billing is another critical area. A growing number of people are managing all their bills through their bank accounts and not getting paper invoices. But, it’s not about just replacing a piece of paper with a digital image. Digital also involves a different way of communicating. When I choose to pay my credit card electronically, the company sends me notification 10 days prior to the invoice’s due date. After it’s paid, I receive confirmation. There is a different interaction here. There’s no assumption that I have received the bill or know that the bill is due. There’s a proactive level of service.
“Another key imperative is expanding claims beyond the transaction, which involves changing the conversation. It’s handling transactional claims more efficiently and at the same time improving service. For example, it may involve handling the rental car and driving it to the insured’s location when an accident has occurred. This is moving from transactional to service.”
AG: Yes, in the case of Allstate, the company is offering a “Claims Satisfaction Guarantee” for auto customers. If they’re not happy, they get a credit on their premium up to six months – that certainly ups the stakes in the way the insurer approaches claims service.
KF: “The next imperative is about how risk now encompasses managing it holistically throughout all areas of business operations. The industry has been through some significant challenges, which require additional vigilance over risk while at the same time recognizing that you never want to squash opportunity. I’ll give you an example that just happens to involve technology. Many insurers have put in new core systems. These are high-risk projects and require more than just your fundamental project management, the level that is suitable for a simple enhancement. Here you need a different type of management and you need to look at everything from a risk perspective.”
Karen also explained that when it comes to rethinking legacy, now the conversation is about modernization, not about replacing a legacy. “When you just replace one system with another and duplicate the functionality of the system, it doesn’t modernize the company. It doesn’t give the business the capability it needs. Companies are now looking more towards modernization rather than just a replacement system.”
In 2011, the “outer ring” of the Top Ten Imperatives involved governance and while it is still on insurers’ radar, for 2012 this has been replaced with five up-and-coming technologies that insurers should be focusing on. “First, insurers need to look at how social media is driving behavior,” said Karen. “Next, they need to look at the mobile revolution, which has exploded. How do you get information anytime, anywhere, and have it be effective? What are you going to deliver an app on? How do we make a website operate on a mobile device? Some insurers are providing apps to consumers that are not necessarily about insurance, but are related. One example is a home app that tells you where you can get repairs done locally.
“There has been a great deal of conversation about Cloud and SaaS and we are now seeing them mature and watching insurers realize the benefits. There is a better understanding of how to manage security. We’re still at the early stages of adopting Cloud and SaaS, but they’re here to stay.
“Advanced analytics, especially the concept of predictive analytics, is now entrenched and being refined constantly. It’s being used in claims, in underwriting, and other areas. It’s about having insurers unleash all the data they have, not just storing information, but bringing the elements together so you can create differentiation. In a tight, competitive market this makes a big difference.
“In the last six to seven months, we are seeing real emphasis on big data. There is a huge amount of information available in unstructured formats, which outweighs the amount of structured data. For example, an insurance application consists of structured data. But, when you have a social media tweet or a Facebook post, it’s unstructured information. The entire social world offers huge potential when it comes to understanding buying behaviors and how to influence the decision process. Today there are several real technologies available that can help people get a handle on all this data, but data is still being totally underutilized. The world of data has absolutely exploded. They key is how to use it.”