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Q2 | 2018
PREDICTIVE ANALYTICS SOLUTIONS VENDORS
INSURANCE TECHNOLOGY CASE STUDY COMPENDIUM 2018
INSURANCE IT PRACTICES AND DISCIPLINES
2018 COUNCIL MEETING REPORT
PURPOSE-BUILT AI SOLUTIONS FOR INSURERS
BUSINESS AND TECH TRENDS IN SPECIALTY LINES
2 Novarica Research Quarterly Q2 | 2018
Contents
Council Studies & SurveysInsurance IT Practices and Disciplines
2018 Council Meeting Report
Insurance Technology Case Study Compendium 2018
3
Executive Briefs & ReportsEnabling Innovation, Vol. 3: More Lessons from Silicon Valley
Life Insurance Contact Centers: Key Issues and Trends
Purpose-Built AI Solutions for Insurers
5
Business & Tech TrendsIndividual Life Insurance
Specialty Lines
Individual Annuity
7
Novarica Market Navigators Document ECM/CCM Systems
Predictive Analytics Solutions for Insurers
10
Welcome to the Novarica Research Quarterly! Each issue provides a summary of recently published reports, including studies of insurers’ technology experiences, capabilities, and plans from our Research Council; business and technology trends; CIO best practices; vendor information in our Novarica Market Navigators; and recent webinars and presentations. All of the research summarized here is available for download by our advisory clients at novarica.com. Research reports can also be purchased individually.
If you’d like to learn more or arrange a conversation to discuss any of these topics with our senior team, please contact us at [email protected] or 617-342-8100.
3Novarica Research Quarterly Q2 | 2018
Council Studies & Surveys
Demand for IT capabilities continues to grow and diversify, while IT budgets remain relatively constant as a percent of revenue. In response, CIOs are working to shift dollars from running the business to growth and transformation initiatives by driving multi-faceted and multi-year IT practice process improvement programs.
This report covers the adoption rate and degree of planned expansion of both well-known and newly emerging IT practices. The challenges encountered and lessons learned are also discussed.
Key Points and FindingsTalent and IT operations remain the two most pressing concerns for CIOs. Finding and retaining the right resources to manage legacy environments is top of mind.
Agile development practices have continued to expand and are now the top priority. Carriers have widely adopted Agile to ensure quick, responsive delivery of internal projects.
Enterprise architecture and UX initiatives are also expanding. Carriers are addressing the challenges of integrating new core systems or new technologies into their technical environments, as well as meeting internal and external expectations for usability.
No IT practice improvement efforts saw a decrease in activity. Carriers’ efforts held steady (when they weren’t expanding), indicating that activity from 2017 and earlier remains ongoing. Integrating IT practices isn’t an overnight process.
Topics• Agile Development
• QA/Testing
• Master Data Management/Data Stewardship
• Enterprise Architecture
• IT Governance
• User Experience (UX) or Human Factors Engineering
• Bimodal IT or FAST/CORE IT
Chuck [email protected], Research & Consulting
| 14 Pages
4 Novarica Research Quarterly Q2 | 2018
The Novarica Insurance Technology Research Council is a knowledge-sharing community of more than 300 CIOs and insurer IT leaders with a mission to strengthen the industry’s ability to leverage technology effectively. The 11th annual Council Meeting brought together more than 80 members for a series of presentations, panels, workshops, and direct networking in support of this mission. This report contains a summary of each of the formal sessions and workshops.
Key Points and Findings Realignment. The way that insurers deliver value to their customers and the way that IT leaders deliver value to their organizations are both being realigned due to changes in technology that enable speed and easier access to information and transactional capabilities.
Clarity. This world of rapid change requires clear understanding of and strategies in market, operating, technology, and talent management practices.
Community. No insurer CIO is an island. IT teams, business unit leaders, vendors, regulators, distribution partners, and other key stakeholders must be understood and respected in order for insurers to thrive.
Topics• Innovation and InsureTech. New entrants are more of an educational opportunity than a threat to insurers.
• Data, Digital, and Core. Managing new capabilities and legacy systems.
• Communication and Alignment. Balancing Agile development and cloud deployment with legacy management practices.
| 25 Pages
Contents• Introduction and Key Topics Summary
• Novarica Keynote: Realignment
• Guest Keynote: Blitzscaling and Allied Talent
• Impact Award Winners Panel
• Innovation Workshop
• Data and Analytics Workshop
• Digital Workshop
• Core Systems Workshop
• Security Workshop
• IT Financial Management/Value Metrics Workshop
• Property/Casualty Panel
• Life/Annuities Panel
• Personal Lines Special Interest Group
• Commercial Lines Special Interest Group
• Specialty/Large Commercial Special Interest Group
• Workers’ Comp Special Interest Group
• Life Insurance Special Interest Group
• Annuities Special Interest Group
• Group Insurance Special Interest Group
Matthew [email protected]/CEO
5Novarica Research Quarterly Q2 | 2018
Novarica’s seventh annual case study compendium includes more than 30 detailed examples of IT initiatives that delivered real business impact.
Each case details business goals, project sponsors, team structure, project timeline, tools and technology used, challenges faced, success factors, and business results delivered.
Novarica Impact Awards, voted on by more than 50 CIOs, recognized winners in four categories: digital, data/analytics, core, and IT practice or infrastructure.
Key Points and Findings Cloud, microservices, and AI are playing a bigger role in a wide variety of initiatives that are creating real, short-term business value in all four categories.
Core systems transformations may be challenging, complex, and in many cases lengthy projects, but they are leading to real advances in speed and efficiency and are supporting growth in measurable ways.
Innovation is being approached actively, with formal structures to drive programs and manage results.
2018 Winners • Allstate for use of drone imaging in claims (data and analytics)
• Ameritas for its cloud/API layer to enable external app (IT practice or infrastructure)
• AXIS Insurance for its enterprise transformation project (core)
• Chubb for its agent portal and STP capability built on microservices (digital)
• MetLife for its use of machine learning to optimize personal auto underwriting (data and analytics)
• Pekin Insurance for its enterprise transformation program (core)
• Penn Mutual for its digital life insurance experience (digital)
• XL Catlin for its digital innovation practice (IT practice or infrastructure)
DIGITAL CASES
Chubb
Penn Mutual
Acuity
American Equity
Cake
Erie Insurance
Everest Insurance
Jetty
Mitsui Sumitomo
NSM Insurance
ProSight
Saxon Motor & General
Unum
Zurich Accident and Health
DATA AND ANALYTICS CASES
Allstate
MetLife
Everest Insurance
ProSight
Tokio Marine HCC
CORE APPLICATIONS CASES
AXIS Insurance
Pekin
CM Vantage Specialty
Everest
Haven Life
Motorist
OneBeacon
Wayne Insurance
Westfield
Zurich Life
IT PRACTICE OR INFRASTRUCTURE CASES
Ameritas
XL Catlin
Allianz Life
Farm Bureau Financial
Northwestern Mutual
| 46 Pages
Matthew [email protected]/CEO
6 Novarica Research Quarterly Q2 | 2018
Executive Briefs & Reports
Silicon Valley has long been a leading destination for innovation, housing some of the world’s most forward-thinking technology companies and exceptional talent. Insurers may not be able to mimic the exact science of Silicon Valley in their regions, but significant organizational and cultural shifts can attract the right talent and encourage ideas to emerge internally. As insurers look to bring their organizations into the future, Silicon Valley can offer valuable lessons to help them stay in stride with the pace of change.
This brief explores insights and best practices for insurers from Novarica’s Silicon Valley Innovation Tour during the first quarter of 2018.
Key Points and Findings Cloud is on the horizon. Cloud and SaaS options are maturing, and their implementation will require insurers to rethink traditional spending and IT management.
Digital and AI may fundamentally change how we think about insurance. Enhanced capabilities and platforms may give way to new products, methodologies, and business models.
The talent landscape is shifting. Employee expectations are changing, and nontraditional pipelines may be key to sourcing talent in the future.
Topics• Organizing for Innovation. How companies enable innovative cultures.
• The Move to Cloud. What the shift to cloud infrastructure means for budgeting and IT teams.
• Digital and AI. Sorting through the hype, and the potential impact on IT organizations.
Several insurers have undergone pilots with general-purpose AI providers that offer platforms for machine learning or NLP. These solutions are leveraged by early adopters looking at emerging technology transformation projects, with innovation budgets dedicated to hiring experts and training AI systems against insurance data sets.
Despite the strategic potential, insurers are finding general solutions require an insurmountable investment of time, resources, and capital. Instead, AI offerings tailor-made for the insurance industry are emerging as solutions to internal inefficiencies across the insurance value chain.
This brief explores the potential value of purpose-built AI solutions, the difference between purpose-built AI and general-purpose AI, and some notable solution providers in the space.
Life insurers strive to achieve the same levels of customer satisfaction in their contact centers delivered by retailers and consumer finance, but they face numerous challenges that have hindered their progress over the years.
Some challenges can be overcome through transformation efforts including process redesign and systems integration. Other challenges should be solved by relying on new technologies reaching a level of maturity that supports deployment in production environments.
Understanding the issues, approaches, and technologies surrounding contact centers is a key step in enabling insurers to transform their current environments, achieving significant cost reductions and improving the customer experience.
| 9 Pages
| 7 Pages | 8 Pages
Rob [email protected], Research & Consulting
Jeff [email protected], Research & Consulting
Keith [email protected], Research & Consulting
Ken [email protected], Research & Consulting
Chuck [email protected], Research & Consulting
Stephanie [email protected] Associate
7Novarica Research Quarterly Q2 | 2018
Business & Tech Trends
Individual life carriers are seeking to differentiate themselves in a competitive marketplace through investments in analytics, core systems, and marketing- and service-related technologies.
This report provides an overview of individual life carriers’ business and technology issues, data about the marketplace, and more than 50 examples of recent technology investments by individual life carriers.
Key Points and Findings Product innovation and speed to market are key to growing market share. Improved product modeling and management capabilities are key to revenue growth in a highly competitive market.
Carriers are improving customer experience with straight-through processing (e-apps, e-delivery, e-signature) but still have work to do, especially in post-issue service. Efforts to improve customer service are driving increased interest in document management/CCM solutions. Post-issue service capabilities lag comparable functionality in other lines of business.
Successful carriers are expanding use of business intelligence and analytics solutions to recognize and analyze market trends, product adoption, and producer performance. Some carriers are using AI for customer service or underwriting.
Topics• Recent market and financial trends
• Active reinsurer landscape
• Technology issues, priorities, and examples by functional area
• Top technology priorities for 2018 and beyond
| 29 Pages
Rob [email protected], Research & Consulting
Steven [email protected]. VP, Research
Ken [email protected], Research & Consulting
8 Novarica Research Quarterly Q2 | 2018
Key Points and FindingsCarriers are pursuing long-term data strategies, starting with data quality initiatives and focusing on data warehouses, operational data stores, and appropriate data marts. Carriers are prioritizing reporting tools to allow the business to run ad hoc reports and obtain insights.
Improved underwriting and product development flexibility are key considerations. Carriers are continuing to upgrade to highly configurable policy administration systems to improve underwriting and enable product development flexibility to speed entry to profitable niches.
Billing efforts focus on handling both retail and wholesaler billing needs. Account billing is becoming a higher priority as part of a shift to a more customer-centric approach.
Specialty carriers are extending functionality to agents and policyholders.
New technologies such as IoT are already impacting specialty carriers.
While specialty carriers have traditionally made less use of automation compared to other sectors, they are now seeking to differentiate themselves in a competitive marketplace through use of business intelligence, policy administration and rating, billing, and portals.
This report provides an overview of specialty carriers’ business and technology issues, data about the marketplace, and 57 examples of recent technology investments by specialty insurers.
Topics• Recent market and financial trends
• Active insurer landscape
• Technology issues, priorities, and examples by functional area
• Top technology priorities for 2018 and beyond
| 27 Pages
Eric [email protected], Research & Consulting
Steven [email protected]. VP, Research
9Novarica Research Quarterly Q2 | 2018
Key Points and FindingsSelf-service and transactional capabilities are required to manage expenses, but AI-related technologies are needed to build engagement and address projected increased producer workloads. With a push to lower fees, producers need to grow their client base to make up for lost income—but an increased compliance workload makes serving that base challenging.
Speed to market and product design are vital for sales growth. Business intelligence and core systems investments continue to be critical in improving time to market and product flexibility.
Carriers must be prepared for equity market shifts. Technology to support pricing, reserves, capital management, and statutory reserving are also key.
Regulatory changes will continue to impact the annuities market in the near term. While the DOL guidelines are all but gone, additional NAIC, SEC, and state regulations will replace them.
The individual annuity market faces declining volumes and rising competition from alternative wealth products. Carriers are looking to deepen existing distribution relationships, expand new channels, and improve transparency. Priorities include modernization of policy administration systems, as well as improvements to agent portals, business intelligence, and risk management.
This report provides an overview of individual annuity carriers’ business and technology issues, data about the marketplace, and more than 40 examples of recent technology investments by individual annuity insurers.
Topics• Recent market and financial trends
• Active insurer landscape
• Technology issues, priorities, and examples by functional area
• Top technology priorities for 2018 and beyond
| 29 Pages
Chris [email protected], Research & Consulting
Steven [email protected]. VP, Research
10 Novarica Research Quarterly Q2 | 2018
Novarica Market Navigators
Enterprise content management is an important function for insurers due to increasing focus on customer experience, new communication channels with content that needs to be stored and managed, and business demands to better leverage internal and external customer data. ECM generally refers to systems that manage intake, storage, workflow, and distribution of various content used by an organization’s business functions. ECM is a broad term which, for insurers, generally includes document management and workflow as well as document creation/customer communication management (CCM) and other related content management tools such as Web content management (WCM).
This report provides an overview of the available stand-alone document management/enterprise content management (ECM) and document creation/customer communications management (CCM) systems currently available to US insurers. The report contains profiles of each of 20 vendor solutions, summarizing the vendor organization, technology used, differentiators, client base, lines of business supported, deployment options, implementation approaches, upgrades/enhancements, and key functionality.
Vendors included: CEDAR Document Technologies, Cincom Systems, Echo Ridge Partners, FIS, GhostDraft, Hyland, iPipeline, Messagepoint, Napersoft, OpenText, Optical Image Technology, Oracle, Pitney Bowes, Pyramid Solutions, Quadient, Smart Communications, Top Down Systems, Vertafore, and Xpertdoc Technologies.
Chuck [email protected], Research & Consulting
Tom [email protected], Research & Consulting
| 146 Pages
11Novarica Research Quarterly Q2 | 2018
In one way, predictive analytics is merely an intensification of what the insurance industry has been doing for several hundred years—identifying patterns of risk in a sea of information to predict future risk based on patterns. Any actuarial table is essentially a predictive model: It takes demographic data about an applicant and determines the best price using past experience.
Modern predictive analytics refers to something more than actuarial tables. The term is most commonly applied to the creation and use of predictive models, typically used by insurers to generate a “score” that can then be interpreted by a human or an automated process. These scores are used to assess policy applicant risk, derive customer profitability, indicate claim severity, or any other area where an insurer would like to do a better job at knowing the unknown. Since admitted lines require the public filing of rate models, predictive models don’t typically feed directly into a rate decision, though a score might influence a risk tier, which then indirectly adjusts the rate.
This report provides an overview of the available predictive analytics software solutions currently available to US insurers. The report contains profiles of each of 19 vendor solutions, summarizing the vendor organization, technology used, differentiators, client base, lines of business supported, deployment options, implementation approaches, upgrades/enhancements, and key functionality.
Vendors included: Angoss, Atidot, Carpe Data, Guidewire, Infogix, Infosys McCamish, Intellect SEEC, ISO, LexisNexis, LTI, MFX, Pegasystems, Saama Technologies, SAS, Valen Analytics, Willis Towers Watson, and Zensar Technologies.
| 122 Pages
Jeff [email protected], Research & Consulting
Eric [email protected], Research & Consulting
Novarica helps more than 100 insurers make better decisions about technology projects and strategy through research, advisory services, and consulting.
We serve clients in life/annuity/retirement, property/casualty, workers’ compensation, and reinsurance. Our clients range from Fortune 100 insurers to small regionals and specialty companies. Although most of our clients prefer us to keep their names confidential, a partial client roster includes Amica, GenRe, Penn Mutual, ProSight, SECURA, SunLife, and XL Catlin.
Our senior team has direct experience as senior IT executives at firms including AIG, Arbella, AXA, Guardian, Liberty Mutual, MassMutual, Marsh, Progressive, Prudential, Voya, and others.
We publish frequent, independent, in-depth research on trends, best practices, and vendors. Our research projects are directed by our senior team and leverage the knowledge of more than 300 insurer CIO members of our Research Council. All reports are available to our clients without seat license restrictions.
Our Strategy-as-a-Service advisory services provide on-demand phone and email consultations on any topic in insurance or technology (as well as full access to our library). Our clients have told us it’s like having a team of experts down the hall—for a flat annual fee that is a small fraction of the cost of a single employee.
Our consulting services include vendor selection, benchmarking, project assurance, and IT strategy development. They are based on our deep knowledge bank, extensive relationships, personal experience, and proven methodologies. Our clients get rapid, actionable insights and guidance delivered directly by our senior team.
© 2018, Novarica, Inc. All rights reserved.
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