7 Technology Trends Transforming the Insurance Industry

7 Technology Trends Transforming the Insurance Industry HOW INSURERS CAN ACHIEVE GROWTH

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TABLE OF CONTENTS

Introduction

1. Mobility

2. Big Data and Analytics

3. Telematics

4. Automating Regulatory Compliance

5. Improving the Agency Experience

6. Social Media and Collaboration

7. Distribution Channel Management Conclusion

About Vertafore

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7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 3

Introduction

Top 7 Trends Transforming Insurance

1. Mobility


3. Telematics




7. Distribution Channel Management

The number-one priority for insurance carriers today is profitable growth and one of the most effective ways to enable this growth is through the use of innovative technologies. Yet, while they are critical, implementing new technologies can drain budgets and resources. Carriers must judiciously determine which technologies are worth the investment today and which ones deserve a strategic “wait and watch” approach.

This E-book will describe seven technology trends that will make a significant impact on carrier growth in a variety of areas:

• How carriers approach their internal processes

• How they collaborate with both external partners and internal staff

• How they develop and distribute products and services

• How they meet regulatory and compliance challenges

In addition to providing an overview of each trend, this E-book includes recommendations for how carriers can apply these trends to both gain a competitive advantage and support growth initiatives.

4 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

1. Mobility

Trend OverviewMobile devices are here to stay—largely driven by a rapid proliferation of consumer mobile apps—and are affecting how carriers conduct business and interact with stakeholders.

In fact, more than 30% of carriers provide agent or customer capabilities via mobile, and more than 60% will add mobile capabilities for policyholders and agents in 2013, according to Novarica’s report, Mobile in Insurance Beyond Personal Lines: Current Trends and Expectations. Karlyn Carnahan, Novarica principal, adds that 70% of property casualty insurers predict that they will offer mobile capabilities by 2014.

There are a few high-profile, mobile-enabled applications, such as Progressive’s For Agents Only website available on mobile devices and Western World Insurance’s mobile app that supports rating, quoting and binding.

Carrier Recommendations While mobile is quickly becoming table stakes for insurance carriers, implementing mobile successfully requires more than simply providing downloadable apps to employees, agencies and customers. Insurance carriers must take a strategic approach to their mobile offerings, ensuring that these offerings truly enhance the user experience, provide the functionality that users want and leverage the form factor of the device.

For example, rather than provide online forms, which can be cumbersome to complete without a keyboard, leverage inherent mobile capabilities such as geo-location and portability.

Carriers can provide field marketers and agents with information they need to perform “what-if” analysis and sell to and service customers on an easy-to-carry tablet rather than a more bulky laptop when making client and prospect visits. Carrier employees can use tablets to write interactive performance reports during a site visit and improve agency performance.

http://www.novarica.com/report_ins_mobile2013/



Mobile is about positioning for the future. –Chad Hersh, Novarica

Other capabilities that insurers should consider deploying include mobile apps that support collaboration with underwriters. Today, about 20% of carriers offer these capabilities, and an additional 20% plan to deploy them in 2013, says Carnahan.

Notes Novarica partner Chad Hersh, “Mobile is about positioning for the future, and significant measurable short-term ROI is in short supply. But given the rate of change in tablet adoptions, insurers cannot afford to be left behind. Avoiding mobile today is like avoiding web browsers in the late 1990s.”

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Report Cited

Î Mobile in Insurance Beyond Personal Lines: Current Trends and Expectations



Trend OverviewIt’s all about the data—and carriers get it. When Novarica asked insurance CIOs how they would spend an “extra” $5 million in their IT budgets, almost one- third said they would spend that windfall on Big Data.

It’s not surprising that a large percentage of CIOs prioritized Big Data over a wide variety of other IT possibilities since insurance continues to be a data-driven industry that creates huge volumes of structured and unstructured data that carriers must manage.

While insurers recognize that harnessing this data can provide them with valuable and actionable insights, they struggle with making the technology modernization needed to support Big Data and embed it into real-time applications.

CIOs will need that extra $5 million because infrastructure modernization can be costly: Gartner predicts that Big Data infrastructure changes will drive $232 billion in IT spending through 2016 across industries.

Carrier Recommendations Big Data presents several challenges to carriers: How to aggregate huge volumes of data and how to analyze that data to make intelligent business decisions.

Carriers are still grappling with ensuring that they are able to collect the data they need and then transform that data into a format that is easily accessible, explains Carnahan of Novarica. Third-party data is being leveraged across almost all business processes. Whether it is used to pre-fill a consumer online quote, verify claimant information or assess fraud risk, third-party data provides significant benefits across the policy lifecycle.

U.S. insurers are increasingly leveraging external data sources in core business processes. Over the past 20 years, the amount of data that is sourced from prospects, claimants or agents has been decreasing while the amount sourced from third-party data providers continues to increase. The business case is simple, yet powerful: External data sources provide immediate access to quality, comprehensive data that can improve underwriting outcomes and create efficiencies for the consumer, agent and insurer.Once they have aggregated the right data, carriers can then take the next step and use that data to perform predictive modeling and build analytics into their operating models. “Those carriers using analytical models are generating significant benefits,” explains Carnahan.



Those carriers using analytical models are generating significant benefits by identifying and acting on unique insights.–Karlyn Carnahan, Novarica

Carriers can use predictive modeling for a wide variety of business activities, including underwriting, marketing and claims. During the underwriting process, analytics can provide guidance to underwriters to improve risk quality assessment and optimize prices. Carriers can identify customers most receptive to cross-sell offers or those most likely to defect. They can proactively reduce fraud by detecting potential fraud earlier in the process and by detecting otherwise hidden patterns of fraud.

Big Data also has a role in risk management, enabling carriers to analyze risk characteristics and claims statistics to decide which accounts would benefit from additional loss control services. Predictive analytics also are being used heavily in the claims space to detect fraud and to better align resources with cases. One workers compensation carrier was able to predict which claimants were likely to have extended lost work days. By intervening early with nurse case managers, the carrier was able to significantly reduce their lost time days, relates Carnahan.

Another area in which Big Data can help carriers is monitoring carrier reputation by analyzing comments about the carrier throughout social media. In doing so, carriers can addressany issues that may damage their reputation or brand.

“Big Data has the potential to transform carriers,” notes Carnahan. “Carriers need to consider the ROI and technology implications of Big Data as well as the impact on their organizations and processes.”

Says colleague and Novarica managing director and partner Matthew Josefowicz: “Insurers can profit immensely from Big Data if they have created a culture where business leaders trust analytics and act on the insights provided. All insurers should take steps to create the culture today if it doesn’t already exist in their companies.”

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Report Cited

Î Top Five Disruptors in the Next Five Years for Insurers

http://www.novarica.com/top_5_disruptors/


Trend OverviewTelematics and usage based insurance (UBI) are among the hottest topics in auto insurance. Rather than creating broad rate tiers by looking backward at the performance of a book of business, it promises the ability to create more granular pricing segmentation and improve the accuracy of pricing by using a customer’s actual driving behavior as the basis for generating rates. The feedback provided to drivers also has potential for actually changing driver behavior to safer levels.

Carrier Recommendations For carriers considering entering the UBI market, there are a number of important areas to assess. The technology is still evolving, and there are several business models to evaluate. UBI comes with real costs, so carriers need to consider their options carefully.

The first area to evaluate is whether UBI fits with a carrier’s strategic market. Carriers looking for long-term “preferred” customers will likely find this a good match with their strategy. However, carriers that focus on the sub-standard market, or short-term policies, may not benefit from UBI because of the cost of the infrastructure needed to support it. Assess not only which customers are likely to switch to a UBI-based program, but also what the implications will be for those customers who don’t switch. Drivers that demonstrate superior driving skills will certainly earn a lower premium. Those drivers, though,

who don’t switch are likely to experience higher prices due to the normal skewing of rate distributions. Carriers may need to plan for a higher defection rate from those customers.

Carriers that are considering moving forward with telematics have different business models to evaluate. Two dominant business models are being used in the industry today. Pay as You Drive (PAYD) typically charges a customer based on actual, documented miles driven. Pay How You Drive (PHYD) generally bases pricing on a variety of dimensions related to the driving behavior of the customer, such as rapid accelerations and decelerations, the time of day, the routes driven and the territories driven through. Carriers can either use installed devices and collect granular driving data themselves, or can work with a provider that sends them aggregated data—think of it as a driving score—that can be used as input to rating models.

The PAYD vs. PHYD decision has significant implications for carriers as it affects the technology requirements and influences how they can utilize telematics as a service offering for their customers. If a carrier is planning to utilize an installed device, additional considerations apply, such as how to distribute the device, install the device, provide customer support for the device, collect data from the device and retrieve the device in the event of customer defection.

3. Telematics


Although UBI is still not widely available or even widely understood among consumers, the adoption rate of the technology is slowly picking up speed as more insurers develop UBI programs to add to their offerings for both personal and commercial lines of business.–Karlyn Carnahan, Novarica

A major consideration in UBI rollout is the existence of Progressive’s UBI patent, which has been a barrier to entry for carriers. The Progressive patent is fairly extensive, covering “a method and system of determining a cost of automobile insurance based upon monitoring, recording and communicating data representative of operator and vehicle driving characteristics … [including] an operating state of the vehicle or an action of the operator.” In December 2012, Progressive announced terms for licensing its UBI program. Carriers interested in using the Progressive patent must apply by the end of June 2013. If approved, carriers will be permitted to rate customers under the patent starting on or after April 2015.

What should a carrier do during those years of waiting before they are permitted to use the data for rating purposes? Some carriers are looking at providing telematics capabilities as a customer service. They are planning to use the time to evaluate the collected data, but not use the data as an input for rating. Examples of services considered by carriers include safe driver coaching, automatic crash notification/emergency call, crash data management, stolen vehicle tracking, geo-fencing, remote access and vehicle diagnostics.

Once a carrier has completed its strategic assessment, data management issues must be evaluated and preparations made. A plethora of data about driver

behaviors may be available, and a carrier needs to assess what should be collected, stored and used for analysis. Carriers may need new technology infrastructure to store, organize, cleanse and manage the data. Additional skill sets may be needed to take full advantage of this new data through sophisticated analytics, data mining and modeling.

While it may be tempting to sit back and watch the UBI market rather than leap in, opportunities across the value chain exist for insurers that adopt the technology early, especially now as the main barriers to entry are falling. Insurers waiting too long potentially face “adverse selection” and may be left mostly with customers who don’t suit their pricing model.

Although much has been written about the use of telematics in the auto insurance industry, other types of insurance can also benefit from behavior-based products. Home monitoring devices can track whether or not a homeowner locks external doors and drive underwriting since a locked door reduces burglary risks. In commercial insurance, devices can monitor bridges or large buildings to identify potential structural issues.

In life insurance, carriers can offer discounts for wellness programs based on the number of times a customer visits a gym per week.

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Trend OverviewAs a highly regulated industry, insurance carriers have always built regulatory compliance into their business processes and adjusted their processes to assure they remain in compliance as new regulations are enacted. Whether it is ensuring producers are properly licensed and appointed, making sure pricing is generated in a fair and consistent manner or confirming that claims are handled fairly, compliance practices impact all aspects of the insurance industry. Carriers that have not built flexibility into their systems struggle with consistently implementing regulatory requirements and responding quickly to data calls.

“Carriers need to be able to rapidly add data elements, modify documents and assure workflows are easily modified to deliver consistent practices,” says Carnahan.

The carriers best able to anticipate the future regulatory landscape and implement technology to streamline regulatory compliance will be in a much better position than their competitors to address new and emerging mandates, such as the Affordable Care Act, without missing a beat or impacting agents or customers.

Carrier Recommendations Automating regulatory compliance serves several purposes. It provides carriers with almost instantaneous access to information and minimizes the risk of non-compliance by ensuring processes are followed consistently. When regulators ask for information, carriers must supply it quickly, explains Carnahan.

Regulators also look for consistent behavior. In other words, is the carrier consistently following the law and operating in a way that is fair and non-discriminatory to policyholders? Automation ensures that tasks are being completed consistently by all staff—even novices—because the business rules are incorporated into the workflows. Automation also provides the underlying data for reports and documentation about how a task was performed and by whom.

Carriers with modern core systems have an advantage in regulatory automation over their peers working within the confines of a legacy environment. A modern system, based on business rules or workflows rather than hard-coded instructions, is much easier to change as regulations morph.

While carriers are highly motivated to drive growth today, every carrier wants to do so in a way that is compliant with their regulatory obligations. –Karlyn Carnahan, Novarica

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Look at your technology offerings and compare what you’re offering to what the agents are looking for in their top carriers—fast, responsive, easy.–Karlyn Carnahan, Novarica

Trend OverviewSince agents write more business with those carriers easiest to do business with, carriers that work with independent agents cannot achieve their objective of profitable growth without focusing on the agency experience. Carriers are taking note, and up to 80% of carriers plan to enable agents to perform most information and transactional capabilities through easy-to-access agent portals, according to the Novarica report, Paper, Phone, Email, Web, Mobile: Communication Channels in U.S. Insurance.

Carrier Recommendations Top carriers listen to what agents’ value and then leverage technology to provide that type of experience. For example, the most important capability for agents is carrier response to underwriting, followed by speed of underwriting decision, according to Novarica. Carriers focused on improving those capabilities with technology successfully drive increased revenues. Agents also value participation with comparative raters, especially in personal auto.

More carriers are providing a robust portal environment that provides functionality to agents, including uploading applications, quick quotes to bind and issue endorsements, quick-and-easy access to appetite guides, and proprietary rules and forms.

Real-time upload and download to agency management systems is important particularly for those carriers working with large insurance agencies that represent multiple carriers. However, improving the agent experience is more than offering real-time connectivity; it requires holistic approaches that ensure that every agent touch point is optimized.

Asserts Carnahan, “Carriers should be thinking, ‘How can I enable agents to be more productive and write more business?’” The goal is to minimize the amount of time agents spend on non-revenue generating activities.

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Report Cited

Î Paper, Phone, Email, Web, Mobile: Communication Channels in U.S. Insurance

http://www.novarica.com/communication_channels/






Trend OverviewSocial media is about helping people connect. Consumer and agent expectations for connection have been established through social media tools that provide an opportunity for people to collaborate and share information. Social media tools—such as Facebook, LinkedIn and Twitter—are frequently used in marketing to drive brand awareness and connect with customers. But other uses of social media tools improve collaboration and improve decisions and processes both internally with carriers and externally with the distribution channel.

Today, most collaboration in the insurance industry takes place in the form of emails and face-to-face meetings. While there will likely always be a need for these types of collaborations, carriers can create efficiencies by moving beyond these communication avenues and providing a centralized collaboration platform where people can share documents and ideas and manage knowledge.

More than 70% of carriers that distribute through independent agents use social media, says Novarica in its report, Insurer Social Media Strategies for Independent Agent Distribution, yet more than 40% have no social media policy in place. Insurers need to institutionalize their social media interactions with agents in such a way that they can learn what’s important to agents and use those insights to drive profitable growth.

Carrier Recommendations Carriers can use collaborative technologies to improve process time. During agent onboarding, agents could access a variety of documents they need to get started with a carrier, such as sales pipeline management and training. They could also connect with other agents in discussion forums designed to support knowledge sharing. Agents could ask questions of their peers, discuss tactics and generate new ideas. The collaboration platform would also store agent action plans and reports.

http://www.novarica.com/socialmedia_strategies_2012/


11724 NE 195th StreetBothell, Washington 98011

800.444.4813 vertafore.com

Vertafore delivers software and services that transform the business of insurance. Unique to the industry,

more than 20,000 customers rely on Vertafore to provide integrated technology that connects the entire

industry with the most complete source of solutions—agency management, rating and connectivity, content

management and workflow, research solutions and producer lifecycle management—so their businesses run

better and are more profitable. For more information about Vertafore, please visit vertafore.com.

© 2013 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. VCM.EB.7TRE.0613


Any social media tools must be intuitive, contain content people care about, provide choice over relationships and give employees something back that they value.–Karlyn Carnahan, Novarica

Many use cases exist in the insurance industry—from creating training communities to large account underwriting to product development. Carriers are generating measurable improvements in both process time and the quality of decisions.

“Collaboration portals should be designed to help people do their job,” says Carnahan. “Any social media tools must be intuitive, contain content people care about, provide choice over relationships and give employees something back that they value.”

Carnahan recommends that carriers begin by determining the role of collaboration within the context of the carriers’ overall business strategy, including its impact on governance and compliance, cultural implications and ability to demonstrate measurable success. This includes creating processes and policies and driving employee adoption and participation.

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Report Cited

Î Insurer Social Media Strategies for Independent Agent Distribution



7. Distribution Channel Management

Trend OverviewIn a multi-channel world, existing distribution channels remain as new channels emerge, complicating channel management. Today, they are managed as discrete distribution channels unable to integrate for seamless agent and carrier interactions.

“Different elements of insurers’ communications are shifting at different speeds, and older channels are not going away,” says Josefowicz of Novarica. “This creates additional burden on and confusion for insurer CIOs, who are required to invest in supporting new channels without being able to shutter older channels.”

Carrier Recommendations Carriers need to consider how to strategically link multiple distribution channels beyond the consistent posting of transactions. They must also analyze how channels relate to each other, especially for those carriers selling direct to consumers and through agents. Carriers must support both direct and agent channels by motivating agents to generate business, compensating them appropriately and providing a suitable level of service to extract more revenue.

Carriers are experimenting with a wide variety of techniques to better manage their agents strategically, not just on a transaction-by-transaction level. Mobile sales force applications, social media support tools and straight through processing are all techniques that deliver tangible benefits.

Different elements of insurers’ communications are shifting at different speeds, and older channels are not going away. –Matthew Josefowicz, Novarica

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“The future ain’t what it used to be,” Yogi Berra once said, and for the insurance industry, it’s true that the future will likely look quite different from the present.

For insurance carriers, technology trends such as mobility, collaboration platforms, analysis of huge amounts of structured and unstructured data, and new distribution channels can transform how they interact with their customers, their agents and others in the insurance value chain. These seven technology trends are deserving of carrier resources; those carriers that ignore them risk being left behind in a rapidly changing industry.

For more information on how Vertafore helps carriers transform their business and achieve their growth objectives, visit vertafore.com.

Conclusion

These seven technology trends are deserving of carrier resources; those carriers that ignore them risk being left behind in a rapidly changing industry.

11724 NE 195th StreetBothell, Washington 98011

800.444.4813 vertafore.com

Vertafore delivers software and services that transform the business of insurance. Unique to the industry,

more than 20,000 customers rely on Vertafore to provide integrated technology that connects the entire

industry with the most complete source of solutions—agency management, rating and connectivity, content

management and workflow, research solutions and producer lifecycle management—so their businesses run

better and are more profitable. For more information about Vertafore, please visit vertafore.com.

© 2013 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. VCM.EB.7TRE.0613

7 Technology Trends Transforming the Insurance Industry

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