Life in the Cloud – Vendor Activity is High

Few technologies are talked about as much as cloud computing. Cloud services may top the list of technology buzzwords used in corporate board rooms, by Wall Street analysts, in the trade media and within insurance IT organizations, but it often is talked about as an emerging technology – one that is potentially transformative but still little used.

The level of general interest in cloud computing is understandable. It promises tremendous flexibility, tempting economic advantages, and unending operational efficiencies. To that end, insurance carriers are dependent on the cloud offerings available. Only if vendors are offering products on the cloud can carriers take advantage of them.

So where are the vendors? Do all vendors have cloud applications? What options are available for insurance carriers and are they aligned with carriers on the importance of cloud apps? What challenges do vendors face, and what are their plans for the future?

I surveyed 41 vendors to provide answers to these questions as well as to understand pricing models, platform investments, and their expectations of where the market is going.

Cloud has grown from an emerging trend to the way of doing business for most vendors in a remarkably short time. While vendors may believe they are leading the competition by offering a cloud solution, the reality is that cloud options are now the norm. Vendors have moved swiftly to create cloud offerings and those that don’t have some type of offering are rare. Although these offerings are common, that doesn’t change the very real and significant concerns that carriers have, particularly around privacy issues and performance.

Yet carriers interest in cloud computing continues to gain traction as a way of managing costs, improving efficiencies, and offering opportunities to transform the business. Despite the high interest, vendors who wish to be successful in selling cloud options to carriers will have to address concerns in three key areas: privacy and data integrity, reliability and performance, and may want to provide tools to help carriers learn to manage and govern their cloud offerings.

This rapid evolution is not without its challenges for vendors. Customer-facing challenges are of high concern for vendors include issues such as managing the release cycle across multiple clients balancing front end, customer facing features reliability and performance enhancing features, and the impact of a changing target market customer base. Vendors are also concerned about identifying the right pricing model. Managing the shifting business model from license and professional service fees to subscriptions is formidable for many vendors. In addition, cloud creates notable organizational challenges, especially competing for scarce engineering resources.

Cloud is expected to generate significant levels of revenue, and vendors that have not put their cloud plans together may want to begin to build a roadmap for the future.

Check out the report – Life in the Cloud: Vendor Plans and Priorities

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Majesco Is Moving Fast

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

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

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

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

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

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

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

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

Note that no one responded that the threat would decrease.

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

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

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

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

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

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

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

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

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

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

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Engaging the NAIC on Emerging Insurance Technologies

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

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

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

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

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

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

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What if someone Kickstarted an insurance company

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

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

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

What would we need to start this mythical company?

1) Would you need any employees?

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

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

Building a virtual company has never been easier.

2) Would you need any agents?

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

3) What about capital?

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

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

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

What new idea will be born in your company today?

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For Halloween: The Tricks to Get Innovation Treats

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

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

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


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


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


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

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

from Celent Insurance Blog http://insuranceblog.celent.com/2014/10/29/for-halloween-the-tricks-to-get-innovation-treats/

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