Next Generation Insurance: Leading from the front.

With most large insurance companies sitting on legacy IT assets that hinder flexibility to adapt to new business needs (such as cross-channel ops for customer service), it is critical to consider how their organization structures and decision making processes for IT investments can enable them to move quickly to steal a march on their competitors.

 

Many carriers have been diligent over the last few years in setting up strong governance practices over their IT investments and ensuring they are spending their corporate investments wisely in aggregate by comparing large projects at the company level instead of at LoB level (usually projects over a certain threshold such as $250K). But even though their newly minted governance processes focus on the appropriate financial measures (mostly NPV or IRR, sometimes even option value), executive level decision making still lags with understanding & use of these measures playing catch-up and probably needing another 3-5 yrs before becoming fully mainstream.

In light of the above, there are two aspects of the current trends in the insurance industry that have strong implications for carriers that can make a difference in the competitiveness of their business ops
1.       Shared service ops across LoBs/ distribution channels- with unified customer service the holy grail across the multiple silos that exist today, companies will need to ensure that their executive level sponsorship and decision making also focuses on enterprise level benefits. These cross- silo efforts typically require foundational investments in the legacy IT infrastructure that can be justified only with financial toolsets that measure the value over a 3+ year horizon (as compared to quick fix solutions that deliver small cost savings in 1-2 yrs but increase costs in the longer term).
2.       Revenue focus in the current recessionary environment- there is definitely a strong preference now for investments that can generate higher sales volume and maintain the excitement level within the agent/ sales community. Carriers will need to make fundamental changes in their sales operational infrastructure to enable any real advantages that can deliver benefits beyond the pale of product tweaks and new offerings (such as looking into their claims & underwriting ops for marketing & lead generation potential or even enabling more direct channel sales). Such capabilities will also require very strong financial toolsets to measure the effectiveness of the investments especially given the complexity of measuring returns from revenue enhancements which has been a typical source for double-dipping.  

Carriers who are able to execute the right balance within their organizations between strategic and financial measures and focus their scarce resources on the right investments will obviously steal a competitive edge- enabling the right decision making processes within their organization backed by effective use of strong financial toolsets would be a key ingredient for that balance.

 

Posted by George Ignatius at 11:27 AM | Permalink | Comments (0) | TrackBacks (0)

For over 400 years there has been no parallel to Lloyds of London, while stock exchanges have conflagrated and today you have stock exchanges in every major city, Insurance exchanges are synonymous with Lloyds and the world is contented with just Lloyds, Surprisingly the first direction to break the monotony came recently from New York State Governor, New York State wants to set up a rival Global Insurance Exchange to  specialize in coverage of complicated risks such as oil rigs in hurricane regions, tall buildings that are potential targets of terrorists or corporate directors who could be blamed for accounting scandals Actually this is not the first time New York State wants to do this, New York State set up an exchange in the 1980s as a centralized marketplace for brokering and underwriting, was founded to great fanfare but later closed its doors after the industry was hit by a severe period of losses. In its present attempt the New York Insurance exchange plans to allow underwriters to form syndicates to reinsure, and insure unusual or very large exposures. The State of New York is forming a working group to set out exactly how the exchange could operate, has already tapped the views of a wide range of industry participants including both U.S. and foreign insurers, some of the major insurance brokerages and possible investors.
This opens up an interesting chapter in the global insurance trade, If the present attempts by New York is successful  it could become a formidable competition to Lloyds and also result in creating healthy competition between the various entities and if successful could also open up the clamor to open more such exchanges.  Lloyds writes about 44% of business from US & Canada and if we include South American business as well Lloyds writes about 50% of its premiums from Americas. That’s just about US$ 10 Billion of Gross written premium that is crossing Atlantic to the UK today.
The trend could be a blip or become a wave if New York Insurance Exchange succeeds in its attempt but holds wide felt ramifications & opportunities for suppliers who can tap into help New York Insurance Exchange as a potential service provider. Even if the NYIE picks up 10% of business from Lloyds or simply picks up the additional growth that Lloyds has been seeing in Americas the Exchanges at the right competitive potential could start at about US1 to YS 2 Billion of premium income a year.
Obviously it is still a long way to see how this materializes into reality and what could be the actual performance of such an exchange. Also various waves that came to hit Lloyds in the past including the Captive offshores, Smaller insurance exchanges  and ART schemes have all enriched Lloyds growth and has furthered it to grow bigger and better, it would be interesting to watch how this turns out to be!

Posted by Sivakumar Seshadri at 10:29 AM | Permalink | Comments (0) | TrackBacks (0)

Off late so much is being said in the media about SaaS, Cloud computing and its applicability to Insurance world, Recently a leading insurance industry focused technology journal highlighted 4 key technology solutions that will peak in 2010 and identified the top technology solution every CIO is evaluating at this point of time as Cloud computing and SaaS based software models. Quite a few big names have come to public about their intentions to seriously consider SaaS and Cloud as a part of their vision though they have also raised concerns on the ability of Cloud /SaaS to protect their data privacy requirements & organizational requirements in the longer term. 

 

Cloud computing has two sides to it one covering the IT Infrastructure consisting of mainframes & end-user desktops and workplace computing. Insurance companies which have tried cloud have so far restricted themselves to private clouds.  I believe insurance companies will continue to restrict themselves to safer cloud options in view of the data protection & privacy requirements. 

On other side SaaS (Software as Service) has been adopted so far only around peripheral enterprise applications such as email, collaboration, office applications, and stand alone business applications such as CRM. Sales force lead management solutions have been existing for quite a number of years and salesforce.com is a classic example of how SaaS structure could be exploited by insurance companies. So far this is the area that has seen maximum SaaS adoption.

I believe that the both the key trends will grow to attract more attention and It is important for Life, P&C Insurers to adopt and build a longer term vision statement with a privacy protected Cloud , SaaS view.

Posted by Sivakumar Seshadri at 6:45 AM | Permalink | Comments (2) | TrackBacks (0)