Merging IT software providers, designations as systemically important financial institutions, fluctuating interest rates — a lot affected insurers in 2013. But, what did insurers make happen? The INN editors took a look back at the Top 5 Trends they identified as emerging at the end of 2012, and caught up with insurers to find out how those trends have developed and how they will extend to 2014 and beyond.
The past year brought analytics closer to center stage for insurers, says Matthew Josefowicz, managing director at research and advisory firm Novarica. "The role of chief data officer and the creation of data science units expanded, especially at larger carriers." Twice as many large property/casualty insurers are deploying, piloting or planning to pilot big data/analytics technology tools compared to 2012, and large P&C insurers are leading the way in building the infrastructure to support future big data operations, according to "U.S. Insurer IT Budgets and Projects 2014," a report from Novarica. A separate Novarica report said that in commercial lines business intelligence and analytics efforts are being expanded beyond claims reporting and analysis to operationalize predictive analytics.
One such insurer experiencing the pervasion of analytics is CUNA Mutual Group, a commercial and personal insurer. Since 2006, CUNA Mutual has mined its databases with SAS to create internal reports. Now, using SAS Enterprise Guide as its primary predictive modeling tool, the insurer is embracing more advanced uses of the software. "In 2013, for our direct to consumer business, we have improved our data insight in the service operations and across our sales centers side to help enhance the customer experience and improve our targeted marketing and sales," says Rick Roy, CUNA Mutual Group SVP and CIO.
Using predictive models, in 2013 CUNA Mutual revamped its customer contact strategy to provide more relevant, timely offers to credit union members. It also develops forecasting models and automated scoring to identify the best prospects to target as most suited to cross-selling opportunities. "We have continued to improve our data governance and metadata management to bring clearer, universal data views across our company," Roy says. "For 2014, we are working on several areas that will continue to support our enterprise data strategy and direct-to-consumer business. One new concept is data visualization. We take the data and put a visual component to it. The visual concept translates large amounts of data into a picture that helps our businesses 'see' data in a different way, ultimately improving marketing, claims and service operations."
For 2014, insurers will be challenged with bringing analytics into the re-evaluation of existing business processes and market/product strategies, says Novarica's Josefowicz. "Since insurance is a business of analyzing data and pricing risk, new levels of data accessibility and new analytical capabilities have the potential to drive massive change." -Carrie Burns
When it comes to distribution, the question has always been: what makes a good agency or agent good? says Paul Nelson, principal of Deloitte Consulting's P&C practice. Historically the answer has been revenue, but increasingly, the answer includes profitability and consistency of the customer experience. To address those challenges, and that of standing out in a crowded and increasingly commoditized market, analytics is changing insurance distribution strategies. And investment in the technology has been spurred, Nelson says, by historically low premium-to-surplus ratios, which have left many insurers flush with capital.
"For years there has been a focus on process automation and self-service to improve agency productivity and customer satisfaction, and eliminate non-value adding activities. That likely will continue," says Mark Hill, specialist leader with Deloitte. Insurers will use analytics to identify and understand opportunities for sales, cross sales, retention and the propensity to switch, he says, at many levels, which can bolster the connection between insurers, agencies and agents.
The ability to offer specific benchmarks to agents and agencies is an important differentiator and critical to building productive business relationships with independent agents, says Peter McMurtrie, chief sales and marketing officer at Grange Insurance. "The ability to leverage real-time data to enable agents to understand how they are doing, discover opportunities and benchmark them with our own data is something that we found tremendous success with." Grange territory sales managers now can correlate survey results with retention levels and benchmark them against others in a territory, for example, and suggest a course of action to increase retention. "We are connecting the dots," McMurtrie says. "That creates the value proposition, so that they want to sell more of our products." In 2014, that technology will be rolled out to territory managers on tablets for more dynamic and timely insights.
This sort of emphasis on agency analytics is a significant shift from the historical focus on commissions and incentives, says Kimberly Harris-Ferrante, Gartner Group. "The movement to digital agency is key to evolving the agency channel and includes better alignment of agents to new behavioral trends of the evolving insurance consumer."
Expanding the focus of analytics to include the customer experience is likely in 2014, says Deborah Smallwood, founder of Strategy Meets Action. "It's big thinking and requires the convergence of plans and investments in agent/self-service portals," and other technologies, she says. -Chris McMahon
The demands and concerns surrounding the search for talent appear to have become even more pressing over the last 12 months, according to a recent survey of executives at large U.S. companies conducted by Accenture. Among those concerned about growing skills gaps, the majority (44 percent) were concerned with IT talent.
One of the biggest reasons for this is the quickening pace of technological change, which has led Kin Lee-Yow, CIO with CAA-South Central Ontario, to become a bit more creative with his recruiting efforts over the past year.
Near the end of last year, the insurer invested in a new policy administration system and is struggling to find the appropriate IT talent, Lee-Yow says. "Trying to recruit people with specific knowledge of [the new policy administration platform] is a little challenging."
In 2013, Lee-Yow began working with community colleges in an attempt to create a pipeline of applicants. He is introducing them to the company's new policy administration system technology and development tools, seeing if he can use the educational space to increase the number of people who can understand and work with it.
The quest for talent will continue to challenge insurers well beyond 2014. In fact, 48 percent of the insurance workforce will retire in the next 15 years, according to Bureau of Labor statistics. Insurers will need all the help they can get. And that's what Lee-Yow is planning to do - get help. "My next step is to get [the technology vendor] to help, to work with the community colleges to see if they can create a program where people can go get training, he says. "
Lee-Yow emphasizes the important role that vendors can increasingly play; making sure that there is enough talent with the appropriate skill sets to handle new systems. Working with colleges and universities is where this effort can start, according to Lee-Yow.
"With new technology, that's what you have to try to do. Get the vendors to go to the school system, get them to provide training so they can train more people and then people can see there is demand out there. So you create the supply." - Justin Stephani
In 2012, mobility was heralded as "The Future of Insurance" in a report written by Ellen Carney, a senior analyst with Forrester. Carney also says in the report that, when it comes to mobile, insurers leading the way embed it in the way they do business.
Michael Helton, special projects coordinator of technology and training at Combined Insurance, is one year further along in his quest to do just that. Since last December, mobile viewing of courses and content has tripled, according to Helton, who attributes much of the program's success to the company's openness to feedback from its users.
"We put a feedback slide at the end of each piece this year, and on one course, one of the first big courses we had, we got over 3,000 responses. It was overwhelming," Helton says. "We created the first one, got a huge volume of feedback, were able to take that feedback and apply it to the next one, and then the next one we got a lot more feedback. Mobility was the key to that collaborative process."
In effect, the company outsources its efforts to improve its mobility push by querying its users, which has given Combined the confidence to expand, including more niche experiments. For example, the insurer took a concentrated consumer base, in this case with military families and veterans, and created a video specifically addressing the needs and concerns of this type of potential employee.
In addition to the busy 2013 and Helton's excited interest in the emerging potential of social media and gamification, Combined plans to provide tablets to its agents in the field during 2014. With applications specific to Combined as well as off-the-shelf software, Helton says the company has been preparing during this past year and is in the final stages of development and testing. Coming off a year in which the consumption of its training and recruiting content has tripled and in some cases quadrupled, executives at Combined Insurance are convinced of the value when it comes to embedding mobile capabilities in the way they do business. -Justin Stephani
Though still in its infancy, usage-based insurance (UBI) is growing quickly. In September, insurance consultancy Aite Group estimated that while UBI comprised just 1 percent of the private auto insurance market, it could rise to 20 percent by 2020 and in a separate survey found that 56 percent of American consumers are interested in the technology to lower premiums.
Several insurers entered the North American UBI market in '13, bringing the total to 20, says Mark Breading, partner, Strategy Meets Action (SMA) and consumer uptake for many was on the upswing. "In September, Allstate announced they have tracked more than a billion miles and are expanding into new states." Technology costs are declining and more insurers are experimenting with smartphones to collect data, which push costs down even faster and helps drive adoption, Breading added.
"Many people will view 2013 as the year of the telematics tipping point, at least here in the United States," says David Pratt, general manager of usage based insurance at Progressive Insurance. In the UBI space, Progressive was first to market, holds six patents it licenses to competitors, wrote more than $1.9 billion in premiums, and has more than 1.6 million customers who have tried its Snapshot UBI product. "From a Marketing perspective, the consumer education piece will be key in 2014. We need to make sure drivers are aware of the empowering option to take more control over their insurance premiums," Pratt says.
One clearly negative development is the realization that 40 percent of consumers are opposed to the devices based on privacy concerns. That would affect risk selection, says Jim Noble, director of global fleet services, Interactive Driving Systems and formerly of Zurich Financial Services. To counter negative perceptions and increase adoption, Noble says insurers will need to incorporate value added services to get those reticent consumers to participate. For the commercial lines, the solution likely will revolve around the creation of a "total risk portrait," a more powerful, actionable set of data than can be created from telematics alone, he says.
Pratt says consumer education is crucial to expanding adoption. "Our 8 billion miles of data shows of those drivers who plug in the device, two-thirds will save money on their premiums. Being able to offer discounts to more people - so good drivers aren't paying for the bad drivers - is one of our primary motivations. People can earn the rate they deserve, and we find that pretty exciting." -Chris McMahon
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