Next Generation Insurance: Leading from the front.

Demographic shifts in the US market and its implications on the consumer buying behaviour

Wed, 03 Mar 2010 06:56:17 +0000

I recently came across an article on the demographic shifts in the US market where:

1.The multigenerational household is gaining prominence - affecting major purchases, like automobiles, homes and college tuition. With a record 70 million grandparents in America in 2010, these grandparents will be deeply involved with their grandchildren - with decisions often being made by two generations of people - the parents and the grandparents.

2.No household type will neatly describe even one-third of households. The iconic American family (married couple with children) will account for a mere 22% of households. The most prevalent type of U.S. household will be married couple with no kids, followed closely by single-person households

3.Diversity will vary greatly by age - the younger population substantially more diverse than the old . By 2015, 80% of people age 65-plus will be white non-Hispanics and just 54% of children under age 18 will be white non-Hispanics. White non-Hispanics will account for fewer than half of births by 2015

Value selling – strategic benefits typically trump financial measures…but should the latter continue to be a laggard?

Wed, 27 Jan 2010 11:27:22 +0000

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.

New York Insurance Exchange

Wed, 20 Jan 2010 10:29:50 +0000

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

Insurance SaaS Services on Cloud

Mon, 11 Jan 2010 06:45:29 +0000

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.

Pack away the holiday stuff- wait a minute, what is that on the shelf?

Mon, 28 Dec 2009 19:14:58 +0000

As everybody starts to wind down the year and close their 2009 budgets and look forward to 2010, one thought that comes to mind is the purchases made that have been unused so far. For financial services firms that track investment earnings closely, it is quite interesting to note that a few millions in IT investments may not be tracking any returns yet. The most obvious example is that of software purchases that are simply not yet implemented or even poorly implemented with minimal changes to existing business or IT processes.

Improving Producer Experience

Thu, 24 Dec 2009 06:56:13 +0000

For an insurance company both Policyholders and Agents/Producers are equally important to top-line and bottom-line growth. Even in this day and age, Producers continue to play a vital role in bringing together carriers and end customers. Insurers are well aware of the importance of satisfied Producers — captives independents and others — in driving new revenue as well as in providing a competitive edge in the marketplace.

It is true that market-relevant products and attractive compensation will favorably influence a Producer’s decision to contract with a carrier. However the ‘ease of doing business’ - be it for initial contracting and appointment, tracking continuing education credits or license expiry or other administrative activities like maintaining biographical information, banking details etc. - will be a deciding factor in continuing a mutually beneficial relationship with the carrier.

Do you have a goal for reducing the % of non-discretionary spend?

Tue, 15 Dec 2009 11:25:39 +0000

I have been curious to ascertain the discretionary spend of insurers and I can see a shift in the response over the last few years. A few years ago, most companies would respond that, their discretionary spend is in the range of 20% to 25%. This is attributed mostly to the maintenance / support of the legacy insurance systems. Of late I am seeing an increasing trend of companies saying that they have improved this to 30% to 35%. Most of the reduction in non-discretionary spend has come down either due to offshoring or through server consolidation & virtualization etc. However, very few companies can claim that they reduced due to better modernization of systems, processes & applications

Sourcing Strategy to Optimize IT Spend

Thu, 26 Nov 2009 05:38:20 +0000

There has been a raging debate (on this blog as well as all major media outlets) on the right level of IT spending for carriers. While, generally speaking, the participants in this debate seem to be converging on the central theme of shifting to a ROI based prioritization and governance of IT spend, ruthless management of Total Cost will continue to be an imperative that impacts the ROI.

Most organizations have leveraged sourcing in some way or the other to optimize total costs. While sourcing is a strong lever, it is also important to assess the right sourcing strategy in optimizing the total cost. Managed services models provide an excellent opportunity to manage cost structures while shifting to a variable cost model. Using managed sourcing in conjunction with other strategies (like Grid computing) can be very effective in managing total cost to address the variable demand.

We all know TC = FC + VC*Q. For the IT landscape Q (Production) is the same as demand for IT in an enterprise (both discretionary and non-discretionary). Functional areas that have potential significant variability in demand (or seasonality – for example processing claims in the hurricane season or a new product launch) can benefit from leveraging models that lower fixed cost (and allow to not plan infrastructure and systems for the peaks) and use variable but predictable (tied to business outcomes) costs.

Let’s take a look at a model for optimizing Total Cost

What is the true discretionary spend in insurance companies?

Wed, 18 Nov 2009 11:48:28 +0000

I have written a couple of blogs on discretionary spend earlier. Word discretionary spend is quite loosely used. You can rarely get the same response to a question on the % discretionary spend – when you ask 3 senior IT executives of the same organization. Some consider discretionary spend as anything outside of operations and support. Some include enhancements as discretionary. Some consider only new development / re-engineering spends as discretionary. Some include new development / enhancements tied to regulatory compliance as discretionary.

“Be Careful What You Wish For . . . “

Mon, 02 Nov 2009 04:07:35 +0000

Over the past few months I’ve had an increasing number of discussions with insurance industry clients and prospective clients, alliance partners and analysts regarding “managing complexity . . . increasing complexity”. These discussions frequently turn to a newer dimension of this “complexity challenge”; one that has been enabled via the availability of insurance-specific software products (n.b., whether full applications or components) that do provide a significant degree of “flexibility and adaptability”. A variety of such products have been architected and developed with a view to enabling a significant degree of “flexibility and adaptability”.

Tying Web 2.0 technology to Business Objectives for improving ROI

Thu, 29 Oct 2009 06:16:02 +0000

Organizations are seeing Web 2.0 as a technology enabler to achieve business objectives to deliver results. Key to success is “collaboration” between business & IT in leveraging web 2.0 to achieve business objectives.

Some key business objectives of Insurance companies are around enhancing customer experience, revenue growth, minimizing operational expenses, improving employee productivity and distribution effectiveness. IT departments need to evaluate where Web 2.0 would be most effective to solve parts of the business problems once the business objectives are internalized. These business problems can be broadly structured around 3 key stakeholders – Employees (for Internal Operational effectiveness & Employee productivity); Customers (Customer experience, product development & revenue growth); Partners - Distributors, Suppliers etc (For Channel productivity and efficiencies).

Once the key stakeholders / business objectives are identified, organizations could start working on three key dimensions of change management – Process, Technology & people. Focusing on technology without focusing on business process and people can be disastrous. There are several examples where blogs, wikis, discussion forums don’t attract enough interest in the user community because the key business problems or issues are not addressed

Customer who? Insurers regaining abdicated role...

Mon, 19 Oct 2009 18:32:22 +0000

Insurance companies had typically abdicated their customer ownership role to agents who would be able to reach the customer face to face and drive the sales & service processes. But insurers are increasingly asserting their primary role nowadays with customers willing (and desiring in many situations) to work directly with their insurance companies.

A friend in need is a friend indeed!

Wed, 14 Oct 2009 06:00:53 +0000

Mortgage crisis, Credit crisis, Job losses, Car sales plummet – Welcome to the new economy of the 21st Century global village. For all businesses including insurance carriers, retention of existing customer is extremely important. So what do we do? Launch an elaborate customer data analysis, and create “n” more tiers of segmentation and focus on the top tier (the ones who contribute high volume of premium, no claim whatsoever) and shoo others? Well, that is an approach for the short term. What we need is a loyal customer base with a mix of the top tier, moderate and some average- to provide the right customer mix and size that can sustain the value for the long term. It is another story some of the heavy hitters on the claim side swear loyalty to life! Jill Griffin (author of "Customer Loyalty: How to Earn It, How to Keep It." ) mentions that “customer loyalty lifecycle comprises of six stages: suspect, prospect, first-time buyer, repeat customer, client and, finally, advocate. The goal of all relationship marketing is to continually move a customer to increasingly higher stages within the loyalty life cycle” Focusing on research that helps you find which lifecycle stage the customer is, what will enhance the value and move them to the next stage will be of great help.

Tale of two captive agents

Mon, 05 Oct 2009 11:30:49 +0000

For coverage of my home and 2 cars, I have been with the same insurance company / agent for the last 6-7 years. My insurance agent (Agent A) is a business like person whom I have spoken to only the phone. She was referred to by my friend who told me that she can get me the best deal for car insurance. On the phone, she comes across non sense but very efficient and quickly helps me complete the transactions. She has called me to prompt me if I forgot a payment, ensured that I had all the possible discounts and been very responsive to any phone requests. Every once in a while, I have compared rates (mostly online) in response to a TV ad and found the alternatives to be far costlier than what I currently pay for the same coverage.

Immortality- disagreeable future for Insurance industry?

Tue, 29 Sep 2009 11:19:05 +0000

The noted futurist Ray Kurzweil continues to expound his vision of human immortality - though his 20-year timeframe for achieving it does not seem to have moved forward in the last 4 years. Given his commendable achievements and awards starting with his college days at MIT, his views continue to attract the attention of the world media with multiple reports in the past week.