Next Generation Insurance: Leading from the front.

Decline in growth opportunities has forced insurers to look outside their traditional products and markets for sustained and profitable growth.  Product innovation has climbed further up in the list of priorities for today's insurer. I think the following are some of the key drivers that necessitate speedy and efficient introduction of new insurance products in the market
• Increased customer needs and expectations
• Demands from distribution channels
• Increased competition in the insurance marketplace
• Heightened regulatory scrutiny and compliance requirements

It is common knowledge that demand for new and creative insurance products is only going to intensify in the coming years; but the ability of insurance companies to cost-effectively respond is diminishing.  While IT legacy systems may pose significant challenges, other areas like poorly managed product introduction processes as well as inefficient product testing related activities contribute to the problem.  I believe that insurers should address speed to market challenges holistically at both the process and technology levels. 

Process
• Managing the overall process
• Promoting collaboration between stakeholders
• Encouraging customer participation in the product creation process
Technology
• Externalizing product rules and attributes
• Analyzing the impact of product rules externalization
• Integrating the externalized rules environment with legacy applications
Insurers should strive towards process improvements through well-defined and communicated best practices and close monitoring of standard metrics. This will result in predictable development time frames, improved quality and better measurement of results. On the technology front, insurers should consider taking a more active role in adopting new technological advancements for business betterment.
Though it seems to be daunting task, I strongly feel that a well defined strategy backed by well-developed business case will provide significant competitive advantages to the carriers.
Please share other strategy aspects insurance carriers should be looking into to launch the right product at the right time in the market.

Posted by Sanjaya Kumar at 05:15 AM | Permalink | Comments (2) | TrackBacks (0)

In many ways, the current debate about US healthcare reform is similar to the twin debate expected in near future about retirement benefits reform – the two legs of the crippling public finances the US faces in the next few decades. For far too long, the decision makers on these topics have been more “men” than “statesmen”- able to comprehend and address only the immediate time span for their lives/ careers and ignoring the longer term impacts reaching beyond for the state and its future citizens.

For insurance professionals- the challenge is only too familiar as we grapple with legacy processes & technologies many of which date back to the earliest days of the computing platforms from 25+ years ago. It has been immensely challenging to break out of the morass of continuing to do small tweaks to get by because of the high costs of comprehensive improvements which would bring insurance processing into the modern times. Workarounds and small projects seem to deliver what is needed for now (1-3 years), but continue to make future changes more complex and costly leading to a spiral downwards in terms of flexibility and time to market. Just like the larger US public institutions seem to be in the most trouble from legacy policy overhang (Federal & California governments), so too the largest insurance companies seem to be the ones with the most outdated processing platforms. Similar to the debt burden being loaded onto future generations, insurance companies are in essence carrying debts into the future that they will need to begin paying down soon.

The federal government cannot reasonably project today’s situation into the 2035 timeframe without any action (and seem to be understanding the imperative at least for now), so too insurance companies cannot afford to assume they can live with already outdated platforms for the next 25 years and beyond. Who will be the first to get rid of legacy overhang- the next few years will tell and at the least, reputation for the Insurance sector is at stake. Those leading from the front are likely to be the most influential “statesmen” who will leave a “legacy” rather than simply passing on the inherited legacy from prior to future generations.

Posted by George Ignatius at 04:33 AM | Permalink | Comments (2) | TrackBacks (0)

There is an opportunity I sense for Life Insurance companies to lead the financial services industry out of trust crisis & reinstate that lost credibility with policy owners.  One would agree that Insurance, more particularly life Insurance, is just a “promise” and not a product that people can touch & feel. Also, One would not be there to realize the benefits of such a policy and more often than not customers are not eager to realize the benefits they pay for!! A different way to look at it is that you have customers with you for their life time! If life Insurance carriers learn to engage their policy owners, the stickiness of such a business is very high & the co-creation opportunities for new business will emerge naturally.
So one idea I have is to engage each & every policy owner in Corporate Social Responsibility Endeavors your company currently takes up. For eg: For every premium payment reminder you send out, you ask your policy owners to choose causes (from a list of 10) that they would rank as causes worthy of corporate support & that verdict you get from your policy owners drives your corporate social responsibility activities. Well, if you think it worthwhile, you can solicit such a drive through your social networking channels like Facebook, Linkedin etc or getting your customer to vote through your website on their individual logins!

Posted by Umashankar Kotturu at 08:15 AM | Permalink | Comments (1) | TrackBacks (0)

In an industry organization, 30-40% of processes and supporting infrastructure (technology, systems and human resources) are the same as any other organization in that industry. These processes are not a source of competitive advantage for any of these organizations. Insurance organizations are not the exception here. Moreover, if you look at the cost of these processes (including the underlying infrastructure of technology, systems and human resources), it becomes imperative for Insurance organizations to sharpen their focus on the 4 Ps for the source of differentiation – product, price, place (distribution) and promotion.

There are some core Insurance industries specific processes such as product design, claims, distribution, customer acquisition and policy administration. All other non-core insurance processes should fall as good candidates for the “Cross-Industry “Shared services. Perhaps, it is time to see if cross-industry shared services can help significantly reduce cost of operations and assist the carriers in focusing on core differentiators.
What’s your take on the relevance of Cross – industry shared services to Insurance Industry?

Posted by Sanjay Mohan at 05:37 AM | Permalink | Comments (2) | TrackBacks (0)

To Be or Not To be – The dilemma !

Its downturn time folks! Every company is facing the same question when they think of a transformational spend.    Those who have chosen to be in the “To Be” category, great choice-   you have the opportunity to leverage all the positives that this climate can offer as vendors and service providers are ready to offer to you everything they can on the most favorable terms (on a personal note deals on cars to electronics are amazing all over the place- move over black friday- this is the time to buy) to sustain. Therefore it is the best time to move away from the beaten path and take a giant leap into what a robust transformation can offer and think about doing business differently.    For those who are in the “Not to Be” category- let us save it for a rainy day- hey – this is the rainy day and how much worse it could get to?  If we don’t spend on transformation now, when will it be? 
So, Where do you stand?  To be or not To be!

Posted by Baskar Sridharan at 09:37 AM | Permalink | Comments (1) | TrackBacks (0)

In these times of global uncertainty and budget cuts, insurers are unsure how to decide on spending the limited resources available.  Costs of maintaining existing legacy applications continues to rise and this is leaving very little money left for any discretionary spend. At the same time, business groups are demanding returns on the IT investments.

Most Insurance carriers tend to spend upwards of 70% of IT budgets on maintaining existing (IT infrastructure, application maintenance and support) applications. In this situation, some carriers do end up resorting to ad hoc prioritization processes resulting in sub-optimal results. Therefore, it has become very imperative for carriers to manage their expenses meticulously.

A structured multidimensional IT investment model can help in better budget allocations and effective prioritization of initiatives. Following are the few basic principles to manage the portfolio to optimize the return on the spending.
•Ensure identification of the right projects / programs / initiatives by using a structured two-dimensional analysis (Corporate Objective vs. Investment Objective) can easily help in balancing the portfolio
•Regular evaluation of projects whether they merit continued spending in line with the objectives
•Define and adhere to a structured approach to identify and track business benefits
•Effectively leverage variable cost model provided by IT outsourcing industry
•Have a structured method to identify value drivers and impact on key operational metrices and articulate that justify spending on portfolios of initiative

Finally Organizations having clear sponsorship and accountability on the delivery of benefits will be the one’ s coming out of this crisis sooner than the others and will be better positioned to  take a giant leap on the path of robust transformation. 

Posted by Siva Nandiwada at 09:22 AM | Permalink | Comments (1) | TrackBacks (0)

For a few years, developing and launching new products have been a high priority in insurance companies. The Pension Protection Act (PPA) of 2006 opened the door for product innovation and design creativity by allowing the introduction of tax-advantaged combination annuity-LTC insurance products, starting in 2010. This in conjunction with the estimated $ 9 trillion baby boomer market driven by the unfunded life span presented a significant opportunity for Financial Services companies.

The recent economic events have changed the dynamics of the market. The unfunded life span presents a bigger problem for many given that the retirement savings and real estate are down sharply in value and many baby boomers have had to dip into their savings sooner than they had planned. However, this has also negatively impacted the purchasing power of this group. A McKinsey report (Serving aging baby boomers based on 2006 data) projected that in 2015, 60% of all consumption by boomers will come from those who are unprepared for but envision retirement.  This segment is likely to have grown in proportion through the last 9 months and will not be able to maintain their current lifestyle through retirement.

Posted by Srikanth Srinivasan at 08:59 AM | Permalink | Comments (2) | TrackBacks (0)

After about 9 months of cutting spend on operations and scaling back on strategic programs, there seems to be a distinct change in mood over the last 2 months. The mood is still cautious and companies are being very selective about the programs they are investing. In my conversations with executives in both Life and P&C insurance companies, following are a few trends I have seen are
•Focus on improving distribution effectiveness and exploring alternate channels (especially on the P&C side)
•Increased focus on customer experience and retention
•Need to build better business cases to articulate the value of these programs
•Back office operations projects are far fewer in number but seem to be focused on taking cost out of operations through standardization / shared services on common platforms.

Posted by Srikanth Srinivasan at 08:42 AM | Permalink | Comments (1) | TrackBacks (0)