7 Trends Transforming the Insurance Industry 062513_v2b (1)

8/19/2019 7 Trends Transforming the Insurance Industry 062513_v2b (1)

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TABLE OF CONTENTS

Introduction

1. Mobility

2. Big Data and Analytics

3. Telematics

4. Automating Regulatory Compliance

5. Improving the Agency Experience

6. Social Media and Collaboration

7. Distribution Channel Management

Conclusion

About Vertafore

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3/17

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 3

Introduction

Top 7 Trends

Transforming Insurance

1. Mobility


3. Telematics





The number-one priority for insurance carriers today is profitable growth

and one of the most effective ways to enable this growth is through the use

of innovative technologies. Yet, while they are critical, implementing new

technologies can drain budgets and resources. Carriers must judiciously

determine which technologies are worth the investment today and which

ones deserve a strategic “wait and watch” approach.

This E-book will describe seven technology trends that will make asignificant impact on carrier growth in a variety of areas:

• How carriers approach their internal processes

• How they collaborate with both external partners and internal staff

• How they develop and distribute products and services

• How they meet regulatory and compliance challenges

In addition to providing an overview of each trend, this E-book includes

recommendations for how carriers can apply these trends to both gain acompetitive advantage and support growth initiatives.


4/17

4 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

1. Mobility

Trend Overview

Mobile devices are here to stay—largely driven by a

rapid proliferation of consumer mobile apps—and are

affecting how carriers conduct business and interact

with stakeholders.

In fact, more than 30% of carriers provide agent or

customer capabilities via mobile, and more than 60% will

add mobile capabilities for policyholders and agents in

2013, according to Novarica’s report, Mobile in Insurance

Beyond Personal Lines: Current Trends and Expectations .

Karlyn Carnahan, Novarica principal, adds that 70% of

property casualty insurers predict that they will offer mobile

capabilities by 2014.

There are a few high-profile, mobile-enabled applications,

such as Progressive’s For Agents Only website available on

mobile devices and Western World Insurance’s mobile app

that supports rating, quoting and binding.

Carrier Recommendations

While mobile is quickly becoming table stakes for insurance

carriers, implementing mobile successfully requires more

than simply providing downloadable apps to employees,

agencies and customers. Insurance carriers must take a

strategic approach to their mobile offerings, ensuring that

these offerings truly enhance the user experience, provide

the functionality that users want and leverage the form

factor of the device.

For example, rather than provide online forms, which

can be cumbersome to complete without a keyboard,

leverage inherent mobile capabilities such as geo-location

and portability.

Carriers can provide field marketers and agents with

information they need to perform “what-if” analysis and sell

to and service customers on an easy-to-carry tablet rather

than a more bulky laptop when making client and prospect

visits. Carrier employees can use tablets to write interactive

performance reports during a site visit and improve agency

performance.

http://www.novarica.com/report_ins_mobile2013/http://www.novarica.com/report_ins_mobile2013/http://www.novarica.com/report_ins_mobile2013/http://www.novarica.com/report_ins_mobile2013/


5/17


Mobile is aboutpositioning

for the future.

–Chad Hersh, Novarica

Other capabilities that insurers should consider deploying

include mobile apps that support collaboration with

underwriters. Today, about 20% of carriers offer these

capabilities, and an additional 20% plan to deploy them in

2013, says Carnahan.

Notes Novarica partner Chad Hersh, “Mobile is about

positioning for the future, and significant measurable short-

term ROI is in short supply. But given the rate of change in

tablet adoptions, insurers cannot afford to be left behind.Avoiding mobile today is like avoiding web browsers in the

late 1990s.”

“ ”

Report Cited

Mobile in Insurance Beyond Personal Lines: Current Trends and Expectations

http://www.novarica.com/report_ins_mobile2013/http://www.novarica.com/report_ins_mobile2013/


6/17


Trend Overview

It’s all about the data—and carriers get it. When

Novarica asked insurance CIOs how they would spend

an “extra” $5 million in their IT budgets, almost one-

third said they would spend that windfall on Big Data.

It’s not surprising that a large percentage of CIOs prioritized

Big Data over a wide variety of other IT possibilities since

insurance continues to be a data-driven industry that

creates huge volumes of structured and unstructured data

that carriers must manage.

While insurers recognize that harnessing this

data can provide them with valuable and actionable

insights, they struggle with making the technology

modernization needed to support Big Data and embed

it into real-time applications.

CIOs will need that extra $5 million because infrastructure

modernization can be costly: Gartner predicts that Big

Data infrastructure changes will drive $232 billion in

IT spending through 2016 across industries.


Big Data presents several challenges to carriers: How to

aggregate huge volumes of data and how to analyze that

data to make intelligent business decisions.

Carriers are still grappling with ensuring that they are able

to collect the data they need and then transform that data

into a format that is easily accessible, explains Carnahan

of Novarica. Third-party data is being leveraged across

almost all business processes. Whether it is used to

pre-fill a consumer online quote, verify claimant

information or assess fraud risk, third-party data

provides significant benefits across the policy lifecycle.

U.S. insurers are increasingly leveraging external

data sources in core business processes.Over the past 20 years, the amount of data

that is sourced from prospects, claimants

or agents has been decreasing while the

amount sourced from third-party data

providers continues to increase. The

business case is simple, yet powerful:

External data sources provide immediate

access to quality, comprehensive data that

can improve underwriting outcomes and createefficiencies for the consumer, agent and insurer.

Once they have aggregated the right data, carriers

can then take the next step and use that data to

perform predictive modeling and build analytics

into their operating models. “Those carriers

using analytical models are generating significant

benefits,” explains Carnahan.



7/17


Those carriers usinganalytical models are

generating significant

benefits by identifying

and acting on unique

insights.

–Karlyn Carnahan, Novarica

Carriers can use predictive modeling for a wide variety

of business activities, including underwriting, marketing

and claims. During the underwriting process, analytics

can provide guidance to underwriters to improve risk quality

assessment and optimize prices. Carriers can identify

customers most receptive to cross-sell offers or those

most likely to defect. They can proactively reduce fraud

by detecting potential fraud earlier in the process and by

detecting otherwise hidden patterns of fraud.

Big Data also has a role in risk management, enablingcarriers to analyze risk characteristics and claims statistics

to decide which accounts would benefit from additional loss

control services. Predictive analytics also are being used

heavily in the claims space to detect fraud and to better

align resources with cases. One workers compensation

carrier was able to predict which claimants were likely to

have extended lost work days. By intervening early with

nurse case managers, the carrier was able to significantly

reduce their lost time days, relates Carnahan.

Another area in which Big Data can help carriers is

monitoring carrier reputation by analyzing comments about

the carrier throughout social media. In doing so, carriers

can addressany issues that may damage their reputation

or brand.

“Big Data has the potential to transform carriers,”

notes Carnahan. “Carriers need to consider the ROI

and technology implications of Big Data as well as

the impact on their organizations and processes.”

Says colleague and Novarica managing director and partner

Matthew Josefowicz: “Insurers can profit immensely from

Big Data if they have created a culture where business

leaders trust analytics and act on the insights provided. All

insurers should take steps to create the culture today if it

doesn’t already exist in their companies.”

“

”

Report Cited

Top Five Disruptors in the Next Five Years for Insurers

http://www.novarica.com/top_5_disruptors/http://www.novarica.com/top_5_disruptors/


8/17


Trend Overview

Telematics and usage based insurance (UBI) are among the

hottest topics in auto insurance. Rather than creating broad

rate tiers by looking backward at the performance of a book of

business, it promises the ability to create more granular pricing

segmentation and improve the accuracy of pricing by using a

customer’s actual driving behavior as the basis for generating

rates. The feedback provided to drivers also has potential for

actually changing driver behavior to safer levels.


For carriers considering entering the UBI market, there are a

number of important areas to assess. The technology is still

evolving, and there are several business models to evaluate.

UBI comes with real costs, so carriers need to consider their

options carefully.

The first area to evaluate is whether UBI fits with a carrier’s

strategic market. Carriers looking for long-term “preferred”

customers will likely find this a good match with their strategy.

However, carriers that focus on the sub-standard market, or

short-term policies, may not benefit from UBI because of the

cost of the infrastructure needed to support it. Assess not only

which customers are likely to switch to a UBI-based program,

but also what the implications will be for those customers who

don’t switch. Drivers that demonstrate superior driving skills

will certainly earn a lower premium. Those drivers, though,

who don’t switch are likely to experience higher prices due to

the normal skewing of rate distributions. Carriers may need to

plan for a higher defection rate from those customers.

Carriers that are considering moving forward with telematics

have different business models to evaluate. Two dominant

business models are being used in the industry today. Pay as

You Drive (PAYD) typically charges a customer based on actual,

documented miles driven. Pay How You Drive (PHYD) generally

bases pricing on a variety of dimensions related to

the driving behavior of the customer, such as rapidaccelerations and decelerations, the time of day,

the routes driven and the territories driven through.

Carriers can either use installed devices and collect

granular driving data themselves, or can work with

a provider that sends them aggregated data—think

of it as a driving score—that can be used as input to

rating models.

The PAYD vs. PHYD decision has significant implicationsfor carriers as it affects the technology requirements and

influences how they can utilize telematics as a service offering

for their customers. If a carrier is planning to utilize an

installed device, additional considerations apply, such as how

to distribute the device, install the device, provide customer

support for the device, collect data from the device and retrieve

the device in the event of customer defection.

3. Telematics


9/17


Although UBI is stillnot widely available or

even widely understood

among consumers, the

adoption rate of the

technology is slowly

picking up speed as

more insurers developUBI programs to add

to their offerings for

both personal and

commercial lines of

business.


A major consideration in UBI rollout is the existence

of Progressive’s UBI patent, which has been a barrier

to entry for carriers. The Progressive patent is

fairly extensive, covering “a method and system of

determining a cost of automobile insurance based

upon monitoring, recording and communicating

data representative of operator and vehicle driving

characteristics … [including] an operating state of the

vehicle or an action of the operator.” In December 2012,

Progressive announced terms for licensing its UBI

program. Carriers interested in using the Progressivepatent must apply by the end of June 2013. If approved,

carriers will be permitted to rate customers under the

patent starting on or after April 2015.

What should a carrier do during those years of waiting

before they are permitted to use the data for rating

purposes? Some carriers are looking at providing

telematics capabilities as a customer service. They are

planning to use the time to evaluate the collected data,but not use the data as an input for rating. Examples

of services considered by carriers include safe driver

coaching, automatic crash notification/emergency call,

crash data management, stolen vehicle tracking, geo-

fencing, remote access and vehicle diagnostics.

Once a carrier has completed its strategic assessment,

data management issues must be evaluated and

preparations made. A plethora of data about driver

behaviors may be available, and a carrier needs to

assess what should be collected, stored and used

for analysis. Carriers may need new technology

infrastructure to store, organize, cleanse and manage

the data. Additional skill sets may be needed to take

full advantage of this new data through sophisticated

analytics, data mining and modeling.

While it may be tempting to sit back and watch the

UBI market rather than leap in, opportunities across

the value chain exist for insurers that adopt thetechnology early, especially now as the main barriers

to entry are falling. Insurers waiting too long potentially

face “adverse selection” and may be left mostly with

customers who don’t suit their pricing model.

Although much has been written about the use of

telematics in the auto insurance industry, other types

of insurance can also benefit from behavior-based

products. Home monitoring devices can track whetheror not a homeowner locks external doors and drive

underwriting since a locked door reduces burglary risks.

In commercial insurance, devices can monitor bridges

or large buildings to identify potential structural issues.

In life insurance, carriers can offer discounts for

wellness programs based on the number of times a

customer visits a gym per week.

“

”


10/17



Trend Overview

As a highly regulated industry, insurance carriers have

always built regulatory compliance into their business

processes and adjusted their processes to assure they

remain in compliance as new regulations are enacted.

Whether it is ensuring producers are properly licensed

and appointed, making sure pricing is generated in a fair

and consistent manner or confirming that claims are

handled fairly, compliance practices impact all aspects

of the insurance industry. Carriers that have not built

flexibility into their systems struggle with consistently

implementing regulatory requirements and responding

quickly to data calls.

“Carriers need to be able to rapidly add data elements,

modify documents and assure workflows are easily

modified to deliver consistent practices,” says

Carnahan.

The carriers best able to anticipate the future regulatory

landscape and implement technology to streamline

regulatory compliance will be in a much better position

than their competitors to address new and emerging

mandates, such as the Affordable Care Act, without

missing a beat or impacting agents or customers.


Automating regulatory compliance serves several

purposes. It provides carriers with almost instantaneous

access to information and minimizes the risk of

non-compliance by ensuring processes are followed

consistently. When regulators ask for information,

carriers must supply it quickly, explains Carnahan.

Regulators also look for consistent behavior. In other

words, is the carrier consistently following the law and

operating in a way that is fair and non-discriminatory to

policyholders? Automation ensures that tasks are being

completed consistently by all staff—even novices—

because the business rules are incorporated into the

workflows. Automation also provides the underlying

data for reports and documentation about how a task

was performed and by whom.

Carriers with modern core systems have an advantage

in regulatory automation over their peers working within

the confines of a legacy environment. A modern system,

based on business rules or workflows rather than

hard-coded instructions, is much easier to change as

regulations morph.

While carriers arehighly motivated to drive

growth today, every

carrier wants to do so in

a way that is compliant

with their regulatory

obligations.


“

”


11/17



Look at your technologyofferings and compare

what you’re offering

to what the agents are

looking for in their

top carriers—fast,

responsive, easy.


Trend Overview

Since agents write more business with those carriers

easiest to do business with, carriers that work with

independent agents cannot achieve their objective

of profitable growth without focusing on the agency

experience. Carriers are taking note, and up to 80% of

carriers plan to enable agents to perform most information

and transactional capabilities through easy-to-access agent

portals, according to the Novarica report, Paper, Phone,

Email, Web, Mobile: Communication Channels in

U.S. Insurance .


Top carriers listen to what agents’ value and then leverage

technology to provide that type of experience. For example,

the most important capability for agents is carrier response

to underwriting, followed by speed of underwriting decision,

according to Novarica. Carriers focused on improving those

capabilities with technology successfully drive increased

revenues. Agents also value participation with comparative

raters, especially in personal auto.

More carriers are providing a robust portal environment

that provides functionality to agents, including uploading

applications, quick quotes to bind and issue endorsements,

quick-and-easy access to appetite guides, and proprietary

rules and forms.

Real-time upload and download to agency management

systems is important particularly for those carriers working

with large insurance agencies that represent multiple

carriers. However, improving the agent experience is more

than offering real-time connectivity; it requires holistic

approaches that ensure that every agent touch point is

optimized.

Asserts Carnahan, “Carriers should be thinking, ‘How

can I enable agents to be more productive and write more

business?’” The goal is to minimize the amount of time

agents spend on non-revenue generating activities.

“

”

Report Cited

Paper, Phone, Email, Web, Mobile: Communication Channels in U.S. Insurance

http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/http://www.novarica.com/communication_channels/


12/17



Trend Overview

Social media is about helping people connect. Consumer

and agent expectations for connection have been

established through social media tools that provide

an opportunity for people to collaborate and share

information. Social media tools—such as Facebook,

LinkedIn and Twitter—are frequently used in marketing

to drive brand awareness and connect with customers.

But other uses of social media tools improve collaboration

and improve decisions and processes both internally with

carriers and externally with the distribution channel.

Today, most collaboration in the insurance industry

takes place in the form of emails and face-to-face

meetings. While there will likely always be a need for

these types of collaborations, carriers can create

efficiencies by moving beyond these communication

avenues and providing a centralized collaboration

platform where people can share documents and

ideas and manage knowledge.

More than 70% of carriers that distribute through

independent agents use social media, says Novarica in

its report, Insurer Social Media Strategies for Independent

Agent Distribution , yet more than 40% have no social

media policy in place. Insurers need to institutionalize

their social media interactions with agents in such a way

that they can learn what’s important to agents and use

those insights to drive profitable growth.

Carrier RecommendationsCarriers can use collaborative technologies to improve

process time. During agent onboarding, agents could

access a variety of documents they need to get started

with a carrier, such as sales pipeline management and

training. They could also connect with other agents in

discussion forums designed to support knowledge sharing.

Agents could ask questions of their peers, discuss tactics

and generate new ideas. The collaboration platform would

also store agent action plans and reports.

http://www.novarica.com/socialmedia_strategies_2012/http://www.novarica.com/socialmedia_strategies_2012/http://www.novarica.com/socialmedia_strategies_2012/http://www.novarica.com/socialmedia_strategies_2012/


13/17

11724 NE 195th Street

Bothell, Washington 98011

800.444.4813

vertafore.com

Vertafore delivers software and services that transform the business of insurance. Unique to the industry,

more than 20,000 customers rely on Vertafore to provide integrated technology that connects the entire

industry with the most complete source of solutions—agency management, rating and connectivity, content

management and workflow, research solutions and producer lifecycle management—so their businesses run

better and are more profitable. For more information about Vertafore, please visit vertafore.com.

© 2013 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc. The names of actual companies and

products mentioned herein may be the trademarks of their respective owners. VCM.EB.7TRE.0613


14/17


Any social mediatools must be

intuitive, contain

content people care

about, provide choice

over relationships

and give employees

something back thatthey value.


Many use cases exist in the insurance industry—

from creating training communities to large account

underwriting to product development. Carriers are

generating measurable improvements in both process

time and the quality of decisions.

“Collaboration portals should be designed to help people do

their job,” says Carnahan. “Any social media tools must be

intuitive, contain content people care about, provide choice

over relationships and give employees something back that

they value.”

Carnahan recommends that carriers begin by determining

the role of collaboration within the context of the

carriers’ overall business strategy, including its impact

on governance and compliance, cultural implications and

ability to demonstrate measurable success. This includes

creating processes and policies and driving employee

adoption and participation.

“

”

Report Cited Insurer Social Media Strategies for Independent Agent Distribution

http://www.novarica.com/socialmedia_strategies_2012/http://www.novarica.com/socialmedia_strategies_2012/


15/17



Trend Overview

In a multi-channel world, existing distribution channels

remain as new channels emerge, complicating channel

management. Today, they are managed as discrete

distribution channels unable to integrate for seamless

agent and carrier interactions.

“Different elements of insurers’ communications are

shifting at different speeds, and older channels are not

going away,” says Josefowicz of Novarica. “This creates

additional burden on and confusion for insurer CIOs,

who are required to invest in supporting new channels

without being able to shutter older channels.”


Carriers need to consider how to strategically link

multiple distribution channels beyond the consistent

posting of transactions. They must also analyze how

channels relate to each other, especially for those

carriers selling direct to consumers and through

agents. Carriers must support both direct and agent

channels by motivating agents to generate business,

compensating them appropriately and providing a

suitable level of service to extract more revenue.

Carriers are experimenting with a wide variety of

techniques to better manage their agents strategically,

not just on a transaction-by-transaction level. Mobile

sales force applications, social media support tools

and straight through processing are all techniques

that deliver tangible benefits.

Different elementsof insurers’

communications

are shifting at different

speeds, and older

channels are not

going away.

–Matthew Josefowicz, Novarica

“

”


16/17


“The future ain’t what it used to be,” Yogi Berra once said,

and for the insurance industry, it’s true that the future will

likely look quite different from the present.

For insurance carriers, technology trends such as mobility,

collaboration platforms, analysis of huge amounts of

structured and unstructured data, and new distribution

channels can transform how they interact with their

customers, their agents and others in the insurance value

chain. These seven technology trends are deserving of

carrier resources; those carriers that ignore them risk

being left behind in a rapidly changing industry.

For more information on how Vertafore helps carriers

transform their business and achieve their growth

objectives, visit vertafore.com.

Conclusion

These seven technology

trends are deserving

of carrier resources;

those carriers

that ignore them risk

being left behind in

a rapidly changing

industry.


17/17

11724 NE 195th Street

Bothell, Washington 98011

800.444.4813

vertafore.com

Vertafore delivers software and services that transform the business of insurance. Unique to the industry,

more than 20,000 customers rely on Vertafore to provide integrated technology that connects the entire

industry with the most complete source of solutions—agency management, rating and connectivity, content

management and workflow, research solutions and producer lifecycle management—so their businesses run

better and are more profitable. For more information about Vertafore, please visit vertafore.com.

© 2013 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc. The names of actual companies and

products mentioned herein may be the trademarks of their respective owners. VCM.EB.7TRE.0613

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