The insurance industry worldwide is undergoing a significant change accelerated by the financial meltdown and changing demographics of its customer base. In this blog, we will discuss the challenges, approaches and possible solutions to dealing with the transformation that the industry has unwittingly entered into.

June 26, 2018

Next Generation Policy Admin System And Cloud

Like many other industries, P&C insurance industry is undergoing huge digital transformation. It is facing huge margin pressure due to the fierce competition and increased calamities etc. These call for operations to be run at very high efficiency levels and for better risk mitigation. 

There is a change in the customer's mindset as well due to digitization etc. Mobile channels are used more often for policy servicing and claims etc. Customers have tools to compare rates of multiple providers before making a decision at their fingertips.

Localized insurance providers are turning out to be the biggest threat to large players in the market due to the local flavor they can bring in apart from the cost advantage to the customer. As most of these providers are startups, they start with the latest technology stack and computational models. Due to lack of legacy data, they need not worry too much about regulatory and compliance requirements which in turn increases their operational efficiencies.

There is increased usage of technology across the board in insurance policy life cycle right from quote to claims:

  • Drones are used for property assessment and claims estimation. 
  • Analytics are also used for customizing products for customers
  • IoT devices are used for real time data collection
  • Claims and policy management processes are expected to be transformed using Block Chain.

All these changes require big players to make big changes to their core systems to stay relevant. At high level, the core features of new system can be classified into the following:


Policy administration system (PAS) is a key component of P&C insurance provider's application landscape as this the place where customer is going to directly interact with the provider's system. This system must be flexible enough to perform the activities with utmost ease and at the same time intelligent enough to offer new services based on the usage etc. NextGen PAS need to have the following characteristics to stay relevant in the current times:

NextGEN_PAS2.pngThese are very important to implement modern models like 'Usage Based Insurance(UBI)" etc. Lot of collaboration is needed among multiple systems which requires strong collaboration platform. This where cloud computing plays a key role. 

The underlying platform should be highly elastic and have seamless integration capabilities with IoT devices etc. With the amount of investment Cloud Service Providers (CSPs) are making into their service offerings, cloud adoption as the first step of their modernization journey would help insurers get to the target state faster.

March 1, 2018

PaaS adoption in P&C Insurance

What is PaaS?

PaaS stands for 'Platform as a Service' in Cloud computing world. It gives one level of abstraction over the basic cloud service offering - IaaS (Infrastructure as a Service) by taking care of underlying infrastructure so that the enterprise can focus on delivering business value to the end users.

Majority of the Cloud Service Providers (CSPs) offer PaaS offering apart from IaaS offerings. Open source PaaS platforms like CloudFoundry, Heroku and OpenShift are also popular.

Trends in P&C Insurance

P&C Insurance is undergoing tremendous changes currently. There is huge pressure on premium costs reduction. New products must be delivered to customers quickly to compete with the increasing number of players in the market. Also, the local players and startups are turning out to be big threats to large players in this area due to the local flavor they can bring to the policies.

For the large players to stay relevant in the current market environment, it's important that they embrace digital transformation. At the core of this transformation journey is the agility from infrastructure procurement to feature delivery.

The following will be the primary objectives of the digital transformation journey of the large players in P&C Insurance sector:

  •  Reduced time to market
  • Reduced infrastructure costs
  • Reduced operational costs
  • Improved collaboration of global teams
  • Mobile first approach to new feature delivery

All the above will require the infrastructure to be globally available at lower cost and the development processes to be very agile. So, Cloud computing becomes the natural center point of any modern large digital transformation journey. Large insurers started recognizing this important aspect and are currently evaluating various cloud adoption options.

PaaS adoption in P&C Insurance

One of the challenges of adopting cloud in Insurance sector is meeting compliance and regulatory requirements. It was relatively easy to meet them with on-prem data centers and application servers as the organization has full control over access etc. With public cloud, it's not easy to meet them due to the nature of public cloud. Hence the insurers are opting for setting up private cloud within their network with the infrastructure capacity provided in-house.

To balance the regulatory requirements adherence and modern computing pattern adoption, insurers are evaluating various PaaS options such as PCF, OpenShift, Heroku etc. This gives the organization to build regulatory compliant cloud and adopt modern methodologies like DevOps to meet business objectives. These PaaS platforms also reduce the infrastructure maintenance overhead for the organizations by abstracting the underlying infrastructure management from the developers.

These platforms offer industry standard infrastructure management options apart from the portability which is also one of the key objectives of the organization. These platforms provide the opportunity to avoid Cloud Service Provider (CSP) vendor lock-in and thus align with multi-cloud strategy of the organizations.

Observations and recommendations

While most of these PaaS platforms do offer the above-mentioned flexibility, they are primarily container driven platforms. So, there will be few applications in large enterprise IT landscape that are not good candidates for containerization. Re-engineering those apps would be preferred option but that won't be generally done at the beginning when an organization starts on modernization journey.

There will also be few data sources which the enterprise would still like to host in isolation and they source data for some of the apps hosted on these PaaS platforms. The access mechanisms are generally more secure which need to be supported by these PaaS platforms as the security at container and orchestration level also becomes key for overall security.

Based on the experience, adopting these PaaS platforms would help insurers speed up their modernization journey apart from improving developer's productivity. Respective enterprise level security patterns and nature of data sources need to be considered before choosing a PaaS platform. Integration with on-prem applications and the cost associated with such setups should also be considered before going for PaaS instead of IaaS.

December 13, 2017

Electronic Health Records and Cloud Computing

Electronic Health Record (EHR) is the digital version of patient's health record. EHRs are real time unlike the traditional records. They can be used for tracking patient's health history digitally. These are also secure and will be made available only for authorized users.

EHR can contain all the details of a patient from doctor visits to prescribed medication to daily routine as single entity as these are electronic in nature. This gives the health care providers new ways to assess, track and take a decision on health insurance premiums etc. This will be a win-win situation for both the health care provider and the patient.

With the evolution of IoT, devices like FitBit and Apple Watch can be used to track the work out habits of the patient. This data integrated with the prescription and lab tests data can be used to pass back benefits to the customer and reduce the risk of the health care provider.

These are few things that can be done with digitized health records. The benefits are quite evident from simple analysis. However, the challenge is the amount data one needs to handle and integration of various systems. On top of these two, one should keep the system up and running 24x7 as the customers for major health providers and spread across geographies.

With typical on-premise system, this setup would need at least two sets of servers and data centers to meet high availability requirement apart from frequent synchronization. Integration of devices and third-party apps would also be a challenge as enterprise security patterns are not designed for such integrations. This will call for additional gateways etc. though the device data itself is not so critical until it's integrated with core patient data. This separation of security levels is tough to achieve with on-premise setup. The above-mentioned points will result in increased cost from both infrastructure and support perspectives. Depending on the scale of the organization, this may outweigh the benefits derived from EHR and associated processing.

Cloud Computing gives an economic and efficient solution for this by offering the following:

  •  Auto scaling for meeting the demand
  • Availability zones for DR
  • Pay per use policy
  • Seamless integration with devices and third-party apps
  • Apply different security patterns for different stages of data processing

While most of us are familiar auto scaling etc., we perhaps need to consider the last point in detail. The device data is a continuous flow for a specified duration generally. This data itself need not be run through typical enterprise level security checks as it's not integrated with the patient record yet. The data from devices can be stored on the cloud system and the data from that device will be linked with the patient record only after verifying the device registration within the enterprise database.  As these two can split into two separate tasks or work flows, different security policies can be applied on these two which will give cost benefits to the organization.

Cloud based EHR systems also give the enterprises option to collaborate seamlessly from multiple locations without compromising on security. Most of the modern cloud providers offer regulatory compliant computing systems which will help meet the regulatory requirements without any additional effort from the provider's side.

To conclude, health care providers can take advantage of the cloud computing to better manage patient health records and to keep the health care costs low.

June 2, 2015

Nordic Insurance - Digital disruption underway

Digital transformation today has taken entire industries by storm, transforming the landscape beyond recognition. Think about Nokia, Kodak, Blockbuster, traditional music labels, brick & mortar book stores and numerous other examples. Digital mavericks are coming to the market with game-changing innovations and business models focused on customer journeys and experiences that is proving to be the sudden death for traditional ways of doing business. Consider Geico, Friendsurance, Netflix, Airbnb, Apple and Uber - each one of these has changed their respective industries, and overnight everyone has to play according to the new agenda set by these digital mavericks.

Continue reading "Nordic Insurance - Digital disruption underway" »

September 1, 2014

RIP Traditional Insurance, Digital Disruption Has Arrived!

Currently Insurers are finding themselves in a tempest where the digital disruption has caught a few of them completely off guard. The digital disruption has arrived with a proliferation of smart devices and advent of the digitally savvy customers. Insurers will have to display Digital motility to quickly beef up- Customer experiences and Operational efficiency. Tackling either one of them without the other would lead to dismal results. Digital insurers need to follow this twofold strategy while injecting Digital in every aspect of the business.

We are seeing a metamorphic transformation take place where the consumers, employees & stakeholders are expecting intuitive experiences and agile responsiveness leading to a buildup of necessity to innovate on the go.

Continue reading "RIP Traditional Insurance, Digital Disruption Has Arrived!" »

February 10, 2014

Retain your profitable policy owners!

One of the most important KPIs of Insurers is to retain the existing policy owners. It is more relevant in the current world for two reasons. First, it is becoming difficult to attract the digital consumers day by day as carriers are still in process of understanding them. Secondly, it is less costly to retain the existing customers than adding new customers.
Insurers need to be diligent when trying to reduce the churn. They have to question whether it is worth trying to retain all the customers who have the tendency to churn.
Let me try to explain this using a scenario from Life Insurance Industry. For example, Assume a set of customers have been identified whose churn probability is higher than others. All these customers had cleared financial underwriting conditions originally. If Life time value (LTV) is refreshed for such customers before initiating churn reduction activities, it may turn out that some of them are not profitable at all.
In these circumstances, Insurers would be better off if they focus only on profitable customers.
In the past, it used to be a major challenge to identify customer profitability at the customer level. Typically all customers would be contacted for renewal of their policies simultaneously based on the previous personal data available within the Insurers' systems. Now with abundant technical capabilities in the analytics space (SAS or R or any other platform) built on the basis of strong statistical models and data from internal / external sources, it will not be that difficult to track the profitability at individual customer level. Carrier may increase their focus on profitable policy owners.
Here is a simple approach.
Step 1: Identify set of customers who are likely to churn
Step 2: Refresh their life time value (in other words refresh the customer segment)
Step 3: Check the profitability of customers and map them to benchmark values
Step 4: Identify key reasons why profitable customers want to breakaway
Step 5: Initiate cross sell if the churn reason is either 'under-coverage' or 'does not meet the need'.
Step 6: Launch customized campaigns to promote cross-sell opportunities within profitable customer segment
This approach assumes that the insurer has benchmark values for profitability, agreed customer segments, good quality of data and strong technology capability like SAS or R or any other platform for executing the models

February 1, 2013

Telematics - the future of Insurance Ecosystem

When I boarded an Airport Taxi, recently, I was with my family. Like many others, my father is a kind of person who wants to be at the airport or a train station at the earliest. I have an intuition that he might have sent signals to the taxi driver that we are in a hurry (not that rest of us were relaxed either!). Anyways, so the taxi driver decided to take controls in his hand. The moment the taxi hit the express-way, we were traveling - with fair speed. I was about to take a glance at the speedometer when a recorded voice declared -"You are exceeding the speed limit, please slowdown". That's 'Telematics' I announced for the benefit of audience. In fact, a more appropriate term for my self-initiated announcement would have been "Vehicle Telematics".

Telematics has been the buzz word in the auto insurance industry for quite some time now and rightly so. As mentioned in my previous blog, it represents one of the most disruptive innovations in recent times for the insurance industry. The idea is to capture the real-time data and transform it to either a 'Usage Based Insurance' (UBI) or a 'Pay as You Drive' (PAYD) insurance. The UBI is basically governed by the amount of time you spend behind the wheels while PAYD encompasses your behavior (e.g. speeding) while driving, along with the mileage driven. The 'behavior' component is essential to differentiate between two drivers - both travelling the same distance over a period - one does a daily commute during the rush hour in a hurry to not miss the morning appointment, while other doing a leisure travel during the weekends.

The traditional implementation of telematics device would be a black box integrated along with other on-board-devices in the vehicle and making use of satellite and cellular network. A more recent innovation is the advent of smart phones. Smart phones could make use of a suitable mobile app, the inbuilt GPS and the accelerometer to send and receive data over the mobile network. The result of all this would be multidimensional. The underwriters would be assessing more relevant and updated information to write policies with actual risks. The drivers would have an opportunity to reduce their premium and deductibles by showcasing their good driving behavior. The society would get not only a safer road (refer PAYD insurance) but also a greener one (refer UBI).

One area which is still undiscovered - in terms of using telematics - is 'Life Insurance Underwriting'. As we know life insurance is a complex product and needs more expertise in underwriting. In that sense, the use of telematics should be considered a farfetched idea. Underwriters usually want to factor in all possible facts that might affect the mortality risk of the applicant. Premium amount for a policy is typically driven by a person's health history and lifestyle (relate it to the behavior aspect we discussed a while earlier). Smokers end up paying more compared to non-smoker. While a person with possible heart risk might end up paying more than a person without. Thrill hunters who love 'Auto Racing', 'Sky Diving' or rock climbing might well be denied a cover.

Life Insurance policies often include an "Accidental Death Benefit" (ADB) rider along with the normal policy. Most of the insurance providers are offering this rider on a flat rate basis or rather very minimal underwriting. An ideal scenario would be if underwriters were to establish some kind of formula to rationally charge for the ADB rider. The 'behavior' part of the life underwriting decision should also consider the applicants behavior on road and how it contributes to the risk. With the increased use of 'telematics', there might come a stage when life insurance underwriters start seeking that information. Like the credit scoring system, a 'safe driving index' system might eventually make its way to provide information to the auto industry as well as life industry.

Although the implementation of telematics itself comes with pre-packaged concerns which can be discussed at length, one cannot deny the potential of this disruption. It could lead to new ways of underwriting as well as product development. In an ideal insurance ecosystem, be it auto or life, telematics seems to be a promising part of the future-state.

March 23, 2011

Video: Web 2.0 in Insurance

Watch Siva Nandiwada, Associate Vice President - Insurance, Healthcare & Life Sciences (IHL), as he highlights how insurance companies can leverage Web 2.0 to enhance business efficiency

June 28, 2010

Smarter Organization - Simplify

In my previous blog I mentioned the need for Insurers to  "Simplify", "Collaborate" and "Adapt" to emerge as "Smarter Organizations". I would like to elaborate on the need to "Simplify" in this blog.

Continue reading "Smarter Organization - Simplify" »

October 29, 2009

Tying Web 2.0 technology to Business Objectives for improving ROI

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

Continue reading "Tying Web 2.0 technology to Business Objectives for improving ROI" »

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