Majesco Is Moving Fast

Majesco (formerly MajescoMastek) is bulking up fast. On December 12 it acquired Agile Technology’s business; and on December 14 it announced a merger with Cover-All. The resulting entity will have revenue greater than $100 million; and more than 150 insurance customers globally.

Scale has always been a plus in the insurance software business. It speaks to a demonstrated ability to create and maintain insurer relationships. Technology firms with more customers have broader and deeper IP; and more resources to invest in getting better.

That said, size alone is no guarantee of success. Smarts and agility and foresight are not correlated with size.

Majesco has moved quickly to create a big player with impressive resources. Now comes the harder, but necessary, work of integration, vision, and creating value for current and future customers.

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Board Member to Insurers: “Don’t get Uberized”

At the National Underwriter Executive Conference last week, a member of the Board of Directors at one of the largest life insurers in the world warned insurers: “Don’t let what happened to the taxi industry happen to us. Taxis thought regulation would protect them and you see where that got them. We can’t allow ourselves to be Uberized.”

Beyond the fact that this was the first time I have heard the verb form of Uber (remember when Google was just a noun?), the statement represents a valuable summary of the disruptive threat for our industry. The public expression of this possibility by such a highly visible leader is another in a number of recent signals that insurance innovation is gaining real traction.

A recent Celent survey provides the datapoint that innovation practitioners expect the probability of disruption to rise in 2015:

Note that no one responded that the threat would decrease.

However, recent events demonstrate that the Uber effect is also an opportunity for insurers — the high level of trust that the industry has earned over the past 150 years. An Uber driver in India has been charged with assaulting a female passenger, reminding us of the dark side of the sharing economy.

I am not suggesting that this is a reason for insurers to become complacent, or think that the need to invest in experimentation and to reward risk taking has lessened. Rather, I trust that our industry will heed the threat expressed by one of its most prominent leaders and leverage the positive relationships it has established with its consumers to deliver new solutions which increase its value proposition.

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The Lion and the Mouse: Start-ups Pitch to Top Insurer

One of the common behaviors of successful innovative companies is establishing creative partnership arrangements. These relationships are not traditional supplier/buyer arrangements (zero sum games) but are mutual agreements that combine deep subject matter expertise and new technical capabilities to produce unique and valuable solutions.

I witnessed an event this past week that demonstrated partnership-building in full force. Eight start-up companies pitched their solutions to one of the largest insurers in the world. It was inspiring to see the interplay between the very different perspectives, and encouraging to watch the participants struggle, and most times overcome, hugely different communication styles. It reminded me of the Aesop fable about the lion and the mouse, the moral of which is that size is not an indication of value.

Each presentation followed the same general structure. The founder / CEO / CTO of the start up reviewed the key functions and value propositions of their solutions. In most cases, about half way through, the audience members from the insurer would begin to ask what I call use case questions. “Does this mean we could use your solution to do ABC?” and “We have a problem with doing XYZ. How would your system approach this?” I was struck by how natural it was for the subject matter experts to quickly apply the technical information to their current challenges and how easily they could imagine future capabilities.

I think that there were several reasons for the success of the session. First, this insurer’s innovation team has been in place for multiple years. Over this time, I know they have worked hard to engage with the “innovation evangelists” in the organization. This meeting included the right “curious minds” and was a manifestation of their advance work.

Another reason is that the facilitating company which selected the start-ups chose carefully and coached the participants regarding presentation messaging and delivery. There was just enough tech talk and a good amount of insurance-specific application examples.

Finally, I think the immediate translation into use cases signalled pent-up demand from the insurer. Their attendees obviously have already been thinking in specific terms about how technology can help them better run their businesses. This forum provided them an outlet for expression of those thoughts.

The session was a well-planned and well-executed example of innovation execution – the type of activity that Celent calls Deliberate Innovation. Kudos to all involved for demonstrating how to operate in a market of exciting possibilities!

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Engaging the NAIC on Emerging Insurance Technologies

“If the regulators aren’t with you, expect insurance innovation to take longer and cost more.” This comment surfaces repeatedly in Celent’s research. We believe this is true and have seen this occur in the past (credit scoring, predictive analytics, telematics). In order to address this issue, we at Celent have begun to proactively engage regulators around emerging technology topics.

Last week, I presented at the fall annual meeting of the National Association of Insurance Commissioners. Addressing the Property & Casualty Committee, the topic was “Emerging Technologies and Their Potential to Impact the Insurance Industry”.

I observed that regulators are eager to receive information about this topic. This is understandable, as budget constraints make it very difficult to divert resources from the day-to-day crush of filing and approvals to concentrate on the future. However, mentioned in the session, it does the industry absolutely no good if the first time a regulator learns about a new technology is in a new filing!

Celent is tracking several technologies with the promise to change insurance proposition in important, fundamental ways. For example, digital capabilities allow customer engagement to shift from periodic (only at time of renewal or a claim) to continuous (daily lifestyle suggestions). Another trend we see is a movement from “pay as you rate” to “pay how you use”. The introduction of telematics in the Auto line is the best example of this.

Several case studies from around the world were used to illustrate how, in other regulatory environments, technology is being applied to insurance. The digital customer experience platform built by Tokio Marine was shown as an example of continuous customer engagement. AXA’s use of public and private data sources to change the FNOL reporting process was offered as a case of a transition from reactive to proactive claims management.

Celent will continue to be involved in briefing regulators on these issues. We encourage insurance technology providers to do the same. We are all on this journey together and will get their faster and more effectively if we communicate actively.

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What if someone Kickstarted an insurance company

As analysts in the insurance industry, Celent spends considerable time and effort considering new and improved ways to do business. Much of this emphasis is on technology and where our customers, and the industry, are in their efforts to improve and what still needs to be done.

Our industry is evolving and implementing new innovations, particularly focusing on the customer experience, including the web and mobile. Many, if not most, companies are hampered by aging technology in their back-end systems. This is certainly true in the P&C and Health industries and particularly true in the Life industry. Life insurance is inherently a contract that extends over a significant period of time. Therefore, many insurers are using systems that are 20, 30 or even 40 years old. Let’s assume that a system installed in the 1960s does not play well in an Internet connected world.

So the question for this post is about disruption. While Kickstarter or other crowdfunding methods are unlikely, it is interesting to think about how an insurance company would be formed and implemented if it was a new company formed today.

What would we need to start this mythical company?

1) Would you need any employees?

This is the first fundamental question. Many insurers are large employers with a significant investment in people and facilities. If you were starting from scratch, would you hire industry veterans, trying new employees and open up a big office?

Possibly not. Once you have capital, virtually every other function could be outsourced. There are solid Sales and Marketing companies with licensed agents to service both web applications and call centers. Reputable Third Party Administrators exist that can handle every operations functions. Good actuarial firms can be contracted to design the product. Reinsurers can not only take risk, but in many cases provide Underwriting guidelines (and technology). Financial management requires a solid accounting firm. The list goes on, but it is an intriguing question.

Building a virtual company has never been easier.

2) Would you need any agents?

Again, possibly not. Starting from scratch, the company could be entirely on-line, backed up by a call center. As mentioned above, there are many companies that can provide this service. Of course, they’re still agents, just not the traditional independent or captive that sells locally.

3) What about capital?

This might be the biggest barrier for entry. Money isn’t as available as it once was and, notwithstanding the title of the post, crowd funding isn’t designed to raise the amount of money required for an insurer.

The purpose of this post is not to suggest that the reader run out and start a company, although let us know if you do. It is more for the existing insurers that are not able to be as nimble and change with the marketplace as quickly as they might need. Even the largest brick and mortar insurer can innovate.

There are companies, large and small, in our industry that are truly innovating. If this post intrigued you, or even if it didn’t, but you do not have any formal innovation process, then perhaps you should. Your competitors are staffing dedicated innovation labs to stretch themselves, and the industry. They’re trying new things and failing fast.

What new idea will be born in your company today?

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For Halloween: The Tricks to Get Innovation Treats

Innovation is not witchcraft but, when done successfully, there is a touch of magic. The magic happens when innovation becomes “part of the way we do things around here” (read: corporate culture). When people across the firm approach their jobs constantly through the lens of “how do I change my job so that I deliver more value to my customers?”, magic can happen.

We discussed this in a webinar this week (Innovation in Insurance: Differences across Continents). The point was made that there are specific actions (tricks!) that prepare a corporate environment for magic. Specifically:

• Establish a common language around innovation; what is it? what is it not?


• Revise reward systems, especially around encouraging “fail fast” behaviors


• Develop a communication plan around innovation – leverage Corporate Communication expertise to sustain a messaging effort around innovation


• Tune existing governance structures to handle innovation initiatives differently than run-the-business projects

The message coming through in Celent research is that innovation is more process, sweat, and political capital than black art. So, try these tricks in your organization so that you (and your customers and teammates) can enjoy some innovation treats!

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Watch out. Apple with Mayo is heading your way

Hmmm . . . That combination is pretty tasty in a Waldorf salad, but it’s a bit hard to think of other recipes that do appeal.

The Apple Watch is very attractive—one analyst hoped it would be stylish enough to wear to the Oscars. (I’ll let everyone know what I decide to do next year).

But from a healthcare and health insurance Internet of Things perspective, questions still remain. Early information is that the Apple Watch’s biomonitoring functions are pretty modest: pulse and movement (and distance?). Did anyone say fitness band?

Somehow “killer app” doesn’t sound quite right in this context, but that is the real question in terms of making people with serious medical conditions (or serious medical vulnerabilities) want to buy the Apple Watch. In roughly ascending order of technical and ergonomic challenges—temperature, blood pressure, glucose levels, blood chemistry of all different types, urine analysis, and (why not?) genome-driven personalized medicine—are off in the future, in some cases well beyond the horizon for a wearable (time telling, messaging, location-revealing) device.

Meanwhile there is always next year’s Oscars.

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$100million — Follow the Money: Investment in Innovation Ventures

The announcement yesterday that MassMutual has set up its own fund to invest in innovations that may/will affect life insurers is another move demonstrating how real money is being bet on disruption.

Here is the link to their press release site: http://ift.tt/1xc16qc

Celent is aware of several organizations which have set up similar funds. These are not 3rd party venture funds, but are managed, directed, and owned wholly by insurers.

These moves signal that innovation leaders are increasing investments to discover new ways of responding to customers’ needs. The difference from past behavior is that insurers want to own the technology, not just buy it once it is available on the market.

In these companies a first mover advantage strategy is replacing the age-old fast follower approach. The bet is that, as technology investments pay off, patents and expertise barriers will prevent others from even being able to follow. Insurers will gain advantage because they own a protected capability, or they will be able to license it and capture an alternative revenue stream.

Stay tuned. It’s going to be exciting!

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The Efficiency CIO vs the Agility CIO

Craig Beattie

I wanted to take a moment to discuss two CIO archetypes. I had the occasion to see a panel recently where CIOs from different ends of this scale were sat next to each other to discuss a common topic. Having grown up in application development and worked in Enterprise Architecture I found myself split on how to approach change and investment.

First with my EA hat on. For those who have talked to me about Enterprise Architecture you may have heard me espouse the view that it is frequently focused on efficiency. EA is a great tool for mapping out current state and understanding change. Two of the key outcomes of EA are highlighting gaps in change, infrastructure, applications and the organisation as well as highlighting duplication. Duplication obviously yields opportunities for rationalisation and efficiency with what is typically an easy business case to assemble.

As an EA it can be easy to become focused on making investments in IT highly efficient, keeping a simpler applications architecture and making the right large investments in IT.

With my EA hat on I align with the efficiency CIO. Making large, meaningful investments in IT change that has the best promise of return on that investment. The key is to have the big view of change and protect future change from complexity. Here, change is executed selectively, as reliably as possible using the right resources at the best possible cost.

Now with my application developer hat on. Here my interest is in how do create new software and grow software assets to better meet the customers needs. With this hat on I want more change, to create more software to satisfy the many diverse requirements of the customers in the organisation. As a software engineer or application developer I see where parts of the organisation are starved of simple change, starved of access to skills like mine to continuously improve their position.

Here I observed what I have called here the Agility CIO. The CIO who is the developers champion, who values the ability to create new software and is happy to have the IT landscape grow to assist the business in similarly growing. Why not throw some IT folks, either internal or with partners, at a business problem and create something new? There needs to be adoption of pre-built assets, re-use, re-factoring, replacement – but this is a natural result of engineering and something we trust developers to execute as part of their role. Of course this means having good developers who are well paid, rather than the cheapest resources available. Further, with new software and expensive developers complexity and cost base tends to increase over time as well.

There is a role for both types of CIO, each organisation has different priorities whether they’re an insurer, intermediary, vendor, start-up, etc. Further, these priorities change and the CIO needs to balance their approach to change along this continuum. Indeed there will be parts of the organisation where the Efficiency CIO is most appropriate in reigning in unproductive change, and other parts facing stiff growth challenges that need an Agility CIO.

Where is your IT organisation on this scale? Where should it be? What is a good balance? I’d love to hear your feedback.

Celent is looking to understand how fast is fast, as well as how investment can be protected or future-proofed in a survey live at the moment. We’d be happy to share the results to those who share their views…

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6.24.2014 Celent Insurance Webinar: BPO in Insurance

Mike Fitzgerald, Senior Insurance Analyst

This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chuck Smith at csmith@celent.com or at 617-262-3125.

Please click here for more information.

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Apple Takes a Bite at the Internet of Things—Where are Insurers?

Apple has just announced two new “robust frameworks” for developers that are aimed squarely at two of the hottest sectors in the Internet of Things (IoT): HealthKit and HomeKit (http://ift.tt/1pMLVBK).

The IoT connects people and non-human things. HealthKit facilitates communication between fitness apps (think fitness bands) and health apps (think doc in a box). HomeKit uses Siri to poll and control household appliances and systems (heating and cooling, lighting, security (and eventually entertainment?). Everyone who saw “Her” and wishes they could achieve a higher level of intimacy with an AI/Machine Learning avatar, can now (according to Apple’s PR) “tell Siri you are “going to bed” and it could dim the lights, lock your doors, close the garage door and set the thermostat.”

Apple also announced some initial partners: the Mayo Clinic for HealthKit; and Philips Lighting for HomeKit—both strategically good, and household names (so to speak).

What is missing from this announcement is any mention of how health insurers or homeowners insurers could participate in what Apple wants to be a foundational step for connecting networked sensors to data stores, and then using analyses of that data to better price, underwrite, and control losses.

The iPhone (and other smart phones) have changed parts of the claims process, and basic communication between consumers/patients and healthcare providers. Apple clearly hopes that HealthKit and HomeKit will begin to do the same for the IoT.

Will insurers jump on this wave—or stay on the beach?

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My Risk Manager is an Avatar

In the world of Commercial Insurance there exists the very curious role of Risk Manager. I mean curious in the sense that successful risk managers appear to have superpowers. They are charged with taking the actions necessary to avoid or reduce the consequence of risk across an entire enterprise. Their knowledge must extend deeply into a variety of subjects such as engineering, safety, the subtleties of the business of their employer, insurance (of course), physics, employee motivation and corporate politics / leadership. Their impact can be wide-ranging, from financial (eg., dollar savings from risk avoidance / mitigation) to personal (the priceless value of the avoidance of employee death or injury).

Sadly, the tyranny of economics restricts the access that businesses have to continuous, high quality risk management. Full-time risk managers are prevalent in huge, complex, global companies. These firms often self-insure, or purchase loss sensitive accounts and the financial value of a risk management position (or department) is clear. The larger mid-market firms can afford to selectively purchase safety consultant services, their insurance broker might perform some of these tasks (especially at renewal), and their insurers may have loss control professionals working some of these accounts. However, for the majority of small businesses, risk management at the professional level is not affordable.

Over the past year, I have toyed with different ideas about how to automate this function in order to bring the value of a risk manager to the small commercial business segment. My attempts were always unsatisfying (and one reason I have not blogged this idea before). However at The Front End of Innovation conference last week in Boston, a presentation by Dr. Rafael J. Grossmann (@ZGJR) crystallized the vision. I can now clearly see how existing technology can be combined to create a Risk Manager Avatar.

Dr. Grossmann is a trauma surgeon who practices in Maine. In addition to the normal challenges of his profession, he is one of only four trauma surgeons servicing a very wide area. Although sparsely populated, the challenge of distance and time complicates the delivery of medical services. Dr. Grossmann presented his vision of a medical avatar, a combination of technologies which will perform 80% or more of the routine medical cases in a consistent, timely, and cost effective manner. Combining the technologies of mobile, voice recognition, virtual reality, artificial intelligence, machine learning and augmented reality forms a new silicon entity – a medical doctor avatar. He also introduced a company, sense.ly, that is now working to deliver similar services (video here: http://ift.tt/1o9orcj).

If such systems can deliver medical services, then why not risk management? For example, given permission, a system would monitor the purchases of a small company and identify when the historical pattern changes, eg., when the company begins to buy new types of materials. Using predictive algorithms, the pattern can be compared against others to evaluate if there is likelihood that the company is now performing new business operations. The avatar could then contact the small business, or could signal human intervention by an underwriter to evaluate the necessity for an endorsement to a policy to cover the new business operation. Eventually, some of these interventions would also be handled through machine to machine communication and would allow the endorsement to take place automatically.

Someone will build a Risk Management Avatar. The question is, who will do it first?

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You can take a horse to water but a pencil must be le(a)d: The challenge of “What does Digital really mean for the industry”?

Recently, I facilitated a roundtable discussion on “What digital really means for the industry”. Over the last couple of years, we’ve run many similar roundtables on the topic. Each time we run one, it never ceases to amaze me around the lack of a common definition for what digital really means, not just across the industry between firms but also between individuals within the same firms. In fact, I’m sure that there is a PhD paper waiting to be written on the topic.

One of my favorite set of questions at these events is to first ask the delegates how they define “digital” and then to follow-up by asking if this definition is shared across their organization. Generally, when you ask the first question, you get very articulate and clearly well-thought through strategic response that makes 100% rational sense. Then, when you ask the second question, you often get a look of despair or, at best, frustration with their colleagues who “just don’t get it” or are “pulling in different directions”. Well, I might be exaggerating a little here but hopefully you get the idea.

From the experience of asking this question repeatedly over the last couple of years, it seems to me that there are two challenges around “what digital really means for the industry”.

The first challenge relates to opportunities presented by technology, which range from the mundane (such as good old fashioned ‘Straight Though Processing’ and even the application of newer more exciting mobile technologies in customer engagement) through to the extreme (such as new device enabled propositions and business models fueled by the Internet of Things). This is the “what?” challenge, the one that we hear most about and the one that we can articulate the best. It’s tangible. You can see it. You can experience it. You can recognize what others are doing that you are not. There is no mystery around this challenge and you can build a program of change to address it.

The second challenge is a more subtle one. It is “as old as them thar hills” and can be aptly summed up by the saying “You can take a horse to water but you can’t make it drink”. It’s also one that this industry, as well as others to be fair, have been struggling with every time there is a step-change in pace and direction. If you know where you need to head to, bringing the rest of the organization along with you is the next big challenge, especially when you’re a large and complex one. This is the challenge of “How?”.

When discussing the topic with one insurer, he shared with me his view that “digital” is merely a term used to get his team to think differently about the way things are done. To stop his team thinking about the way they do things today and start thinking about what could be instead. For me, this was a refreshingly honest perspective. It was not about the devices, the technology or the Apps, it was about re-envisioning his business. To achieve this takes great leadership and mustering support around a shared vision.

This brings me back to the title of this blog. Stan Laurel couldn’t have said it better (or maybe worse?) in “Way out West” … “You can lead a horse to water, but a pencil must be led”. Maybe now is the time to move the debate on to talk more about the “pencils” and the vital role that leadership has to play in addressing successful Digital Transformation? I’d be interested to hear your views about where the challenges around digital really lie for you.

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Quotes from the Innovation Roundtable

They said it couldn’t be done, but we held the latest installment in Celent’s series of innovation roundtables in Tokyo recently. Our innovation roundtables put the focus squarely on interactive discussion among the participants. This is a relatively untried model in Japan, where events typically take the form of conventional conferences with presentations. We’re glad we tried it though, because we got a very interesting line-up of firms. Participants included the whole spectrum: banks, capital markets firms, and insurers; Japanese and foreign firms; traditional mega-institutions and alternative new entrants.

The discussion was lively; below are some quick notes I took of some of the more interesting comments made, to capture a bit of the flavor of the day.

Why Innovate?

“Innovation is not the goal, it is a method and a tactic.”

“We need to innovate because it has become difficult to differentiate us from our competitors.”

“In today’s environment, innovation is necessary if you want to stay profitable.”

Paths to Innovation

“Incremental innovation is an axymoron. You can’t innovate by increments; innovation requires a big bang change.”

“It might be possible to rearrange existing elements to create something new.”

“When to innovate? If our clients think a new service is interesting, we try and create it for them and see if it succeeds.”

“Innovation needs to be business driven.”

“Financial institutions need to have an innovation division; an incubation unit that accumulates ideas from throughout the company.”

IT and Innovation

“IT is not the impetus for innovation, but because IT inevitably evolves, that creates need for innovation.”

“Legacy is a barrier: it is hard to throw things away.”

Cultural Challenges

“We need to justify ROI on any investment each fiscal year. It is hard to show this on an innovation project.”

“If you think about it, financial institutions don’t even have R&D departments.”

Quote of the Day

“Changing company culture is really about changing oneself. I personally enjoy innovation and change. Innovative culture is about getting a bunch of people together who enjoy change.”

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6.11.2014 Celent Webinar: How to Better Leverage Celent

Celent CEO, Craig Weber

This event is free to attend and we expect you to walk away with a better view as to how you can get more from working with us. For more information, please contact Anna Griem at +1 603 582 6137 or agriem@celent.com.

Please click here for more information.

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It’s The Little Things

I bought my wife some flowers recently, and was shocked to discover that the florist—as of this minute, my ex-florist—no longer gives out those little cards you tuck in the arrangement. The person behind the counter said, “We have these new ones from Hallmark, for only 99 cents…”

Huh? I’m spending $20 on cut flowers that cost you only $5, and you think it’s smart to eliminate the cards that cost you two cents each? That’s nonsense.

The real story here is that service experiences cannot be disaggregated. As a customer, I don’t view the Buy Wife Flowers Exercise as 10 separate steps, each with its own decision tree and cost benefit. I want it all, end to end, seamlessly. A good selection of fresh flowers, nice vases, honest and helpful service, a fast checkout process, maybe some ribbon, and those little cards that make sure I get full credit for my thoughtfulness. For that, I’m willing to pay $20. Start messing with the formula, I assure you I will look elsewhere.

It’s the same with all of my financial institutions. The basic product features and price are important. So, too, are how they sell to me, how they communicate routinely with me, what happens when things go wrong. And if I’m sitting across the desk from someone, how they treat my five-year-old when he interrupts a financial transaction with an explanation of his favorite Lego. It all matters.

The institutions I am loyal to are the ones that understand this. For example, I got an honest-to-goodness email from someone in a local bank branch when she noticed something unusual about my account that was, in fact, my mistake. “It didn’t look right, so I thought I’d ask,” she said. Problem solved, customer won over.

In the case of the Lego interruption (a different bank), the rep couldn’t have been more patient, which taught my son an important lesson about polite listening. The next time the bank calls me to offer a new service, I’ll return the favor.

I’m still waiting for one of my insurers or my broker to do something small but meaningful to convince me that I’m something other than a random, periodic check for them. They’ve got the big pieces in place, which is why I have relationships with them. But until I experience the extra touches and perhaps an occasional nice surprise, I’ll keep my eyes open for other providers.

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Consumer mobile apps in Property and Casualty: Webinar follow up

On April 16 and 17 we hosted our “Consumer Mobile Apps” webinar focusing on P&C apps availability in Latin America. We had a Spanish and an english version of the webinar.

The survey behind the webinar included the review of 169 insurers, focusing on the top 10 of each market (20 countries). Before you jump to tell me that I am failing on math 101, let’s put a note here: not all countries in Latin America have 10 P&C insurers.

A question that came up was about the role of brokers & insurers regarding customer -facing apps. There are at least two angles to cover this question:

1) Insurers and brokers competing to win customers/consumers

2) Insurers and brokers collaborating to win customers/consumers

Our research shows that insurers and brokers are investing, with different pocket sizes, to win customers attention through apps. First thing to consider here is that consumers don’t just want an app. They want to have easy interactions. Apps are just another cog in the engine. As investment (and capacities) are needed to provide these experiences it is most likely that larger brokers will be able to play this game along with insurers. Now, when we take a look to the intermediation in insurance in Latin America, banks and retailers play an interesting role too. Consumers usually interact more with these than with brokers and insurers, so if banks and retailers decide to invest in an app that would also provide access to the financial and non-financial products the consumer has with them (i.e. credit cards, product and service offers, insurance, travel? in the case of a retailer), would the consumer be more likely to use this app instead the one provided by the insurer? More broadly, will the consumer prefer to buy the insurance through a bank, a retailer, (fill in the blanks with the distribution channel of your choice) or through the insurance company?

It seems that insurers will play an important role in providing an app every time they have a direct model or by collaborating with the distribution channel that can’t manage these interactions by their own. On all other circumstances it is more likely to expect the app coming from the distribution channel that has a meaningful interaction with the customer.

There are some good examples of collaboration between insurers and agents. Allied Insurance, Celent’s Model Insurer Award winner for the digital catregry this year, enabled agents to brand the insurance app. The mobile app serves as another way for Allied to extend and enhance customer service. Select agency partners dynamically brand the customer experience with their own custom logo. Customers can view policy, save insurance ID cards for offline viewing, make payments, view agency information, get accident help and roadside assistance and start a claim. Future plans include expanding the dynamic branding feature; building additional personalized digital enhancements for its agents and customers. The project from concept to full delivery took approximately eight months. They already had 22,000 downloads and more than 200 independent agency partners personalized the app with their own agency brand. The app also enabled thousands of mobile payments. It’s a perfect mix of Broker/Agent presence with the needs of the insurer.

If you’re interested in learning more about effective technology use in insurance be sure to read about our Model Insurer Awards finalists and winners at http://ift.tt/1nRgXdx.

Another case highlighted in the report, John Hancock’s sales tool to empower its agents (though this one is for Life insurance):

• JH Life BriefCase: one central place to store, organize, and manage illustrations and client related information.


• JH Marketplace: manage sales and underwriting materials, increasing speed of distribution, decreasing cost of delivery, maintaining version control for compliance.

What is the potential for mobile apps in Latin America? This was another area of interest for those attending the webinar.

Latin America has surpassed 100% mobile phone penetration. On average, there are 107 mobile phones per 100 people across the region. However, this doesn’t mean everyone in Latin America has a phone or that there’s connectivity everywhere. Smartphone penetration is growing in Latin America, but adoption rates are behind more mature markets such as the US and UK. Smartphone penetration in Latin America is around 32%, though this differs significantly from country to country. Nevertheless, Brazil, for example, has more smartphone users than Germany or France. Brazil and Mexico together have more smartphones than Australia has inhabitants.

Consumer behavior in Latin America should help to accelerate adoption. Increasingly, consumers are using mobile devices to access the Internet. In Mexico, for example, 80% of smartphone users access the Internet daily, almost 90% access an app daily, and 38% did not purchase something on a store as a result of a search on the smartphone.

Apps are also becoming important in enabling new business and service models; providing a platform to distribute, in a cost-efficient way, insurance products that are less attractive to sell through traditional channels. Microinsurance is an example, as are e-wallet capabilities banks are making available, even in feature phones.

As smartphones become more popular and inexpensive (as announced by the major phone manufacturers in the Mobile World Congress at Barcelona) this trend will accelerate and open more possibilities for financial institutions, beyond the top tier customers. Institutions operating in the insurance space such as banks, retailers and non-traditional players such as Google seem to understand this very well.

Finally, from Brazil we got a question around what is it required before even starting with an app. I believe this could actually be a good title for a report! As we don’t have enough space here I would summarize in the following:

• Understand your customer – who/how/when/why he buys from you. Customer needs to be in the center of the design. We have moved to an environment where “the user” is beyond the insurer (and IT department) control.


• Don’t focus just on the mobility concept, most likely it will require an omni-channel strategy to deliver what they expect. Consistency and integration across channels is of vital importance.


• Work on your processes. Simplify and adapt to new channels and customers’ expectations.


• Invest in a core system that will be able to accommodate these processes, integration points and basically that will provide you with the flexibility to evolve in time with agility.


• If you insist and only want to focus on mobility, assuming everything else in your company works fantastically well, then portals/websites should be part of your mobile strategy besides apps. Use responsive design so it is easier to deliver content on any device (and size of screen).

If you are interested in our research about mobile, there is a series of reports published and some more coming out soon. Also expect a couple of reports about Online insurance. If there is any specific theme you would like to see us cover, please let me know.

See you around!

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Personalization in car insurance is just around the corner

In a 2013 survey in Latin America we asked CIOs about their views on the use of Telematics and UBI. We wanted to know if these were currently in their plans and if they believed that they would have any use and impact by 2016. Despite UBI and the use of Telematics has been well received in UK, Canada and the USA, we found that Latin American insurers were not so optimistic about it. Very, but very, few were in the process of investigating it or considering running a pilot, and the vast majority (overwhelming) said they were not doing (and would do) anything about it in the 3 year timeframe.

In our conversations with insurers some would be very cautious about how it could be introduced, particularly on how attractive this would be for a producer to sell. Particularly, successful incumbents reacted as if this had no chance to succeed and that they would not be the ones to try it, as they believed it would negatively impact their current portfolio (lose customers). Others would say that in Latin American countries the burglary component of the premium is significant, while the collision component not so much, and therefor UBI would not bring advantages in price to customers. All these typical reactions from incumbents to an innovative and disruptive idea that provides the means to personalize the rate to reflect the real risk that the driver represents. Pay as you drive, pay how you drive and more lately manage how you drive are value propositions that target to personalization (of risk) and loss prevention, two of the major trends we see in insurance in the future.

As any disruptive initiative, it only takes one to be bold enough and then change the dynamic of the market. We were conscious about some limited amount of initiatives that were being considered during 2013 in the region and our position was that the 2013 survey results would change completely as soon as UBI and Telematics was taken seriously in the region by at least one player (regardless of the size).

We also kept thinking about leading incumbents. Good for them if this did not succeed. But what would happen if they started losing the good risks towards an insurer with an UBI value proposition? For sure their revenue would be affected. But then, how would the leading incumbent’s portfolio look like if only the high risk drivers stayed? Not a pretty scenario, ha?

Some interesting facts that occurred since last year. The few pilots are taking shape; research is also indicating that in fact specific segments of customers pay more for car insurance just for being younger or a combination of factors that have nothing to do with the real individual risk; the use of telematics has seen its first implementation in a producer distribution model, moving away from being exclusively a direct insurance proposition (or targeted by a few specialized brokers); and last week Baseline Telematics, a leading provider of telematics based solutions, and Sistran, a leading provider of core insurance solutions, made available to Latin American insurers a combined offering with all the required technology for insurers to quote, sell and price insurance policies entirely based on the actual driving habits of a driver (mileage and behind-the-wheel behavior), which is obtained through a telematics device installed in the driver’s vehicle.

Guess what? Not surprisingly our 2014 survey (in edition) shows that, as we anticipated, the perspective on UBI and Telematics has changed completely in Latin America! Around half of the respondents indicated that they believe that in 2014 these technology will have some kind of impact or at least will be tried as a pilot, but most importantly, the view 3 years from now (2017) is that the majority believe it will be of use and impact in underwriting, rating and claims (against only 20% that indicate no use expected).

Solutions as the one presented last week enables monthly billing, with a variable premium based entirely on the usage of the vehicle (kms/miles) as well as the behavior of the driver (acceleration, braking and excessive speed). The objective is to attract the best drivers and rehabilitate (or eventually get rid of?) the more risky ones. The goal is to decrease exposure to risk (cost reduction), perfect your technical margins, and gain market share.

It seems now that the market has aligned in the right trajectory and personalization in car insurance is just around the corner. Will leading incumbents take their chances? Will this be the opportunity for others to grow in market share and quality of their car insurance portfolio? Does any of this resound familiar to you in any given market you may be?

If you are interested in the topic, feel free to contact us. Also, these are some of our reports related to this subject:

• http://ift.tt/1nNMWd0


• http://ift.tt/1kLKq4x


• http://ift.tt/1nNMWd1


• http://ift.tt/1kLKq4y


• http://ift.tt/1nNMWd3

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5.13.2014 Celent Webinar: The Internet of Things and Insurance: Can an Old Industry Learn New Tricks?

Donald Light, Director of Americas Property/Casualty Practice

This event is free to attend for Celent clients, flex-plan clients, and the media. For more information, please contact Chuck Smith at 1-617-262-3125 or csmith@celent.com .

Please click here for more information.

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Is there a concentration wave going on?

As part of our research, Celent has been covering a large variety of vendors active in the insurance space. Over the past 6 months we have published a few reports profiling specific core insurance system vendors in different application domains such as policy administration, claims, underwriting and quote and illustration. Based on our continuous screening of the market we have a pretty good understanding of this market:

In Europe, Middle East and Africa we have noticed that the market is highly fragmented and we think that a concentration phase will decrease the number of market participants over the next decade. Mergers and acquisitions activities have already started with some interesting strategic moves that happened over the past 5 years such as the acquisition of Duck Creek by Accenture, IDIT and FIS Software by Sapiens and the merger between FJA and COR AG.

More recently we have seen software integrators or more generally what Celent calls IT services vendors getting more active on the M&A front with for instance MphasiS purchasing Wyde a few years ago. As we are about to kick off the update of our IT Services vendor reports from 2010 (for more information about these reports you can click on the following links: IT Services Vendors Solutions Spectrum: North American Version, 2010 and IT Services Vendors Solutions Spectrum: EMEA Version, 2010), we already have noticed that some IT services firms are getting very aggressive on the market. A good example is without any doubts Sopra who has had an acquisition fever over the past 3 years with the recent acquisition of Steria announced this week.

We find the recent M&A developments in the core insurance system vendor area as well as the IT services vendor industry interesting. We think it demonstrates that IT in financial services and more specifically in insurance attracts interests from investors, being existing players or new ones. In this fast changing environment, we are looking forward to get a deep dive in the IT services vendor landscape in order to provide the latest about this market to our insurance subscription clients. Stay tuned!

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5.20.14 Celent Insurance Webinar: Which way is IT going across Europe in 2014?

Senior Vice President of Insurance, Jamie Macgregor and Senior Insurance Analyst, Nicolas Michellod

This event is free to attend for Celent clients, flex-plan clients, and the media. For more information, please contact Chris Williams at 44-208-870-7875 or cwilliams@celent.com .

Please click here for more information.

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Is the insurance industry facing a Cyber-Cat? Thousands of websites at risk to heartbleed bug…

No no – I’m not referring to an animated cat on an App but rather the announcement yesterday regarding the Heartbleed bug affecting the security of over 50% of the Internet according to some estimates.

The bug affects the OpenSSL package and is believed to have been in the package since 2011. It affects the way the package deals with heart beat messages, hence the moniker given to the bug. There are already tools in use that exploit the bug and provide access to recent user data on compromised servers.

There have been security alerts before with many large brands facing fines and media inquiries about their losses but this bug potentially affects hundreds of thousands of websites and many businesses globally, but why characterise this as a catastrophe and why would insurers be interested?

In the last 2 to 3 years with the cost of data breaches growing significantly businesses have been offsetting the risk of a breach or loss through Cyber Liability Insurance Covers. Whilst the practice and cover is arguably in it’s infancy it’s popularity suggests that this sort of event could constitute a significant liability to insurers globally offering this cover. Further the event has some characteristics in common with other events requiring catastrophe response:

• Many insured are at risk.


• The event will likely draw the attention of governments and regulators.


• Swift response will mitigate further loss.

There are some significant differences here though. Most notably in the event of hail, storm or flooding the insured are likely aware if their assets are affected or not – they may not know the extent of the loss but are likely aware if they need to claim. Increasingly risk aggregation and modelling tools are helping carriers and brokers understand the likely impact of catastrophe events. In this case however the insured may not be aware if they are compromised or not since the bug allowed for intrusions that would not be logged by the affected systems. In this case the advice is to determine if OpenSSL is used and if so then the server has been vulnerable, may have been compromised and should be patched immediately.

The full statement regarding the bug is available at http://heartbleed.com/ although it is also covered at http://ift.tt/PYLt6O which contains some useful advice. Further coverage is available from Reuters and The Guardian.

As noted on heartbleed.com – Apache and NGinx webservers are known to typically use the OpenSSL library and account for 66% of the Internet according to Netcraft’s April 2014 Web Server Survey.

Google says that it is not affected however Yahoo has already reported that they are working to fix the affected services on their side.

As always communication and collaboration is crucial to managing these events. Insurer clients of Celent may like to read Celent’s case study combining internal and external data to respond to a catastrophe.

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4.29.2014 Celent Insurance Webinar: Insurance Customer Perception

Senior Vice President of Insurance, Jamie Macgregor and Senior Insurance Analyst, Nicolas Michellod of Celent’s Insurance Group

This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chris Williams at +44 208-870-7875 or cwilliams@celent.com .

Please click here for more information.

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4.23.2014 Celent Insurance Webinar: Insurance CIO Pressures and Priorities, North America 2014

Donald Light, Director of Celent’s Americas Property/Casualty Insurance Practice

This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chuck Smith at +1.617.262.3124 or csmith@celent.com.

Please click here for more information.

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Model Insurer Asia Summit: A quick overview

Earlier this month, Model Insurer Asia Summit was held by Celent at the Fullerton Hotel in Singapore. With approximately 50 delegates from across the APAC region, it was a fantastic event to learn from others, debate the key issues facing the industry, and network across the region.

A total of 18 firms were recognised this year from over 8 countries, with entries ranging from large regional technology transformations through to novel uses of technology to enable propositions.

Tokio Marine presented just one such novel use of technology to enable a proposition where an app-based avatar is employed to provide health advice for women based upon how their body is feeling in support of a health insurance product. This solution goes as far to include tracking the insured’s body temperature using a smartphone and a connected thermometer in order to identify when they may be coming down with an illness. I just love this idea! After talking about the potential for personal telemetry within the health insurance sector for several years now within Celent, it’s great to see a live proposition racing towards it. Since its launch in June 2013, Tokio Marine has added 250,000 users already.

The Model Insurer Asia of the Year winner was awarded to Max Bupa Health Insurance (MBHI) from India. Being a relatively new player in India at around four years old, MBHI had aggressive plans to launch new distribution channels whilst not losing sight of delivering an excellent customer service experience. It chose to implement a BPM solution to wrap around its existing applications, enabling it to deliver a consistent end-to-end process that achieved a 75% increase in processing capacity and 90% improvement in service level agreements. This is a great example of how, when applied effectively, technology can truly deliver a differential business performance.

To find out more about these (and the 16 other finalists), a copy of the Model Insurer Asia report can be downloaded by Celent clients at http://ift.tt/1gksfTv.

Finally, this year, we sandwiched the summit between two roundtable discussions: one on the use of digital and ‘big data’ to enable innovation in insurance; and the other one on regional distribution opportunities and challenges. Round-table discussions of this nature are always a great way to get detailed insights around the main challenges facing firms quickly. Unfortunately, I can’t share too much as they’re closed sessions and “what’s said in the room, stays in the room”. However, what I can share with you is that many of the opportunities and challenges facing individual firms across the Asian region are shared with insurers from around the world. There is a growing desire to provide a more engaging proposition with the end client, a need to secure new forms of distribution, and an acceptance that effective technology is at the heart of future business performance. Sound familiar? That said, unlike perhaps some other geographic regions, regional diversity in distribution, regulation, population prosperity, language, character set, and political goals, make it more difficult for insurers, vendors and SIs / consultancies to navigate with a ‘one size fits all’ policy. It’s this diversity coupled together with the regional growth rates for emerging financial services that make the region one of the most fascinating to follow and one that we expect to see a lot more innovation come out over the coming decade.

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2014 Latin America Outlook

The following text was published today in Inter-American Dialogue’s Financial Services Advisor under the title: “What is driving the insurance market in Latin America?”

I provided my view to FSA in advance, and now that it is out there I thought it made sense to share it with you through our blog.

Growth continues to be a common theme throughout the region, though not at the same pace that before and not equally in all countries. The Pacific Alliance countries have been growing faster than Mercosur countries, for example.

Insurance in Latin America has its own dynamics and has been growing year over year, even beyond GDP increase, and is expected to continue this trend through 2014.

A growing middle class is driving insurance buoyance in the region, with Brazil much setting the tone. Estimates indicate that 40M people have gone from living in poverty to the middle class in the past decade in Brazil. Nevertheless, there is a large number of people in the base of the pyramid (BoP) which is also of interest of insurers.

Infrastructure investments, trade, and group life and benefits to attract employees are key drivers for commercial insurance growth.

We are seeing moves towards consolidation in certain countries which are imposing stronger capital requirements and also acquisitions and new entrants into high growth potential markets, such as Brazil, Colombia and Peru. Competition is increasing and new segments are being targeted with more focus. All this is driving higher investments from insurers as well as competition for qualified talent in the marketplace.

Some countries are moving towards a stricter risk-based capital measurement, and the rest should move in the same direction as part of a global and regional trend.

In many countries sales practices are far from innovative and what customers expect to be. There is a need to evolve in the use of distribution channels and provide a better customer experience. Most insurers are still tied to legacy systems that impose a burden to become more competitive, efficient and smart.

Rising inflation, weakening of financial market due to lower quality of loans (as they compete for the raising middle class); lower demand of products from China (mostly commodities), Europe and USA, and risk aversion from foreign investors are some of the concerns shadowing the region’s potential.

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Segmentación de clientes, ¿moda o futuro?

Tradicionalmente las aseguradoras se han estructurado por líneas de negocio y algunas se han agrupado en torno a líneas personales y comerciales para diferenciar los negocios de las personas. Con las oportunidades de múltiples canales de distribución y tecnologías más sofisticadas, las aseguradoras están comenzando a ser mucho más granulares en su visión de los clientes.

Las aseguradoras tienen ahora la oportunidad de moverse de sus mercados tradicionales y ser capaces de crear una oferta para atraer a los diferentes segmentos. Algunas de estas acciones incluyen el desarrollo de Microseguros, dirigidos a las personas en la base de la pirámide, y seguros para Pequeñas y Medianas Empresas (Pymes).

Los productos para Microseguros se están lanzando casi mensualmente en diferentes sitios de Latinoamérica. Recientemente Asomi y Redcamif lanzaron una iniciativa en El Salvador con pólizas de vida comenzando en $0,68 mensuales provistas por Pan American Life Insurance Group (Palig).

Algunos brokers, los más grandes, se están dirigiendo hacia las Pymes pero utilizando su plataforma de afinidad en lugar de sus plataformas comerciales para soportar sus negocios. Mientras que originalmente el negocio del seguro para segmento Pymes debería recaer en lo comercial, se han dado cuenta que requiere los procesos y la agilidad que esperan también en sus negocios de afinidad.

En otra movida interesante, MetLife Mexico anunció una nueva división dirigida a los segmentos socio económicos C, D y jóvenes, que no son los targets usuales de las aseguradoras.

De acuerdo a la clasificación desarrollada por AMAI, una asociación mexicana, la población se divide en 5 segmentos: AB (personas con alto poder de compra y de ingreso), C+ (personas con ingresos superiores al promedio, cuyas familias son encabezadas por alguien con un título universitario y ambos tienen automóvil), C (personas con ingresos promedio, cuyas familias son encabezadas por alguien con un título secundario, un automóvil y la posibilidad de viajar una vez al año), D+ (personas con ingresos un poco por debajo del promedio, con educación secundaria y sin vehículo familiar), D (personas con niveles de ingresos bajos y una forma de existencia austera, que tienen educación primaria y que no tienen acceso a los tradicionales servicios bancarios).

Metlife Mexico estará ofreciendo productos simples y flexibles y al mismo tiempo desarrollando mejores canales de distribución con énfasis en el uso de la tecnología.

Los proveedores de software se también están realizando su aporte para ofrecer soluciones que permitan esta granularidad. Soluciones analíticas para entender mejor al cliente; soluciones digitales para brindarles un mejor servicio y mejorar los puntos de contacto; procesamiento de datos y BPM (Gestión de Procesos del Negocio) para ajustar sus productos y procesos de acuerdo a los diferentes segmentos, sólo por mencionar algunos.

En este sentido, el año pasado Guidewire presentó su visión de cómo un sistema de administración de pólizas será capaz de soportar segmentación de clientes, proveyendo en su actual versión alguna de la funcionalidad requerida. Los sistemas centrales son un engranaje más en el motor y es importante que los proveedores estén al tanto de cómo necesitan integrarse con otras soluciones para que las aseguradoras sean capaces de entregar una propuesta de valor segmentada.

A pesar que estoy convencido que la segmentación de clientes es hacia donde la industria necesita ir, no es sino a través de grandes desafíos que podrá lograrlo.

Las aseguradoras necesitan conocer las diferencias y actitudes de compra de estos diferentes segmentos. Omnicanalidad es uno de esos aspectos, pero también lo es tratar los conflictos del canal y los aspectos regulatorios. Los productos necesitan ser desarrollados a la medida, de manera tal que sean flexibles pero capaces de escalar masivamente y esto significa trabajar sobre el precio, presentación, marketing, distribución y servicio. Los procesos necesitan ser ajustados para proveer el valor correcto a cada segmento. Al final de cuentas no querrán ser percibidos como una solución de bajo rendimiento y poco valor, ni tampoco entregar de más si esto significa exceso de costos y reducciones importantes en sus márgenes.

Mi pensamiento final. ¿Cómo se verá afectada la estructura de su organización a medida que se mueva hacia servir segmentos? ¿Cómo afectará esto al reporte y a las estadísticas que por cierto hoy son vistas por líneas de negocio (incluso por los reguladores)?

¿Está Usted preparado? ¿Estamos preparados?

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4.2.2014: Celent Roundtable: Exploring Digital in Financial Services

Celent Banking Senior Vice President Dan Latimore, Insurance Senior Vice President Jamie Macgregor, and Tsukasa Makino, Manager, Corporate Planning Dept. & IT Planning Dept. at Tokio Marine & Nichido Fire Insurance Co., Ltd.

Admission is free, and exclusively for executives from financial institutions. Pre-registration is required. If you have any questions, please contact Anna Griem at agriem@celent.com or at +1.617.262.5503.

Please click here for more information.

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Does Google Know Your Religion?

An industry contact recently told me that her phone popped up the following “creepy” message one Sunday morning: “9 minutes’ drive time to St. XXXX Church.” This, of course, was a predictable result of Google Now keeping track of where and when she regularly went, and nobly trying to help her get to her regular 8:30 a.m. Mass on time.

What makes it creepy is that most people put religion (and politics? and sex?) on a mental “Off Limits” list. Deeply personal issues like these are risky fodder at cocktail parties, and equally risky subjects for automated, data-driven insights. An application like Google Now doesn’t understand the issue unless its human coders are prescient enough to realize there are some connections we humans simply don’t want our devices to make on our behalf.

But now the string of unintended consequences has begun. My contact told her story in a room full of people. The consensus reaction around the table was, “Google keeps track of where you drive, and even figures out what’s there? That’s over the top.” What else, we wondered, would the app notice about us and dispassionately reflect back via pop-up message? Some bland examples: “You’re almost out of gin, and there’s a liquor store nearby…” “Your wife won’t be home for another hour, and Melrose Place is on channel 7 right now…” “You’ve been getting a lot of emails from XXXXX—perhaps you should ask him/her out?”

The conversation took us quickly from ambivalence to unease. Others in that group probably mentioned their unease to their spouses and colleagues and friends. As I write, an ever-widening circle of people is developing reasons to be suspicious and uncomfortable about Google Now—which, by the way, is a perfectly excellent and useful app about 99 percent of the time! It’s a grand example of the problem we’ll face as we try to harness the power of big data.

Years ago, when desktop publishing first became a technical reality for business users, a friend of mine who was a professional designer put a sign on her wall: “Power Ability.” She was telling people that just because they could publish their own office newsletters, crammed with cutsie clip-art, didn’t mean that they should.

Someone might want to give Google the same sort of advice, especially when church locations are involved.

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2.26.2014: Celent Insurance Webinar: Countdown to Celent’s Model Insurer Awards: The Nominees

Celent Senior Vice President Jamie Macgregor and Analyst Karen Monks.

This event is free to attend. Please contact Chuck Smith at csmith@celent.com with any questions.

Please click here for more information.

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2.19.2014: Celent Webinar: Current State of Innovation in Financial Services

Celent Senior Analyst Mike Fitzgerald and Mick Simonelli, Innovation Consultant and former Chief Innovation Officer at USAA.

This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Anna Griem at + 1 617 262 5503 or agriem@celent.com.

Please click here for more information.

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Part 2: From Big Brother to Mindful Mom

Part 2: Transitioning from Big Brother to Mindful Mom

Remember the old story about shipwrights working on an ocean liner at an East Coast shipyard? The workers hear a noise above them and look up to see a transatlantic airliner heading for Europe and can’t foresee how it will affect them. Although a bit melodramatic, the metaphor about an entire industry not knowing about, or taking heed of impending change wrought by new technology could be apt for the insurance industry. In our case, the airliner is digitization and the likely effects it will have on the business of insurance as it is pursued today.

The ongoing digitization of the world around us is both subtle and ubiquitous. It may be felt within the financial services industry to a greater extent among higher income echelons and specialty groups before others. In a more global context, the changes may mimic the POTS (plain old telephone systems) versus cellular phone service rollouts and economic impacts that were felt in places like India and Africa. Emerging economies were held back in some cases where the roleout of traditional phone systems met with various combinations of unyielding terrain, politics, or infrastructure issues. These seemed to condemn these places to glacial roll-outs of phone services and spotty capabilities at best. Enter cell systems that surmounted these challenges and opened the door to services that sometimes eclipsed those available in much more mature economies. In general, these groups do not confine their thinking to old patterns and constraints of cellular emigrants versus their open thinking as cellular natives.

So, what of it? How will these trends and capabilities lend themselves to a new paradigm for insurance? Let’s explore one version of this likely future.

Those familiar with some of the themes used in conversations about the future of the financial services industry will recognize the basic ideas being put forward here. Succinctly stated, the time is fast approaching when the business of insurance will recognize that simply wringing additional efficiencies from existing products and services is a zero-sum game. The following is an overview of one of the new mechanisms that could provide financial protection for our lives and property.

The aforementioned scope and power of digitization is the key to this particular mechanism. In the same way that automation is clearly being applied with great success to inherently risky situations (flying aircraft, global navigation, driving automobiles, or complex process control for example), such automation can be applied to the establishment of automated/adaptive personal risk management (APRM).

A foundational aspect of this new insurance product means that individuals and business entities will have to embrace a fuller measure of digitization in our lives and society. It also means accepting the potential risk (ironically) of things going wrong that could range from negative “Big Brother” events to simple gaps in process. However, the intrusion into our digital lives that this new insurance mechanism requires will quickly be offset by the positive outcomes.

Delivering this type of service requires that an insurer actively locates, collects, analyzes and uses the slices of Big Data that can define a person across multiple dimensions. This is the key difference between APRM and what the best insurance agents or brokers might or even could do for a client. It uses smart information technology (akin to artificial intelligence) and not simply process automation glued together with manual intervention. It creates a ‘protection advocate’ virtual avatar which actively monitors a client to provide broad and efficient coverage that balances cost and the management of risk requested. This service could happen in real time (i.e., as often as sufficient change in conditions or situations occur) using a ‘power-of-attorney’ mechanism to purchase, change, or discard coverages to support the needs of the client. In this illustration, servicing could be accomplished via the use of just-in-time or micro-duration products up to more recognizable macro-duration products of today

During the course of the APRM contract, a prototypical younger client would have several conversations with the protection advocate avatar about loss events, opportunities and things she wanted to accomplish. Some of the activities taken on the client’s behalf were signaled to her, all were recorded and had to be anonymously vetted against other APRM companies’ products every 9 weeks. The carrier and its avatars monitored her digital life and kept her risk as managed as possible by working within the parameters to which she and her folks agreed (‘Mindful Mom’ setting). Her out-of-pocket losses were minimized, gains secured, and she retained the carrier for another period with some updated goals and plans.

Finally, this scenario highlights the emerging concept of holistic or functional risk management. Much like its counterpart in the medical field, functional risk management works to manage the multiple dimensions of risk in everyday life, not simply a few for which a single carrier has products. It is truly consumer and human centric and will soon be offered at a carrier near you.

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