Tuesday 29 December 2015

Silicon Valley? No, Chilecon Valley.

In previous blog posts regarding fintech in Latin America my position was, and remains, that one of the reasons for being behind is that it lacks of a “Silicon Valley” equivalent.

Efforts to create a fintech ecosystem, as Finnovista is doing, become a good alternative to overcome the absence of a geographical pocket of innovation. Particularly consider the market fragmentation of Latin America comprised by 19 countries, some of which have 3M inhabitants to Brazil having +200M. People in most countries may speak the same language but markets are far from being similar just for that.

Under (or against?) these circumstances, Chile is working to become Latin America’s Silicon Valley. One of its most attractive initiatives is “Start-Up Chile”, created four years ago to transform the Chilean entrepreneurial ecosystem. It began with a question: “What would happen if we could bring the best and brightest entrepreneurs from all around the globe and insert them into the local ecosystem?”

The initiative offers work visas, financial support, and an extensive network of global contacts to help build and accelerate growth of customer-validated and scalable companies that will leave a lasting impact on the Latin American ecosystem. The idea is to make the country a focal point for innovation and entrepreneurship within the region. Start-up Chile, with only four years, is a start-up itself but it has a good starting point and great potential:

  • Chile has demonstrated for years its entrepreneurial spirit, with Chilean companies competing successfully in various industries (air transportation, financial services, and retail, just to mention a few) and a stable economy.
  • This year two Chilean start-ups were the winners of the BBVA Open Talent in Latin America: Destacame.cl, aiming to financial inclusion by creating a credit scoring based on utility payments; and Bitnexo which enables fast, easy and low cost transfers between Asia and Latin America, using Bitcoin.

While other countries and cities in the region are working in offering support to start-ups, it seems Chile is leading the way. Hopefully this triggers some healthy competition in the region, which in the end will benefit all.

In the meantime, let’s meet at Finnosummit in Bogota – Colombia next February 16th. Join financial institutions, consultants, tech vendors, startups and other digital ecosystem innovators, to learn how startup driven disruption and new technologies are reshaping the future of financial services in the region. Remember to use Celent’s discount code C3L3NT20% for a 20% discount on your conference ticket.

 



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Wednesday 23 December 2015

1.1. Predictions of Christmas Past

The speed of technology change is presently both amazingly fast and disappointingly slow. This paradox arises from seemingly huge shifts in technology regularly occurring over the last decade and a half but slow realisation of these in industry.

Of late I have personally felt that things aren’t moving quite as quickly as I expected. Since we’re at the end of the year and the holidays are a great to reflect and review how things have gone I thought it worth going back a little and looking at some of Celent’s predictions from 2012.

The image below summarises some of the predictions Celent used to highlight just how much change could occur in the following eight years. How much of it has proven to be accurate?

Celent Predictions

Printing human organs with a 3D printer was a topic of active research in 2011 and the topic of a TED talk. Still a topic of active research and still some years (possibly decades) until we’ll be getting replacement printed hearts and ears. That said, doctors in the US did save a two year olds life with a man made windpipe in 2012.

In this case the ambiguous commercial space flight referred to the then-likely space tourism although the efforts of SpaceX have pre-empted the space tourism industry by some years. SpaceX was the first private company to complete a delivery to the International Space Station in May 2012 and made a delivery beyond Earth’s orbit in 2015.

Widespread use of 3D printing was another suitably ambiguous phrase. In 2015 every home certainly doesn’t have a 3D printer although the devices are widely used in prototyping activity and are regularly found in increasingly popular innovation labs. The price of 3D printers is coming down to the level where other devices such as home printers and microwaves started to become popular – but the killer application is perhaps missing.

Social commerce referred to the seemingly inevitable integration of retail directly into popular social platforms. While retail websites have adopted social features Facebook has not surpassed Amazon in terms of retail, indeed the leading social networks are still advertising platforms and not retail platforms, despite rumours over the last 3 years social networks still don’t have payments integrated in. A prediction firmly not realised.

As regards the battery technology the insta-charge batteries are still not here, whilst they are an area of active research. Similarly the idea of highways capable of charging electric cars via induction is still at concept stage – with the adoption of electric cars having been slower than some expected with the popularity hybrids. There’s still time for these predictions to come about but they feel more like a bet than a certainty now.

As regards drones executing simple tasks this is already being widely discussed, regulated and piloted in multiple countries. The concept of pizza deliveries by drone – a particular favourite of mine, has already been piloted in multiple cities.

Smart energy meters and grids was an early expression of the Internet of Things technology beyond telematics in cars. This is increasingly finding its way into mature markets with multiple insurers in both the US and Europe offering insurance based on devices in the home.

Finally, the crash proof car – the topic of Donald Light’s report on the end of auto insurance. It felt far too early to say driverless cars would be ubiquitous by 2022 so this was a safer bet. While it’s a strong statement to say a car is crash proof we have already seen the rise of testing of autonomous cars as well as multiple car manufacturers underwriting the activities of their vehicles while in autonomous mode. We are already seeing manufacturers literally willing to bet their vehicles won’t be responsible for crashes on todays roads.

Perhaps then, things are moving swiftly and Celent’s wild predictions of 2012 aren’t that far from the mark. Also of comfort to me is how members of the insurance are directly involved in some of these initiatives, where they are relevant.

If you get time to think back on the year, I would be curious on your views. Has technology change sped up? Slowed down? Surprised? Disappointed? Where do you think it will head next?

Celent has it’s thinking cap on already and some of these topics will be discussed in our events, What if…. and Celent’s 2016 Innovation and Insight Day, although we’d surely love to hear your views.



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Thursday 17 December 2015

California DMV Flashes Yellow Light for Driverless Cars

As a long time resident of the Golden State, let me say that the words “fair,” “judicious,” “California,” and “DMV” just don’t appear together in the same sentence. But, I’ll break precedent and say that the  California DMV’s new draft regulations for driverless cars are (overall) fair and judicious.

The regs begin to address the knotty social and legal issues of safety and liability. Manufacturers and a third party tester must certify the ability of a driverless car to meet specified safety and performance requirements. Operators (who used to be called drivers, back in the day) must be able to take control of the car and will be responsible for all traffic violations. It looks like the larger issue for insurers and trial lawyers of “who gets sued” is not directly addressed by the draft regs.

Additional parts of the regulations include:

  • Special licensing for driver/operators
  • Obtaining driver/operator consent for collecting information “not necessary for the safe operation of the car” (hello interior-facing dashboard cams)
  • Ongoing reporting requirements by the manufacturers on the vehicles’ performance and safety
  • And, sign of the times, the vehicles must be able to detect and respond to cyber attacks

Some manufacturers may be (privately) impatient. But the reality is that these regs provide a path for broader deployment into a litigious and worried society of technologies still in the R&D stages.



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Monday 14 December 2015

What if… the insurance industry didn’t innovate?

As a techy with long hair and a beard when I stand up and speak on technology an audience generally expects a futuristic view of the world and a call to action. Of late I’ve been more tempered in my view. Having talking about IoT, telematics and drones for five years now Armageddon hasn’t come, the sky above the insurance industry has not fallen and to be honest, many insurers are still running as they did five years ago with little challenge to their bottom line. In short, in many parts of the globe, insurance hasn’t changed.

Have I changed my mind? Only regarding the timescales. For those that are looking – the proverbial canaries are falling. The signs can be seen in multiple countries globally that real change is coming, whether it’s the rise of price comparison websites, the rise of data aggregators, the rising population of connected sensors – whilst the industry hasn’t changed the world it is sitting in is gently coming to the boil.

Whilst the timescale of change to the industry itself is uncertain the possible impacts to the insurance industry won’t be random. That is the driver behind our What if event in February. A key part of event is to inform the audience about the possible scenarios that might befall the industry, to offer tools to consider the impact of these scenarios on their business and current investments. Our hope is to invite the attendees to consider how they would respond and if their current investments are preparing them adequately.

Back to the title of the blog – what if an insurer didn’t innovate? An innovation agenda is one response to change and opportunity – whether that’s a change in competitor activity, customer expectations or change in distribution. Other responses could be to increase the agility of the organisation, finally address those legacy niggles or to simply improve the companies research capability to better keep an eye on what changes are coming. What if isn’t solely about innovation, but rather a look at likely scenarios and ensuring your organisation is prepared.

If you haven’t registered yet, the event is in February in London and you can view the agenda and register here: http://ift.tt/1Zwdt1c

For a list of other benefits have a look at Mike’s blog from earlier in the year, along with a reveal of the magical venue.

 



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Thursday 10 December 2015

$13 Million Investment in Social Insurance Signals Disruption

Will a sharing economy model work in insurance? The announcement about the start up Lemonade highlights the challenges that social insurance (also called peer-to-peer insurance) faces. A Celent colleague, Jamie Macgregor attended a panel on social insurance propositions at FinTech Connect Live in London this past week (see Jamie’s blog post below). On the panel were leaders of three such companies, Sebastian Herfurth, co-founder of Friendsurance, Steven Mendel, CEO and co-founder of Bought by Many, and Louis de Broglie, President and co-founder of Inspeer.

These companies operate as brokers, managing the transaction between the end consumer and insurers. They offer either a deductible sharing scheme or a pooling mechanism to gain price discounts. The panellists spoke about their common challenges — sustaining growth and educating the consumer about an alternative approach to insurance. It remains to be seen if any can achieve critical mass. Of the three, Friendsurance is further along having started (way back!) in 2010. (See Celent report: Friendsurance: Challenging the Business Model of a Social Insurance Startup — A Case Study)

Similar brokerage models have also been adopted by Guevara and Tongjubao. These companies seek to apply social insurance to more complicated lines of business – automobile (motor) and life, respectively.

The Lemonade announcement stated that it will expand the social insurance model beyond sales and service by taking on risk on its balance sheet. They report that they have applied to be an insurer in New York. This will be an early, significant test given that state’s past regulatory reputation. However, the company has some strong arguments to make. They can point out that sharing increases transparency and aligns the interests of an insurer with their consumers. Additionally, the sizable initial capitalization will positively influence regulators.

These alternative approaches are good news for the industry as they challenge the traditional, sometimes adversarial, relationship between insurer and insured. The ability of Lemonade to secure $13 million in initial funding from veteran venture capitalist firms (Sequoia Capital and Aleph) is a serious indication of industry change.



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Tuesday 8 December 2015

Personal musings from one of the world’s first InsurTech incubators

Last Friday (and flowing into the weekend), I was privileged to take part as a mentor in the final selection process for the first “InsurTech” cohort of the StartupBootcamp’s accelerator programme targeted at the insurance industry. This programme claims is one of the first specialist “InsurTech” accelerators to be run globally by independent firm. The programme has attracted pretty impressive backing from the industry with firms like Admiral, Allianz, Ergo, Intesa SanPaulo, LV=, Momentum, LBG/Scottish Widows, Tryg and UnipolSai taking partnership roles.

To give you an idea around the scale of achievement of those who got through, the process started with circa 1.3k interviews, 250+ applications, 42 short-listed ideas and then whittled down to just 18 finalists…from which just 10 could be accepted onto the program. These ten firms will now go on to be mentored during their start-up phase, have their ideas challenged and further developed from people within the industry and independent entrepreneurs and, in doing so, build the network they will need to both attract funding and find new clients.

Over the two days that I spent with the finalists, there were a number of themes that came through the submissions. Here are my personal musings:

  • Data featured strongly across nearly all of the initiatives. Having access to either unique sources of data (whether from a home move, from a travel plan or from connected world) and a model for assessing underwriting risk appeared to be a winning combination.
  • Digital engagement, aggregation and ‘robo-advice’ are hot topics. What I found most interesting was the focus on underserved markets, whether targeting prospects with poor health records, in difficult to reach populations around the world, or educating Gen-Y/Z of the value of insurance. Addressing underserved markets profitably is a big issue that the industry often struggles with. A fertile area if tackled well. What impressed me the most, however, was the passion and sense of purpose displayed by the teams in fixing something that just feels ‘plain wrong’ to them.
  • The Internet of Things (IoT) is going to change the industry’s client engagement experience and liability profile. Five initiatives related to the IoT were submitted. Three were focused on wellbeing, one on the connected home and one on drones.

    Although it didn’t quite make it into the final ten, I found the drone initiative fascinating. With Amazon and others itching to launch commercial drone services at scale, this is a market that is set to grow. Drone insurance could be the next ‘fleet’ or ‘auto insurance’ (as was pointed out by my fellow mentor Charles Radclyffe). Certainly, the current risk models in use today are immature and unlikely to be adequate for a world where autonomous vehicles are delivering packages across our heads 24×7 (assuming the regulator allows it). Sadly, the drone initiative didn’t quite make it into the final ten. Personally, I wonder if it’s just maybe a little too early, but perhaps still one to watch for the future?As with anything IoT related in insurance currently, each initiative will face a shared challenge. Although the proposition concepts may be compelling, the instrumentation rate of adoption will ultimately set the pace for growth. The IoT is still in its infancy across the industry and convincing prospective clients to share their instrumented personal data is no small undertaking.

  • Data permissions are a growing concern for both individuals and regulators. It was refreshing to see some of the propositions pitch personal digital vaults as part of their propositions, whether for managing data from connected devices, personal wellbeing or personal belongings. Although it’s not yet clear how the market will develop for these services or how they will be monetised beyond a simple subscription model, services like these may suddenly find themselves in the limelight once regulators step in to protect personal privacy.
  • Regulatory compliance. It wouldn’t be the insurance industry unless there was at least one idea focused on regulatory compliance. What if you took all of your regulatory compliance reports produced, aggregated them, and then analysed them? A really simple idea without a huge amount of cost involved.

It was a refreshing couple of days. I look forward to seeing how their ideas and propositions develop over the next year. If you’d like to know more about each of the final ten, details can be found here.



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Tuesday 1 December 2015

Kanban Insurance

The Internet of Things (IoT) has evolved and matured to a point where pilots and programs are already in place around the world for every major line of business: Auto, P&C, Life and Health.

The most mature market unarguably is auto insurance in part because sensors have been in place for many years and the auto industry is driving the use of telematics for its own sake, not just insurance.

But it is not just telematics; vehicles are becoming smarter. Collision avoidance and secure driving aids are more common now, and not only in luxury cars. At the end of the road we already know that vehicles will evolve to the extreme of being smart enough to become autonomous.

A Celent Report “A Scenario: The End of Auto Insurance” by Donald Light back in May 2012 predicted the end of auto insurance as we know it. Donald’s prediction is now a reality.

Smarter vehicles make smarter (and safer) drivers reducing significantly the driving risk. Autonomous vehicles take away the driving risk almost entirely (we still have the risk of the system being hacked or that there is a flaw in the programming) .

All this is happening while telematics driven auto UBI hasn’t yet become the norm in the insurance industry; and already has an expiration date. So should we continue to invest in auto UBI programs to cover driving risk knowing it will inevitably be disrupted? Is there another approach to consider?

Some of you may be familiar with Kanban; a method (and term) used in manufacturing, first introduced by Toyota, for a scheduling system for lean and just-in-time (JIT) production. Is a system to control the logistical chain from a production point of view, and is an inventory control system.

I believe insurance is changing in a way it will be lean and just in time also; think of “Kanban Insurance”, driven by IoT and digitally delivered and serviced.

Kanban insurance is not limited to auto insurance but can be applied across all LOBs, moving away from the traditional concept of insurance pre-defined products where the customer chooses from a limited set of options (and within an existing LOB), to flexible insurance solutions which are a bundle of coverages, regardless of LOB.

Kanban insurance is digitally sold and serviced, tailored to the specific needs of each customer with the solution being created automatically on the fly. Kanban insurance allows customers to easily opt in/out and connect devices and sensors to activate the insurance and monitor in real time the changing aspects of the risk.

Imagine a solution that is created on the fly based on your specific needs and will follow your daily journey. A solution that for example could cover your commute, whether you use public transportation, Uber/Lyft, an autonomous vehicle you own or share, or that you decided to drive the old fashioned way (manually). This solution will activate a set of coverages for your home which is in autonomous mode as you left the house (as nobody is at home and sensors are active) which are different coverages to the ones you have when people is there; while your life insurance coverage and insured sum (and premium) automatically adjusts depending on what driving mode you are using (or if you are in a train, cruise or air trip).

Kanban insurance makes more sense to me than just UBI programs. Insurers that agree with my view should focus on the implications and requirements to be able to support this approach. These will include core systems functionality, digital solutions, data integration, analytics, machine intelligence, 3rd party partnerships, and deciding on infrastructure and data ownership.

 



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Friday 20 November 2015

You’ve got email, but not from your life insurance company

When was the last time you received email communications from your life insurance company? For most of us, the answer is never. Contrast that with the last time you received email communication from your bank, your financial advisor or your favorite retailer. Life insurance is so far behind that it is not even in the e-delivery race.

E-delivery allows the customer to elect to receive documents such as contracts, letters, account statements, and billing notices via email rather than paper mail. Generally, a notification is sent that a document has been posted to a secure website, or, in the case of general notifications, mailed directly to the policy owner’s email address.

Areas of opportunity for e-delivery in insurance span all processes, from field administration to customer acquisition to claims. The benefits of using e-delivery are typically derived from reducing scanning, mailing, and printing, lessening process complexity, and increasing automation and systems integration. These drivers lower costs, reduce cycle times, and increase customer and agent satisfaction.

I recently published a report titled, You’ve Got Mail Two Decades Later, Why Are We Still Talking About E-Delivery Rather Than Doing It, where I interviewed 17 life insurers about their current and future e-delivery plans. Although e-delivery can bring multiple benefits to life insurers, it has been poorly adopted. In fact, only 25% of the surveyed insurance companies are using e-delivery.

Areas of focus within the report include:
• Progress of e-delivery.
• Targeted documents for e-delivery.
• Benefits and challenges associated with e-delivery.

There are a number of challenges life insurers face when it comes to e-delivery, including legacy systems, policy holder adoption, and agent engagement. However, other industries have found a way to overcome these challenges. It’s time for life insurers to set aside the excuses and find a solution.

Life insurers have been left in the e-delivery dust and need to run with haste to catch-up.



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Monday 9 November 2015

The Hottest Ticket in Town: @HamiltonMusical, Really?

The CBS news show, 60 Minutes (@60Minutes), ran a story last night about the hottest new Broadway musical – Hamilton (@HamiltonMusical). It turns out that some of the research for the show was conducted at the site our Innovation and Insight Day – The Museum of American Finance (@FinanceMuseum).

This biography underscores why we chose the Museum for our next Insight and Innovation Day (April 13, 2016). The segment talks about Hamilton’s numerous accomplishments: “…a penniless, immigrant, orphaned kid who came out of nowhere and his achievements were monumental…he creates the first fiscal system, the first monetary system, first customs service, first central bank…”
Without these innovations, the modern economy as we know it now would look very different.

Anyone working in financial services today is aware of the challenges we face responding to changing customer expectations and new technology opportunities. Vast sums of money and time are being spent on innovation, looking for answers. However, Celent’s research shows a widely held view that FS cannot innovate very effectively.

industry rank

How do we improve?

The theme of our Insight and Innovation Day event this year will take inspiration from Hamilton’s work and use it as a guide for our future efforts.

BTW, if you want to go to Hamilton while at the Celent I&I Day, I suggest you get your tickets now. It’s the hottest ticket in town.

And here is the link to the 60 Minutes segment (14 min):
http://ift.tt/1MtLzNY



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Tuesday 3 November 2015

Free Advice for Auto Manufacturers: How to Sell the Experience of Driving an Autonomous Car

I rarely, actually never, give advice to automobile manufacturers because I am an insurance technology analyst, and not an automotive analyst.

But as more and more and more auto manufacturers make announcements about their plans to get autonomous cars on the road, ready or not—the dire implications for automobile insurance cannot be ignored.

So on occasion I do find myself thinking about what autonomous cars will mean for manufacturers. In particular, since the marketing of cars emphasizes the driving experience so heavily, what will the automakers do when all they can offer is a riding experience?

I mean a rolling home office, or family room, or man cave, or walk-in closet only has so much appeal.  And yes I know that all these cars will be totally connected, but still how many touchscreens will entertain a car buyer/driver during the morning commute?

So I do have an answer: virtual reality! Not just any virtual reality, but a virtual reality that makes the passenger in an autonomous car believe that he or she is actually driving that car—with appropriate physical artifacts (steering wheel, pedals, brakes, dashboard, etc.); and a choice of scenic and challenging routes.  If Disney can create rides that make people feel like they are accelerating, de-accelerating, steering, and cruising, why not GM and Toyota?

As mentioned, this advice is free. But if any manufacturer reading this post is so inclined, please send a large check to Celent (not me). Thanks.



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Thursday 29 October 2015

Scary Thought: What Happens When Start-up World and Insurer World Mix?

Accelerators, incubators, hackathons and labs, oh my! There have been an increasing number of partnerships between insurers and start-up technology companies in the past year. It is an exciting time, full of possibilities and I don’t mean to pour cold water on the enthusiasm, but…

What happens when fast-moving startups meet governance-heavy insurers? When faced with a joint decision, how will professionals who have spent a career avoiding risk reach agreement with their partners who seek out risk? To what degree should action plans be coordinated and how is that done if one group is using an agile development method while the other prefers waterfall?

Do these differences really matter, or will the incentive to deliver something really cool power through such differences?

It is time to ask this question, along with what is, and isn’t working, and what actions will improve results.

Celent is excited to partner with #SiliconValleyInnovationCenter to assess the current state of innovation partnerships in insurance. We value your views would like to invite you to participate in a survey. Leave your email and I will send you a summary report.

The goal of this survey is to accelerate insurance industry innovation / transformation by identifying effective partnering methodologies and processes. It specifically focuses on the relationship between incumbent insurers and start-up firms. It takes under 10 minutes to complete.

Hope you will add your views:

Click here to start



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Tuesday 27 October 2015

The schizophrenic nature of innovation in insurance

I have attended various conferences on innovation over the past few years. In almost all of them futurologists of all kinds and innovation experts who are invited to present tend to use the same examples, such as Uber and AirBnB, to describe how new business models can disrupt an industry.

The message to insurers is strict and clear: one day the insurance industry will have its own Uber that comes in and disrupts the traditional insurance business model.

They present these models as forming part of social revolution where consumers come together to demand a new style of service, based upon social equity and reinforced by free-spirited democratic principles. In some respects, they’ve taken their lead from the Internet generation of superfirms that dominate our digital lives (such as Google, Amazon, eBay, and Facebook).

While I fully agree that insurers have to innovate, anticipate, and adapt to changes impacting our industry, I have to confess that I find the usual message too simplistic. What particularly strikes me is the lack of criticism towards these firms. Indeed companies have been embracing and advocating non-discriminatory values for decades in various guises (e.g., gender equality, ethnical diversity, etc.). The US has been proudly supporting these values in the global economy, and the Silicon Valley companies have been keen to promote this message.

Therefore I am surprised to observe that these companies have exported their business model but neglected its social impact in new territories. The recent developments around Uber in France are a good example of this. Taxi drivers have to pay a high license authorization to be able to do their job. Many of the taxi drivers have to invest their pension to get a steering wheel. This entry tax is compulsory and supports the community, like all taxes do in every country.

Don’t get me wrong, these innovative companies have brought to the market great products, services, and added value. I think they contribute to helping their industry change in a positive way. However, I think they are schizophrenic in a certain way, as they tend to forget their social egalitarian values when economic value is at stake.

I am maybe naïve enough to believe that the future of our industry is not only about innovation at all costs but also about responsibility of all economic agents, including companies as well as consumers. In a world where innovation experts place schizophrenic innovators as examples, I hope consumers’ responsibility and their sense of fairness will help our industry keep a critical mind on the future of innovation and innovators. Maybe there is an innovative business model to create out of this concept?



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Friday 23 October 2015

Why the insurance industry needs more data scientists

Celent will soon be publishing an update to our 2013 report Perceptions and Misconceptions of Big Data in Insurance. In this report we looked at various elements in relation to the role and perception of data in insurance to understand where the industry was in terms of adoption of data-related technologies and more particularly Big Data.

To do so we used what we call our Big Data Maturity Model. This model uses seven dimensions to categorize the industry in terms of their maturity level when it comes to adopting Big Data:

Figure 1 big data

 

We came across an interesting article recently in the Insurance Journal that said insurers needed to hire more Big Data professionals. While we agree with this statement, we have already noticed in the early results of our 2015 survey (still in progress) that insurers have now more data scientist experts as shown in the following figure:

Figure 2 data tools

Technology is not enough and insurers have understood that if they want to make the most of data-related technologies they need to hire highly skilled people with solid knowledge of machine learning, statistics and predictive analytics.

This is an interesting early finding and we look forward to provide our members with more on our seven model dimensions soon. Stay tuned!



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Saturday 17 October 2015

In the quest of making fintech a reality in Latin America

The fintech ecosystem has been evolving and maturing in Latin America for the last three years mainly due to the effort of some participants, including Celent, to connect all key players of the fintech ecosystem.

Unlike the USA where there are geographical pockets of Innovation, as Silicon Valley, that brings the actors together based on proximity, nothing like this exists in Latin America

Furthermore, the individual (country) market size is significantly smaller when compared to the USA. Fortunately technology allows business to be conceived global or at least regional and therefor provide the scale needed for a fintech start-up to be viable.

For these reasons, it is essential to work an ecosystem, a network of participants, regardless of their geographic location in Latin America. I do not foresee a sustained and increasing development of fintech start-ups and initiatives in the region without the existence of this ecosystem.

In this last three years we have seen many cases of “me too” fintech start-ups. While this is not bad, it doesn’t show creativity either. Happily we have also seen completely innovative ventures, especially around blockchain, but without this being the sole focus.

There are all kinds of fintech start-ups; in payments, leveraging the use of data and focusing on customer experience; in loans, traditional and new models such as crowdfunding and Peer-to-Peer (P2P); in insurance distribution and risk management leveraging the Internet of Things (IoT) just to mention a few.

How is this playing for the insurance industry? I believe that the insurance industry is at a tipping point in fintech although I see it more developed out of Latin America. I believe there is a great opportunity gathering and using data for underwriting, claims, and fraud detection; taking advantage of the IoT to develop new personalized products and working on claims prevention; in distribution enabling new channels and becoming more digital and technology reliant, and even using P2P models; engaging with customers in new and improved ways; and discovering how disruption in payments can be leveraged in insurance.

In insurance (P&C, life and health) we are seeing that traditional players start moving towards digital environments and interactions, experimenting with technologies such as telematics and with the opportunities arising of the IoT. In Latin America this is incipient, but we see that it improves every year.

According to our most recent research 41% of insurers in the region have a formal innovation program which has been running, as minimum, for 2 years and 35% indicated that it doesn’t have a formal program yet. The fact that only 8% of them are focusing on disruptive innovation allows us to think that change will be slow, mostly based on incremental innovation, unless some external factor can accelerate change.

The main insurance companies globally are either funding accelerators, have created their Innovation labs, or have established funds to invest in fintechs. However, innovation is often difficult for established players and initiatives of new players appear seeking mainly to innovate in product, distribution, customer experience and looking to benefit from the IoT for both underwriting and claims.

Ingenie, one of the pioneers in offering a pay-per-use model based on telematics alongside its strategy of risk prevention, is not really an insurer but a technology company that was forced to go direct as a consequence of the lack of interest from established insurers in adopting a pricing and underwriting model based on the use and individual behavior of the insured. This model is no longer a novelty and has been adopted by many insurers around the world; it is even being replicated in property, life and health insurance.

Recently John Hancock announced the launch of an incentive program based on the insured to share data related to its health, but it is not the only one; Discovery was one of the pioneers to launch it many years ago in South Africa. Oscar offers it for health, along with a digital-only user experience.

Friendsurance, in Germany, has adopted a model based on social networks and P2P insurance that although it is oriented to auto, it could be applied to other risks (including microinsurance).

In parametric insurance (aka index based insurance) using sensors and data, we have seen initiatives as Kilimo Salama aiming to market agriculture insurance massively, in segments that otherwise was not viable to serve. This is indeed an interesting case of extreme digital, with innovation applied in all the insurance life cycle.

An area that we still see relegated in Latin America is the widespread use of data, a historic deficit that in many cases can be represented by the difficulty of something as simple as not having a claims database at industry level. Blockhain, for its novelty, is another area where insurers haven’t yet stepped in.

Distribution, in the region, is mostly not under the control of the insurer; the direct channel is insignificant in volume when compared to the intermediated business, therefore innovation depends to a large extent of the capabilities of the distribution channels to adopt new technologies and rethink their own models. In this sense banks distributing insurance, where bancassurance is permitted, as well as the largest brokers seem to be in a privileged position to capitalize this opportunity, but suffer the same challenges that other large established players and the final word has not been said yet.

Could an external player, someone that understands digital, data and customer experience, change the market dynamics? They are certainly doing so in banking, especially around payments. Google has already entered the insurance industry, on the distribution side, in United Kingdom and the USA. The founders of Alibaba and Tencent Holdings Ltd acquired shares of Ping An Insurance Group Co of China Ltd in a deal valued at $4.7 billion of dollars in December 2014, in what I see as another major threat to the industry from the outside, but taking positions to be able to integrate the business, from distribution to assuming and managing risks.

I foresee that in personal lines insurance we will get used to buy from companies that offer the best digital shopping experience, being these insurers and intermediaries that were able to adapt by learning how to compete in a digital world, or new players coming from the digital retail sector. In commercial lines I don’t foresee a threat from the outside in the short or medium term regarding distribution, but a deeper use of technology by insurance companies to become more efficient in the marketing of insurance. The level of advisory and specialization required makes it difficult to envision it can be transformed into a digital experience of purchase and servicing in a short-medium time frame.

Nevertheless, in both cases, insurers will continue to be the one assuming risks, just as how banks fund and service credit lines. In this sense insurers must offer flexibility and agility in creating new products, but mainly with the ability to do it based on the use of data, the IoT, and easily integrating with its ecosystem.

We will be meeting this December 3rd in Bogotá – Colombia at Finnosummit to discuss the opportunities and challenges for the fintech ecosystem in Latin America. Fintech start-ups can participate of the Finnosummit Challenge, a great opportunity and very interesting prizes for winners. If you want to attend Finnosummit be sure to use Celent discount code: C3L3NT20%. See you there!

 



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Monday 12 October 2015

Innovation is Magic….Or is It?

What magic does an insurer need to keep up with all the change occurring in our industry? Every firm we talk with is aware of the many challenges currently faced….telematics, digital, social networking, predictive modeling, etc. And yet, more changes are on the way. Our short list includes the Internet of Things, peer-to-peer risk pooling, extended lifespans (maybe never-ending), and artificial/machine intelligence. What should an organization do now to respond and to prepare? What magic is necessary to make it all happen?

Celent is pleased to announce our seminar designed to provide answers to how insurers move forward with innovation on practical terms. It will be in London, on 03 February, 2016. The venue, appropriately, will be The Magic Circle, Centre for the Magic Arts. Through a combination of presentation and hands-on workshops, the session will provide attendees with:

  • a practical understanding of how the very basic assumptions underlying traditional insurance products are changing and what impacts this will have
  • firsthand information of how insurers can respond, gained through a series of experiential, structured exercises
  • networking opportunities with peers which allow for comparisons with like organizations

Our view is that innovation, like magic, requires significant work. Successful “tricks” are the result of the investment of time and resources in various techniques, finding what works, what doesn’t and making appropriate adjustments along the way. After a solution is worked out, practice perfects the approach. Eventually, just like magicians during a performance, implementation must be agile, flexible, and respond to changing conditions.

As the programme builds, we will post updates. For now, please save the date in your diary and register at this address:

http://ift.tt/1Zwdt1c

…oh, and bring your wand!



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Thursday 8 October 2015

A pivotal day for the insurance industry

There were a few key assumptions underlying Celent’s End of Auto insurance report:

  1. Cars would crash less, requiring lower claims expenditure and lower premiums
  2. Cars would drive themselves, liability would shift to manufacturers and ‘driver insurance’ would be a thing of the past

Today with Volvo’s announcement (also linked here) that they would accept all liability for the car in autonomous mode we see the first of three steps towards the end of auto insurance. This is a key moment in human history, a pivotal moment that will redefine how human beings travel albeit that may not be apparent today. Today, this looks like an inevitable check box on the route to autonomous cars. It is in fact both.

Now the other manufacturers must follow suit or relegate themselves to manufacturing cars with no autonomous ability. Immediately, Blockbuster and Kodak come to mind. Initially they may deal with this through captive insurers but this will change over time.

I mentioned this is the first of three steps. The next inevitable one will take place in the court of law, perhaps after the first death where the car was liable. Here the specifics will be tested and understood. This will be a different milestone in different jurisdictions.

The third step will be a few years from now, when the autonomous systems have had enough time to partially fail due to poor maintenance. I am assuming we still own the cars at that point we’re not just renting them by the hour. At this point clarity will be given to who is responsible for making sure an autonomous system is still fit to drive on the road. Governments and lawmakers will have to define a minimum capability that is required before one can turn on the system. In some countries it may happen sooner than others but one imagines this will be a reactive exercise as manufacturers challenge their liability due to customers meddling with or failing to maintain the equipment.

As interesting and drawn out as these second and third steps are, history will show they are insignificant compared to the point in time when the first manufacturer stood up and said they would accept full liability for their cars when in autonomous mode.

Update: Other manufacturers are already following suit. and the Volvo CEO is already calling on the US government to establish testing guidelines as part of the speech.



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Monday 5 October 2015

The Solvency II Preparation Finish Line is Close

Solvency II – the European Union prudential capital regulation – will come in to effect in January 2016 after more than a decade of preparation. For many European insurers it means they are reaching the end of the long road of deep preparation but others have already turned their preoccupations in other directions. For instance the Solvency II regulation came in to effect already this year in Denmark and their level of preparation allowed Danish insurers to adapt to the new regulation.

But let’s recall what Solvency II is and why it is an important regulation for the European insurance industry. Solvency II is the set of regulatory requirements for insurance firms that operate in the European Union. The rationale is to facilitate the development of a single insurance market in Europe while securing an adequate level of consumer protection. It is based on three pillars:

  • The first pillar defines capital requirements. It quantifies the minimum capital requirement (MCR) and the solvency capital requirement (SCR).
  • The second pillar provides qualitative requirements in terms of supervision and review. Indeed, the European Commission wants to emphasize the need for insurance companies to implement efficient risk management systems.
  • The third pillar introduces the market discipline concept. Insurance companies have to promote transparency and support risk-based supervision through market mechanisms.

What makes Solvency II a comprehensive regulation is the fact it includes all types of risks and is not restricted to purely insurance risk. With this it better captures the reality of what an insurer’s risk profile is. Key elements of this approach is of course the diversification effect and this is why we see consolidation among small insurance players who lack diversification in their business (notably small mutuals in France for instance). Going forward we expect other geographies to follow the same principles and we think it is important that multinational companies learn from their European preparation.

Of course Celent and Oliver Wyman have been working on Solvency II in the recent past. We have also published research providing our views and opinions on this topic. A recent report has been published by Oliver Wyman in collaboration with Morgan Stanley looking more particularly at various consequences and notably on cash for insurers. If you are interested to know more here is an abstract: European Insurance: Generating Cash in a Volatile Solvency II World.

For the insurance companies that are interested to better understand the vendor landscape we have published a report profiling vendors with a Solvency II offering a few years ago: Solvency II IT Vendor Spectrum: 2012 Edition.

 



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Thursday 1 October 2015

Innovation for dinner

In late August my colleagues Mike Fitzgerald, Fabio Sarrico and myself were in Sao Paulo, Brazil attending InsuranceTech 2015.

The objective was to spend a few days looking where the Latin American insurance industry is headed in terms of business and technology and what level of success have some insurers already achieved. As the agenda of the event suggests there were very interesting cases such as Wibe (BBVA’s digital platform for insurance) and Rimac’s transformation process among others.

Along with Mike and Mick Simonelli we hosted our innovation workshop for 3rd consecutive year and looked into the state of innovation in LATAM insurers (Report is now published). While there seems to be room for improvement, we are now discussing how to innovate and not just what innovations (or emerging tech/trends) insurers should be looking at, which was the focus for most of insurers when we first started these workshops. For me this is a huge improvement.IMG_1267

Mick’s experience as innovation practitioner at USAA and now collaborating with several leading financial institutions as innovation consultant resulted in many questions from audience. As for technologies and trends to watch we covered several, including IoT and machine learning.

Our research shows that despite much is being said about innovation there are still important barriers to overcome; noticeably “lack of top level leadership” stands out as #1.

Picture1

 

 

Our research around digital also shows that most insurers are in a basic stage, but just to prove us wrong (or better said, the one example that shows it is possible to go beyond basic) BBVA Bancomer Seguros shared how they innovated by creating Wibe, their own digital brand and platform starting with auto insurance (even Uber coverage!). Wibe’s case is a good combination of digital, customer experience, execution, and leadership to bring all together in a short period of time and within an established insurer (and bank). Wibe already has +2.2 million visitors to their website, 61% using a mobile, and their youtube commercials were seen +1 million times each. This translated into +200,000 quotes and +3,000 vehicles insured since launching early this year.

Rimac’s transformation case was also a great example of leadership, vision, execution and persistence in a Tier 2 insurer. Their journey started in 2010 when they defined the strategic plan. Rimac wanted to become a customer centric insurer and for that they required to transform and simplify their IT platform, among other programs which basically touched everywhere in the company. A total of 65 sub-programs were identified just in IT.

Becoming more digital was one of the objectives, along with re-use: the idea to be able to create once and easily deploy in different channels.

Rimac’s transformation is still work in progress (does any transformation program ever end?), nevertheless they shared several indicators of success already. Digital enabled sales represent 1% of premium but they expect this to grow significantly in following years; at least the IT infrastructure is ready and available for the business to take advantage.

A common thread here seems to be execution and leadership; not time, not money (true that you need to be ready to invest; but how much will depend on the type of project). I also believe that execution and leadership are highly tied to culture; and as Mick usually notes: “Culture eats innovation for lunch”. By now I hope you figured out what I am trying to imply…

Changing culture is also an art and it can take time, as transformation programs do (5+ years?). So be ready, and start today. Or start tomorrow and get there one day late. Tic Tac, clock is ticking and the world keeps moving.

 



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Thursday 24 September 2015

What happens when auto manufacturers stop giving away valuable telematics data for free?

Here’s a thought experiment

Imagine that you manufacture some things, let’s call them automobiles. And imagine that in those automobiles you’ve installed bunches of computer systems to control steering, braking, transmission, engine performance, and even record GPS-determined locations. Let’s call these computer systems electronic control units (ECUs). And imagine that these ECUs generate streams of data that are potentially highly valuable to organizations that are interested in how safely a given automobile is being operated. Let’s call these organizations insurance companies.

And imagine that one day, a really smart person at an insurance company had the great idea that if they could capture and analyze these streams of data, they could understand automobile risks in a way that would let them price and underwrite auto insurance in a much more accurate and profitable way. Let’s call that person Flo.

And let’s say that Flo realized that the automobile manufacturers had kindly provided a little port thingy that allows her to access all this valuable and data and transmit it to her insurance company without paying the automobile manufacturers a single penny! Let’s call these port thingys OBD-IIs.

And let’s say that Flo and her counterparts at lot of other auto insurance companies go a little crazy giving their policyholders little whats-its that plug into the OBD-II thingys. Let’s call the whats-its dongles.

But the really great thing is that the automobile manufacturers are still not charging Flo and her peers a single penny.

And let’s say that the automobile manufacturers, one day decide that this internet mobility thing is here to stay, and that it could be a really great way to deliver more value, and deepen their relationships with the people who buy their cars. And to do all this stuff, the automobile manufacturers are going to make cars that connect to the internet! Let’s call these kinds of cars, connected cars.

And lastly someone at an automobile manufacturer says, “Oh Dear Dearborn” or “Oh Cool Cupertino” “We could make a bundle of cash by taking a big slice out of the increased profit margin that Flo and her friends have created by charging them very large fees to get access to the ECU data. Or better yet, we could hire some actuaries and data scientists and enter (or re-enter) into the auto insurance business ourselves—and Flo can go make a big bet on smartphone-based telematics.”

Ok, so here’s the thought experiment. If your were an investor, named Warren, looking for a growth stock, would you invest in an auto insurance company?



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Wednesday 16 September 2015

Why private equity investment in insurance makes sense

As many of you know, the latest buzzword is FinTech. Considerable money is coming to vendors that are attempting to define the next major technological leap in financial services. This chart, from CB Insights, shows the explosive growth in FinTech investments. It is an exciting time.

CB chart

What I find interesting is that Private Equity firms are also finding the more traditional insurance market interesting. For example, Moelis Capital made an investment in Insurance Technologies last fall. Insurance Technologies focuses on the front-end of Life insurance, including illustrations and electronic applications.

More recently, Moelis Capital announced an investment in FAST Technologies, which focuses on the Life Policy Administration System (PAS) space.

Another example is Thoma Bravo, which announced in August that they had purchased iPipeline, another competitor in the front-end space.

To me, these investments make sense. They may not be as technologically sexy as something like roboadvisors, but the market is ripe for improvement. The age of the policy administration systems in use is somewhat staggering, with systems that have been in production for decades. On the front-end, the Life insurance market is still surprisingly dependent on a paper application.

As someone who has been a part of this space for many years (measurable in decades), it is nice to see that the market finds room to improve.



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Monday 14 September 2015

Insurance IoT – You Can Sense the Disruption: Innovation Roundtable Summary

We held another in our series of Innovation Roundtables in NYC last Friday. These are small gatherings, attended by insurers and banks, meant to provide an open forum for a deep discussion of a chosen topic. As Mick Simonelli, one of the facilitators put it: “The format provides a chance for innovators to come out of their day-to-day battles, take a tactical pause, gain some perspective and share their knowledge with other practitioners.”

This edition was focused on the Internet of Things in insurance. More than any other previouse Roundtable, the threat of disruption amongst the group was very prominent. The discussion was best summarized by one participant: “We have been doing the business of insurance according to “effects analysis” for 300 years. That is, actuaries and underwriters have been looking backwards and projecting what contract terms (rates, guidelines, etc.) should be going forward. IoT in insurance will provide new territory, which is as yet unclaimed by any provider. It will allow insurance to move toward “casual analysis”: what are the true causes of loss and in what interventions can be undertaken to avoid them?” Much of the discussion was about how insurance risk professionals can accomplish casual analysis using IoT tools and techniques. However, there was also a recognition that other entities, outside insurance, may figure this new approach out before insurers. This may be the well-know data firms such as Google, Amazon, etc., or may be a group of data scientists yet unknown.

Other main points from the session include:

  • These practitioners report that they sense that the velocity of change around IoT is different than what has been seen before. Unlike other changes in insurance, decision-makers cannot wait for the data to roll in and the “case to be proved” or it will be too late to respond. Companies reported that they have lost partnership deals with start-up firms because they were unable to make a decision in a timely manner. This dynamic supports the need for a “dual governance track” that has been reflected in Celent’s innovation research.
  • Donald Light presented Celent’s model of IoT, and the group engaged in a good deal of discussion about what part of that ecosystem insurers will want to “own”. There was recognition of the incredible predictive value of the data that will be produced by IoT. However, it was pointed out that what has happened in commercial lines fleet IoT applications is that insureds prefer to retain control over the data as the value for them of using it to manage their fleet vastly outweighs any premium discount that might be awarded. It remains to be seen if this will play out in other lines of business.
  • Regarding commercial lines applications of IoT, it was notable that the group spent as much or more time discussing these opportunities as it did discussing the usual suspects – auto telematics, connected home, and health/lifestyle. Celent sees this as a further maturation of IoT in insurance. The consensus of the group was that commercial IoT is not yet widely addressed and is beginning to be a focus for their companies going forward.
  • A lack of cross-industry integration standards was recognized as a significant barrier to expansion. The participants expressed that there is a need (and opportunity) for a data standards group to facilitate this between insurers and potential device providers. Without such agreement, progress will be more expensive and will take longer than it should.

A final discussion point was perhaps the most exciting. The group is tracking the manner in which IoT is changing the profile of the skills required in insurance. Actuarial science is giving way to data science as more predictive techniques and more non-traditional data sources are used. The participants discussed forming a consortium of insurers to partner with NYC-area universities to establish an insurance data scientist training program. Stay tuned!



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The world’s most connected human

I recently read about Chris Dancy, Chief Digital Officer and Senior Vice President of Healthways, Inc. and “The world’s most connected human.” In my line of business and as an avid NPR listener, I really should have heard of him earlier than now. If you haven’t heard of him and you are reading this blog, you should know about him, too.

Chris utilizes up to 700 sensors, devices, applications, and services to track, analyze, and optimize his very existence every minute of every day. I listened to a few of his interviews (I am a curious person!) and found that he has been doing this self-tracking for nearly six years. You can really say he was on the cutting edge of this idea of a quantified self before most people even heard of the FitBit. According to Chris, this quantification enables him to see the connections of otherwise invisible data. As a result, he has experienced dramatic upgrades to his health, productivity, and quality of life.

So what does he track? In a NPR interview while wearing five sensors (FitBit, Nike Field band, BodyMedia sensor, Wahoo TICKR, and his phone) Chris talked about how he has become ‘one with the data’ because he has seen the benefits of understanding his moods, heart rate, and overall health. He admitted that it’s not for everyone, but being a data junkie he said this behavior fit right into his interests. He expanded what he measured because he was interested in the data for which companies are willing to give discounts. If a company was willing to give him a $600 discount for seeing a doctor, going to the gym, and eating better, he wanted to know what data were they considering and what benefits he would derive as a result of knowing what the data said. He also said something very key: “If you can measure it, someone will and that someone should be you.”

So why has he intrigued me so much? Because he said in 2013 that he believed the idea of a quantified self would be ubiquitous in five years. And it would expand beyond the fitness worlds and health care implications to the physical workplace and other industries. He saw sensors as being omnipresent in giving people feedback while they work. Examples could be environmental sensors that let someone change the lighting in their office to reflect a mood one had while on vacation or track ambient sound so that the sensor notifies you to reflect on the tone of voice used in a conversation. The goal, of course, is to have a more productive work environment.

Chris Dancy’s rationale for wanting to know more about the data companies use to give discounts intrigues me the most. Many health insurance companies give discounts for proving that you lead an active lifestyle and for years now, consumers have been able to send driving data to auto insurance firms who offer reduced rates for good driving via a dongle that is plugged into their car’s onboard diagnostics port. Recently this practice moved into the realm of life insurance. John Hancock has become the first life insurer to offer ratepayers a discount when they use Fitbit wristbands that enable exercise tracking. John Hancock policyholders who wear a Fitbit and connect it to the internet can get discounts of up to 15% on their life insurance policy as part of Hancock’s partnership with Vitality, a service provider that integrates wellness benefits with life insurance.

I already consider myself a quantified being because I track my fitness daily through my FitBit, and use that data to push myself to walk more and be more active. I am not sure I believe that my work environment needs sensors to make me more productive at work, but maybe they would. I don’t share my FitBit data with anyone yet, but I would be willing in the right circumstances. My insurers are not asking for my data which to me means that many insurers are not ready to accept the data. As mentioned above, John Hancock is the first life insurer; maybe others are soon to follow.  Will it happen in the next three years?  My gut instinct says no but I hope to be proven wrong.

IBM’s Watson Health Cloud suggests that the medical industry is looking more deeply into how to capture, analyze, and use the multitude of medical data that is created every year, some of which is from fitness trackers and other sensors.  Maybe Watson’s analysis and cloud availability of data will yield better methods of underwriting for insurance. Yet, going back to Chris Dancy . . . during one of the NPR broadcasts Robert Wachter, author of the Digital Doctor, said that today very little of the extraordinary amount of data Chris was capturing is truly useful to doctors or insurers. I guess if that changes, Chris will be ready.



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Friday 11 September 2015

Announcing the winners of the 5th Asia Insurance Technology Awards

Celent and Asia Insurance Review hosted the 5th Asia Insurance Technology Awards (AITAs) at AIR’s CIO Technology Summit at Le Meridien Hotel Jakarta on 1 September 2015. The AITAs recognize excellence and innovation in the use of technology within the insurance industry.

This year we received over 30 nominations from Australia, Hong Kong, Taiwan, India, Sri Lanka, Indonesia, and Pakistan; as well as the Asia Pacific divisions of global insurers. There were many impressive submissions, from which our international panel of Celent insurance analysts selected the very best to receive the six awards.

The Innovation Award recognizes innovation in business models or in the use of technology. The winner was MetLife Asia. MetLife Asia implemented Advanced Data Analytics to transform big data into customer insights and to deliver a more personalized customer experience – delivering the right products and services, for the right people, at the right time. They are using these insights to inform product and services development, and to deliver sales leads to agents. The company won the award because of the innovative usage of data analytics.

The IT Leadership Award honors an individual who has displayed clear vision and leadership in the delivery of technology to the business. The recipient will have been responsible for deriving genuine value from technology and has demonstrated this trait with a specific project or through ongoing leadership.

The winner was Girish Nayak, Chief – Customer Service, Operations and Technology at ICICI Lombard General Insurance. ICICI Lombard implemented a business assurance project to address the ever present gap between real business uptime on the ground vs technology uptime. The firm implemented an in-house customer experience center; and deployed an infrastructure as a service model in Microsoft Azure Cloud. These initiatives generate genuine value for the business.

The Digital Transformation Award honors an insurer who has made the most progress in implementing digitization initiatives. BOCG Life was the winner. BOCG Life implemented the Electronic Commerce System to provide online needs analysis and policy services. Through a transparent, direct and needs-oriented process, it facilitates prospective customers applying for multiple products they need in one go, and allows customer to adjust the offer according to their budget. The company won the award because of the way it is building trust and developing long-term relationships with customers through digital transformation.

The Best Newcomer Award recognizes the best new player in the insurance technology field. The winner was CAMS Insurance Repository Services. CAMS Insurance Repository Services launched the Insurance Repository to provide e- Insurance Accounts to maintain policies as e-policies. This brings new efficiencies and benefits across the stakeholders, including Policy Holders, Insurers, Agents and the Regulator. The company won the award because they demonstrated real, unique value to the ecosystem.

The award for Best Insurer: Technology honors the insurer who has made the most progress in embracing technology across the organization. The winner was RAC Insurance. RAC Insurance implemented a series of projects to digitize the business between suppliers, members and RAC Insurance. These projects include Claims Allocation, Motor Repairer Integration, and a B2C platform. The company won the award because of the way technology transformed the organization’s capability by offering an exceptional, one-touch experience for their members through online channels.

Finally, the New Business Model Leveraging Mobile Applications Award recognizes the insurer who has developed a new, perhaps disruptive business model involving the innovative use of mobile technology. Max Life Insurance won the award. Max Life Insurance launched mServicing and mApp which enable digital servicing of customers, sales force and operations. The company won the award because of the use of mobile technologies to increase agent activity and engagement, enable speedy issuance of policies, and enhance business quality and operational efficiency.

Be on the lookout for the 6th Asia Insurance Technology Awards in 2016. We’ll post another blog when the nomination period opens, sometime around June 2016. You can also find information on Celent’s website: http://ift.tt/1uIwGwa.



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Wednesday 9 September 2015

Voice recognition access means one less password

If you are like me, you have at least 15 passwords or PINs that you must remember. Passwords are a necessary evil of the digital world. I have a user ID and password for everything from accessing my child’s homework assignment to checking my bank balance. Most annoyingly, the passwords never have the same expiry date so they are never synchronized. I, like many others, ironically keep my passwords in an app that requires a password.

 

One financial services company, Manulife Financial, has come to the rescue by providing the ability to access your accounts by using only your voice. I say ‘hallelujah’!

 

Celent is often asked by insurers about voice recognition IVR and will now be able to point to a working model. Nuance Communications is providing the voice recognition technology. The software stores the customer’s unique voice patterns and characteristics. When accessing the account through the call center, the caller repeats a passphrase and access is granted when the voice is matched to their stored ‘voiceprint.” This is an optional service, but I am sure everyone will want to take advantage of having one less password to remember.

 

Insurers continue to look for ways to increase customer loyalty, improve the overall customer experience and reduce call center costs. With the introduction of the voice recognition IVR, Manulife has addressed all three salient points. New uses for biometrics will continue to lead the insurance world into the future one innovation at a time.



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Friday 4 September 2015

Model Insurer 2016 accepting nominations

In its tenth year, Celent’s Model Insurer Award program has grown from a small idea into a big deal for our analysts and the insurance technology world. Not only are insurers across the globe recognized with the premier award in the analyst community for successful implementations of technology projects, but the awards are giving out a Celent’s marquee event Innovation & Insight Day. With over 400 attending at venues like Carnegie Hall, the event has grown to be a ‘must attend’ event for many companies.

 
Celent’s Model Insurer and Model Insurer Asia award programs run annually from September until March/April. Nominations are currently being accepted via two online forms:

 
Model Insurer: http://ift.tt/1FnjDV6. All insurers across the globe are invited to submit a nomination for Model Insurer.

 

Model Insurer Asia: http://ift.tt/1JT5UL8. Celent Asia conducts the Asia Pacific specific program to identify the potentially unique “Model Insurer” solutions that have recently been deployed in the APAC region.

 

The awards are given to insurance companies which have successfully implemented a technology project in five key areas:

• Digital and omnichannel technologies
• Legacy and core system implementation
• Data mastery and analytics
• Innovation and emerging technologies
• Non-core system implementation best practices/IT management best practices

 

For the first time this year Celent is offering a report that describes the Model Insurer program in detail. We hope that any and all questions an insurer or vendor might have regarding the program will be answered in the report. http://ift.tt/1PIRQ79

 

After four years of running the program, I am passing the baton to Colleen Risk. I will be actively involved in the transition year. Colleen and I both are available to answer questions about the program.

 

Celent, Colleen and I welcome all insurers to review your successful IT projects from the past one to two years and submit the project for an award. If you win, you will be among some great company at Celent’s Innovation & Insight Day in 2016.



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Tuesday 1 September 2015

The magic of statistical analysis in insurance (or the weather needs to be more predictable)

My colleague and I were all set to go to West Palm Beach this week for the @LOMA #Lomatech conference. We were looking forward to participating in the inaugural event and were both speakers.

Then the weather intruded. Our friends at LOMA had a tough decision to make on Friday as Hurricane Erika was coming through the Caribbean. The storm had already done considerable damage and caused many deaths. Since the projected path covered the entire state of Florida, there was considerable concern. Once the governor of Florida declared a state of emergency for every county in Florida, LOMA made the only decision they could and postponed the event.

Why do I blog about this today? Because it is Tuesday, the day Erika should be decimating Florida, and I am sitting just outside Tampa enjoying a beautiful sunny day. Not a rain shower in sight.

My point? This is just one example of many of the challenges faced in the insurance industry. Our industry relies on an immense amount of data. We use historical data and averages and every kind of statistical analysis we can to ensure that our customers and the insurance companies are in a win-win situation (as much as they can be in the situation where they need their insurance).

This is a classic example of how all that analysis is wonderful, on average and over time, but can be completely inaccurate in a single event. Your mortality may suggest you will live well into your eighties, but you, as an individual, may not. My homeowners insurance, living in Florida, includes a significant cost associated with the storm that may never come. The county in which I live, Pinellas, which includes Clearwater and St. Petersburg, was last hit by a hurricane in 1921. Yet Tampa is number 4 on the National Oceanic and Atmospheric Administration (NOAA) list of cities most vulnerable for a hurricane. In fact, they state Tampa has an 11% chance for a hurricane every year.

That is the problem with probabilities. An 11% annual chance, but no hurricane for 94 years.

I find the entire process fascinating and continue to marvel at how well our industry does and how wonderfully they protect their customers. At heart, though, I still consider much of it to be magic.



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Friday 28 August 2015

An invite to London and nothing to wear

There are lots of cues and clues to differing cultures across the insurance industry and it’s IT neighbour – one of the most obvious is dress code or at least communal agreement on how one should dress. For a chap in London it should be relatively easy, as the character Harry Hart put it in the film Kingsman, “The suit is the modern gentleman’s armour.” However, recent changes and external influences in London have left me in something of a wardrobe quandary.

For example – the data scientist community and the digital community. I went to the first Strata event in London in my usual suit and tie and swiftly realised that I looked like I a fish very much out of water. Here jeans, t-shirts and the odd tattoo were the order of the day. My most recent visit to the conference I managed to correct my attire although didn’t acquire new tattoos just for the conference (perhaps next year). Oliver Werneyer’s observation at our event in February this year that one needs a good beard to fit in with the start up crowd is also well founded.

Also in London we have Lloyd’s of London with a strict dress code and a requirement for a tie to be worn at all times. More Kingsman territory, clearly one can’t dress for both communities on the same day.

In between we have an increasingly relaxed view of the suit attire or even simply trousers and shirt. Despite having a pretty good collection of ties these are now largely optional (although I still generally carry one around as wearing them varies by client and frankly I quite like wearing a tie to a meeting).

What I don’t have of course is a pocket square – something I rarely have seen adopted before this year (perhaps I wasn’t paying attention) but I’m increasingly seeing a square used to add a splash of colour in the absence of a tie. Thus, we have the title of this post – I have nothing to wear!

Fortunately, London is unlikely to see the weather required for hawaiian shirts and shorts to become the order of the day (albeit I may have something that might fit that bill should it come to pass).

Circling back to culture though, the need to blend these clearly different and shifting cultures together in one organisation is crucial in a modern insurer. Aviva has gone to the extent of creating a digital garage in Shoreditch – the heart of the jeans wearing community, if I may use such a broad brush – to draw in talent to the organisation. Hiscox too has been going to great pains to attract the right talent, along with many other insurers in London seeking to bridge these cultures.

Are you allowing for a varied culture in your organisation? How flexible are you in dress code and working practices across different communities? Have you ever set to preparing for a meeting and realised you simply have nothing to wear? Would love to hear your stories on changing insurance, if only so I know it’s not just me.

 



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Thursday 27 August 2015

KPMG’s revealing survey about cybersecurity and what we can do about it

Some of you may remember my post this spring about the breach of my family’s information by a major health insurer.

I think about that a lot, as I am sure many of you do as well. It feels like we read about another major hack on a daily basis. We now have major governments funding hacks. The perfect is example is the recent breach of the IRS.

This recent health IT survey by KPMG really caught my eye: 81% Of Healthcare Organizations Have Been Compromised By Cyber-Attacks In Past 2 Years.

81%! The survey covered both insurers and providers. I am stunned my mailbox does not overflow with notifications every day, but what concerns me is all of the breaches of which we are still blissfully unaware. It is particularly disconcerting because there are so many rules around patient privacy that we should be able to expect that our information is being managed securely.

It is not.

It would be easy to point fingers at those breached and blame it on their lack of preparation. And I suppose that is true in some cases. It would also be easy to point all the blame where it belongs, on the hackers. The big question for me, though, is what can I do about it?

In short, the answer is not much. I can’t imagine querying an ambulance driver about the information security processes of a hospital. Even if they knew, would you divert to a different hospital based on the answer? Of course not. In a similar fashion, one would be unlikely to change insurers based on information about data security.

But that doesn’t mean customers don’t care about it, and data security is something the audience of this blog can do something about. Regardless of your role in the company, ask some questions. Keep pounding the drum that our industry needs to stop being passive and needs to make the investment, even more investment, in security. We tend to think of the “big breach” as the area to invest, but there are so many more areas on which to focus.

The survey showed that 35% of the respondents had a data breach from their own employees. So when you’re beating the aforementioned drum, make sure to discuss your internal risks too.

As important, if you are in a position to do so, help ensure this is a topic discussed with the CEO of your company. They need to be aware, and be prepared, for the almost inevitable breach. Your company wants to handle it quickly, professionally, and competently. This would be in stark contrast to the insurer mentioned in my previous post, which took 3 ½ months to notify me, and started with my 4-year-old.

In the words of Sergeant Esterhaus in the incomparable ’80s classic Hill Street Blues, “Let’s be careful out there.”



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Tuesday 11 August 2015

Freud in a Box – The Aware Machine

In the week since the release of the Celent report, Machine Intelligence in Insurance: Designing the Aware Machine, I have been involved in several fascinating discussions around a new level of personalization in insurance. An insurer called me to ask if there are any vendors providing intelligent machine services that can analyze social posts of a person and slot them into one of several pre-described personas. It was fascinating to contact some of the vendors involved in the report and find out just how far along they are in using intelligent machines to personalize down to the unit of the individual!

At the same time, my colleague, Zil Bareisis on the Celent Banking team, blogged about a new type of personality test, Personality Insights powered by IBM’s Watson. According to the description of the system, the test “uses linguistic analytics to extract a spectrum of cognitive and social characteristics from the text data that a person generates through blogs, tweets, forum posts, and more.” Interestingly, it claims to be able to reach conclusions just from a text of 100 words. (Zil’s blog is here: Don’t be surprised if your bank knows not just who but also what you are in the future.)
Following Zil’s lead, I copied an extract from the Aware Machine report into the system to find out what Personality Insights said about me. The results:

You are inner-directed, skeptical and can be perceived as insensitive.
You are imaginative you have a wild imagination. You are philosophical: you are open to and intrigued by new ideas and love to explore them. And you are independent.
You are relatively unconcerned with taking pleasure in life: you prefer activities with a purpose greater than just personal enjoyment. You consider achieving success to guide a large part of what you do: you seek out opportunities to improve yourself and demonstrate that you are a capable person.”

After I got over my initial reaction (which was to shout “No! That’s not me!”, especially about the “insensitive” part), my analyst instincts observed that my result contained a great deal of overlap with Zil’s profile. This indicates how broad the analysis is based on such a limited sample. The experience made me want to load a lot of additional data about myself into the system to see how personalized the results could get.

And this is the main take-away for me about these systems – that they are trying to reach areas for which we have not generally applied automation (understanding the personality of our selves/our customers) using unstructured data. More experimentation and refinement will increase the value of both the results and our understanding of how to use them.



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Friday 31 July 2015

The Aware Machine in Insurance

The topics of artificial intelligence, machine learning, deep learning, and cognitive computing have made their way into the popular business press. An insurance professional trying to stay informed of emerging technology may struggle to see the application of these technologies to their industry. A Celent new report, Machine Intelligence in Insurance: Designing the Aware Machine, provides an explanation of this space and its opportunities in insurance. It describes a model named “The Aware Machine”,  identifies the characteristics of high-value problems best suited for such platforms, and suggests specific use cases to serve as proof-of-concept experiments.

The use cases include:

  • Analysis of legal circulars for impact: Continuously identify which regulatory changes will have a material impact. Involves teaching a system insurance law and providing it with a continuous feed of changing regulations.
  • Medical case management: Optimize treatment plans to increase recovery, return to work rates
  • Identification of underwriting leakage: Analyze insurance contracts at the clause level and compare them with each other across lines of business to enforce consistency of intent. Continuously monitor new contracts to ensure that appropriate wording is used.

We invite readers of this blog to submit their own candidates in the comments section and check back for updates. Let’s crowdsource suggestions and get some proof of concept experiments underway!

 



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Monday 20 July 2015

How to grow your book of business.

Most carriers in North America work with independent agents. Although the majority of premium for personal lines is written direct, that is largely concentrated in a few large carriers. Carriers who use independent agents know that high production from agents is correlated with strong relationships. However, beyond encouraging a strong personal relationship with an underwriter, what else can a carrier do to systematically build a stronger connection with an agent and grow their book? Celent surveyed a group of agents to understand those areas most likely to make a carrier the agents’ top choice.

The report addressed the following key research questions.
Key Research Questions
1 When it comes to placing business with carriers, what criteria are most important to an agent?

2 How are top carriers performing on those criteria?

3 Where should carriers prioritize their investments in order to drive growth?

Key Findings
o It is easy to think that price is the most important factor when it comes to where an agency chooses to place business. Competitive products and price certainly are important; however, even more important than products and price is the responsiveness of the underwriter. A fast underwriting decision is also quite important with over 60% of agents stating this is a must-have.
o Money matters to agents although the specific components are not essential to all agents. The most important component is commissions. Interestingly enough, 40% stated that the commission rate does not necessarily have to be competitive. Only 30% said incentive compensation programs were must-haves – and 40% said they were nice to have or didn’t matter at all
o Beyond that, agents also look for support in other areas. A strong brand is important, as it is easier to sell a company where the prospect already has an emotional connection. Marketing, training, and consulting support is seen as important by more than half the agents and especially younger agents who may benefit more from these types of services than older established agents may.
o Mobile tools and social media support are generally not seen as important items to most agents – but there is a significant generational difference here. 25% of younger agents see mobile as a must-have compared to 4% of those over 60. Generational differences will become more important to carriers as baby boomer agents increase their rate of retirement and are replaced by GenX and Millennial agents.
o Agents want carriers to invest in those tools that are most important in helping them perform their job of writing business and providing customer service to the policyholder. Most important to agents is continuing to build out both the integration with the Agency Management System and expanding the functionality of the Portal. Least important to agents are features such as mobile apps, online certificates of insurance, online commission statements, and access to marketing materials.

Looking ahead, the industry is likely to continue to experience increasing channel complexity and increasing regulation, which means there are opportunities both to improve the agent experience and to reduce costs along the way.  Carriers who are looking to drive growth by improving the agent experience should start by looking at their technology offerings and make sure they are delivering the functionality that is most important to their agents.
This report presents the results of an online survey conducted during May 2015 of independent insurance agents.
This 27-page report contains 13 figures and 1 table. You can find it here. Driving Growth by Optimizing the Agent Experience



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Friday 17 July 2015

UBI, Personal Data and the Global Implications of the European Union Data Directive

On Monday, I was asked to present at a UBS conference for investors on technology disruption facing the industry. It was far from Celent’s usual audience of business leaders and technologists, and as a result the questions being asked were quite different, sometimes challenging, however refreshing at the same time. One of the most interesting sections of the day for me was looking at the adoption of usage based insurance (UBI) across the industry and the implications for data protection.

Ever since personal data was first discussed as having the potential for emerging as a new asset class at the World Economic Forum in 2011, capturing and incorporating personal data into the proposition design has been seen as a potential gold mine, fueling the creation of many start-ups and, in our industry, propositions based upon understanding individual risk and investment behaviors. It’s hard to think of any digital proposition today that doesn’t require you to first mark a check-box to say that you’re willing to give up the rights to some of your personal data as part of standard terms and conditions.

When used well, it can enhance the experience enormously. As an avid Netflix ‘box-set’ watcher, I’m sure that I’d quickly get lost (or bored) without it for example. However, I’ve also learnt to be increasingly picky about who I let have access to my data and what links I click. I’m often amazed by how many apps want access to my location without seemingly having a purpose for it. What’s harder for me to know, however, is what happens to my data once I’ve given permission for where I can see it benefits me to do so.

At Celent, we’ve talked for quite a while about how personal data willingly shared could be a major asset in fuelling new proposition design and aiding risk avoidance. It’s not just UBI propositions that can benefit. The potential applies to all nearly all propositions – including commercial and specialty. Data sources such as LinkedIn, Twitter feeds, Glassdoor, and potentially even driving patterns could prove to be an interesting indicator of the quality and morale character of senior management teams for example. However, at the heart of these propositions or services needs to be an acute understanding of the legal implications and ethics around personal data use.

One related piece of upcoming legislation discussed that every insurer with operations in Europe needs to be aware of is the new European Union Data Protection Directive. This directive seeks to unify data protection laws across Europe and is due to be finalized later this year, with a likely implementation date set in 2016. One of its aims is to protect the consumer and, in doing so, strengthen the laws on security, privacy, residency, permitted use and portability. The maximum fine for a firm getting it wrong could be as large as 5% of global turnover. So, for example, if you’re a US or Chinese insurer with operations in an EU country that suffers from a data breach or allows sensitive personal data to leave permitted EU jurisdiction, then your global profits could take a nasty hit.

So, how does this relate to UBI and the use of personal data within the design of propositions and servicing? Well, apart from the obvious security, anonymity and archival implications, insurers will need to watch carefully what data they use and the permissions consumers have signed up for around its use, probably placing them squarely in control of it.

These changes will inevitably tip the balance more firmly in favor of the individual. Open, transparent, incentivized and positive engagement around the use of personal data will need to become the norm. The days of fortuitous use or situations where policyholders are unaware of how much of their data is being used to underwrite risk may be numbered.



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