BPO hosting: Has the dark side finally been destroyed?

When Luke Skywalker was being trained by Yoda did he ever think about Hosting vs BPO – well maybe he should have. Maybe there where bigger fish to fry than cutting his own Dad’s hand off, which felt a little cheesy.

So what are we talking about? Well, for years Carriers have sought a way not to spend multi-million dollars on infrastructure and to host or process outsource their core. Now if you have no CSR staff and do not wish to hire them, then process outsource was the only avenue, if you had CSRs but your enterprise infrastructure was poor you looked to a BPO to provide hosting. Breaking it down though, no BPO firm wants to host your policies, it is not in their business plan. Sure, they will but why do you think they will? Because their sales guy will constantly be trying to drip bleed you dry and move over to BPO “let us handle the excess claim volume next month”, “wow billing is such a simple area, we could take that off your hands and your valued staff could be moving into bigger things” – it is all the “camel’s nose under the tent” – you do not notice the nose and soon enough, the whole camel is in.

So where is this going, seeing as there are limited offerings… the world has changed and at last large Policy Admin vendors are looking to the Cloud. With harnessing new models in a way to offer their products the costing and security can seem great benefit, to the big and the small alike. Only last week I sat with a PAS vendor who took me through how they could, cost effectively, host several small carriers on one hosted instance, spreading the cost and achieving a way for everyone to access the latest and greatest software out there. Of course, people have laid claim to this before but no one has ever seemed to make it a realistic business model, until now.

The good news is, it is out there – finally we can see costing and hardware sizing where they should be — which is the best of what you want, when you need it. No longer do you need to size for your month-aversary and no longer does the end of year CPU crunch need to worry you…you can have the best of the Admin Systems and you can strap on power when you need it. I, for one, finally feel that really Insurance Admin in the Cloud is here and it is here to stay.

Admin vendors can worry about their product enhancements; Cloud providers focus solely on the security and fail over (they are the best at it after all); carriers can focus on customer service and product. Amen, we are all where we should be. And what about us integrators? Well that is simple, with any move like this comes a need to not only have your Cloud strategy in place but also the ideal time to review your Enterprise Architecture as a whole. PAS is just one thing, what about Office 365 in the Cloud? The list goes on and on – it is time to see if the Cloud has an avenue for your organization and time to stop letting others control your destiny. Cloud vs BPO hosting /services – a no brainer decision.

Usage Based Insurance – What Systems Implications does a Carrier Face When Implementing a Program?

Usage Based Insurance (UBI) (a.k.a. Telematics) is gaining traction in the U.S. Market.   At least 18 states have four or more Personal Auto programs implemented, and 49 states have at least 1 program.

As mid-sized and smaller carriers venture into this space, they need to consider the system implications that accompany a program implementation. While the specifics will vary depending on the type of program implemented, there are several areas that will be impacted.

First, Policy Quoting and Issuance: Assuming that the carrier utilizes some type of on-line portal to support the quoting process, the carrier must update the portal to accommodate enrollment into the UBI program on a per vehicle basis. Rules may be needed to limit those who are eligible for the program or to encourage certain individuals to join the program. If introductory premium discounts will be given just for joining the program, these discounts must be accommodated within the new-business rating algorithms. Additional data may need to be gathered about individuals joining a UBI program, such as email address, a field not commonly maintained in legacy systems. If the carrier makes rating available through a comparative rater, the carrier will need to decide if and how the comparative rating site will reflect the UBI program. Policy Declarations will also require alterations to reflect the new program. Finally, upon issuance of the policy, a new workflow will need to be triggered in order to issue a UBI device and installation instructions to the insured.

Second, Administration Systems: Once the policy is issued, various back-end systems and processes need to be altered to accommodate the UBI program as well. Policy Administration and Renewal Processes will need to incorporate the data gained from the UBI device, typically in the form of a driving score. Billing System changes may be needed if the carrier decides to charge drivers for lost or damaged UBI devices. Customer Service systems need to be updated so that service representatives know which customers are participating in the UBI program and can answer their questions related to the devices and driving discounts. The carrier may consider special telephone routing so that UBI program participants are handled by specialized customer service representatives. Claim System changes may also be needed if the carrier wants to ensure that Claims Adjusters are made aware that a vehicle is part of a UBI program.  For carriers who rely on independent agents, Agency Download should also be updated to reflect the new program. Finally, back-end data warehouse and management reporting systems will need to incorporate UBI related data and develop new analyses to support the program.

Third, Workflow and System Capabilities: First, the carrier must manage an inventory of UBI devices, tracking which have been issued and associating issued devices to specific vehicles. The carrier must also develop a number of communication protocols in partnership with their Telecommunications Services Provider. For example, if an issued UBI device stops communicating, the carrier will need to communicate with the insured. The timing and format of these communications requires some forethought. If a UBI device goes silent for a day or two, it could mean that the vehicle is temporarily out of range, perhaps in a remote vacation spot, or the device was removed while the vehicle is in the shop. On the other hand, the device could have been unplugged for routine service and accidentally left unplugged. If the carrier reacts too quickly, they could easily annoy the insured and appear like “Big Brother”; if they wait too long to react, they could lose valuable data. Changes are also needed to accommodate drivers who want to add, remove, or change vehicles within the UBI program during a policy period; this may require a separate management system altogether and could impact the scoring algorithms created. Thus, establishing the right communication protocols is critical to the program’s success.

Similarly, the carrier needs to determine how they will receive and model the driving data collected by the UBI device.  Will they gather the detailed data, transform it into meaningful information, and develop predictive models based on that data that can be applied within renewal rating algorithms. Or will they partner with an expert who can manage data collection and manipulation for them, providing them with some type of a score to apply within their rating algorithms. In either case, the carrier needs to understand the data that they will be receiving and establish systems for managing and utilizing that data.

Finally, the carrier must establish a means to provide feedback to the drivers participating in the program. Typically this is accomplished via a web-site where the driver can view his/her driving history, compare that history to some type of benchmark, and view tips to improve driving behaviors.  Again, the carrier may be able to partner with the Telecommunications Services Provider to deploy this functionality, but the carrier must work with the provider to define what data will be presented, and the carrier must be prepared to answer questions that their insureds will have about the data presented.

In closing, successfully implementing a UBI program has ripple effects across a wide swath of an insurance carrier’s infrastructure.  Before embarking on this journey, a carrier must give thought to both the initial launch and ongoing support of the program, making decisions about how to best integrate the program into its underlying systems and processes. Strong partners, both those with specific UBI expertise and those with more generic system, process, and project management expertise, can ease implementation and speed time to market.

Usage Based Insurance – What Value Can Carriers Offer Customers Beyond A Premium Discount?

Within the U.S. market, Usage Based Insurance (UBI) (a.k.a. Telematics) is primarily marketed as a means of lowering premium.  As discussed in a previous post on Usage Based Insurance, a driver allows the insurer to monitor his/her driving behavior, and in exchange for safe driving habits, the driver receives a discounted premium.   But these programs also offer an opportunity for a carrier to provide value-added services to their customers, an opportunity to craft a product rather than to offer the lowest price on what is often seen as a commodity.  Depending on the device chosen and the data collected, a wealth of services can be offered that allow for additional touch points between the carrier and the insured, beyond bill paying and claims settlement.

For example, safety related services could form the foundation for an offering.  The UBI device could be used to monitor, and proactively report to the driver, information about needed car maintenance items.  It could also be used to offer road-side and accident assistance, to remotely unlock a vehicle, or to locate a lost or stolen vehicle.   For a driver who is searching for his/her car in a large, dark parking lot, this last ability could be both a major convenience and a huge safety feature.

Teen or Elderly driver monitoring services could be the basis of another offering. For example, the UBI device could send text messages when a vehicle arrived, as expected, at a certain destination (e.g. when a student arrived home from school each day).  Similarly, the device could issue an alert when driven outside certain preset geographic boundaries, speed limits, or curfews (e.g. when an elderly driver operated the vehicle at rush hour). The device could also be used to provide mapping, showing where a vehicle was driven or locating a vehicle/family member at any given time.

Innovative gaming techniques and feedback mechanisms could be used to provide driver guidance. These tools would allow each driver in the household to profile and compare his/her habits to others in the household and to the “average” driver. The integration of gaming into current feedback loops would better engage drivers. By comparing driving profiles over time and by competing to improve their profiles, drivers would also improve their driving habits.

While many of these services are available through various venues, a carrier can use a telematics offering to craft a product that provides both value and service to its customers. It can attract and retain customers by providing a unique blend of tools that provide benefit on a daily basis rather than a basic promise of service when an accident occurs. By carefully considering its target market and by focusing on services of benefit to that market, a carrier can differentiate itself within an increasingly commoditized field. As UBI programs permeate the market, smart carriers will leverage their capabilities for far more than another way to compete on price.

How did you find Nemo?

The blizzard of ’13 hit the northeast pretty hard this past week.  Communities still reeling from Sandy now have to deal with feet of snow too.  Power outages and downed communication lines make it extremely difficult for people to contact utility providers to report problems, as well as to receive information regarding service restoration.  Many providers are turning to social networks and to text messaging to help them get the word out and to keep their customers informed.  Others are leveraging mobile apps to assist customers, allowing them to report problems and follow repair progress.  Some utility companies are doing both.  Utility companies have to provide service 24/7; but, while insurance carriers will accept claim reports outside the regular work week, their work really begins on Monday.

Like the utility companies, many insurance organizations, carriers and agents, communicate via their social network accounts and some communicate with mobile apps.  Customers may have already reported the tree limbs falling on their cars, collisions from sliding on the roads, or restaurant food spoilage when refrigeration goes out, and now they need to know when they will hear from the claims representative or damage appraiser to move things along as quickly as possible.  If the power and phone lines are still out, your smartphone becomes your only window to the world.  This is where the carriers that have embraced and leveraged smartphone technology shine, and those that are still dependent solely upon on web sites and telephone communication fall behind, and lose customers.

Thousands of customers could be trying to contact you via your phone lines, and find the never ending phone tree wildly frustrating.  When that becomes exasperating, maybe there’s a mobile app to download, but all you can do with that is pay your premium.  Next, look at Facebook for updates, but that’s just a Hall of Fame for charitable acts and follower counts, nothing on the company’s efforts to reach out to customers about the storm.  How about Twitter?  Maybe the company is broadcasting where mobile claim centers are being set up, tips on how to minimize damage, or special phone numbers that have been arranged?  What about the agent?  They may be without power and communication as well, but they may still be able to provide support taking reports and providing information for claims – if they can get it.

This is the time when the rubber meets the road for insurance, and if you can’t keep in touch with your customers and help them when they need it most, they’ll solve the problem for you – they’ll find out about the companies that do, and they won’t be your customers for much longer.  Now is a good time to rethink and update strategy for carriers who aren’t where they should be.

Customer Intelligence – Analyzing and Acting on the Data

Part one of this topic addressed leveraging social media to improve customer satisfaction.  This is the initial step towards a broader goal to create a robust Customer Intelligence framework that allows P/C insurers to listen, connect, analyze, respond and market to customers in a much more proactive and targeted way.

Customer Intelligence is the process of collecting relevant and timely information about customers and prospects, consolidating the data from all the different sources into a cohesive structure, and providing the sales, service and marketing functions with tools that can leverage this intelligence.  The sources of this data not only include the obvious ones such as a carrier’s Customer Service Center, and Policy or Claims Admin system, but should also originate from the Agent, Marketing Surveys, Telematics, and Social Media, including Twitter and Facebook – all mashed up to produce a Balanced Scorecard and Predictive Analytics.

Most CRM systems need to be updated to include new columns in their user profile for data in addition to email and phone number such as Facebook name, Twitter Handle, etc. With the social listening and response management connected to your CRM, a social inquiry can be viewed in context and the activity recorded for future interactions, available to Customer Service Reps or even Agency personnel. This level of social customer intelligence is going to differentiate companies that do it right, becoming a key element of a carrier’s business strategy.

A fully integrated Customer Intelligence platform provides benefits such as:

• A single integrated interface to many social media outlets
• The ability to manage multiple writing companies
• Create and track cases, contacts, accounts, and leads from real-time conversations
• Manage marketing campaigns and track social media marketing ROI
• Cue CSR’s on upsell and cross sell opportunities

A carrier should determine the Key Performance Indicators (KPIs) that matter most to their business goals, then view the appropriate data in graphical dashboards to track effectiveness of their efforts.  It’s important to tie those KPIs to their influence on customer behaviors such as loyalty and increased sales.  But carriers must also be aware to not look at positive or negative changes in the wrong way and fully understand the reasons for success or failure.  Reacting to success by following up with more online advertising in certain media outlets, may not produce the desired results, when in fact the reason for an increase in sales is due to the upsell and cross sell efforts of CSRs.

Why do Carriers feel the need to turn to Analysts for key decisions such as PAS replacement?

I have been pondering this more and more – I mean the sell prop seems so good at the onset. An Analyst firm is agnostic, so we are lead to believe, they spend every waking moment researching the exact topic, they do countless rfps and they promise to be right by your side all the way to….that’s the nub isn’t it, to the end of the selection. So let’s not even think about the fact they do not have to live with the decision let us really focus on the value prop.

So we look to an analyst because all they do is research topics like PAS replacement or legacy moderization, and that seems to me to be yet another problem — if you never actually go through the whole process how can you truly have a full understanding? I am not talking about asking carriers and CIOs about lessons learned; I am talking about learning them for yourself and having the key knowledge to really know how the “theory” reacts in the “real world”.Let’s take a fun example – if you decided one morning to reenact William Tell with modern weapons, who would you want to take the shot……shall we review the candidates?

Candidate 1) A man that analyzes weapons every second of every day, he knows every single moving part, the exact interactions, the kick, the muzzle velocities, heck he even talks to sharp shooters about the guns longevity, it’s reliability and confidence….seems to be the perfect candidate – he knows everything with the one exception of ever actually aiming and pulling a trigger.

Candidate 2) A US Army Ranger sharp shooter, he knows all he needs to know about the weapon, he may not know the exact rifling pattern but he does not need to he has something different; he knows exactly how the weapon reacts, the wind, the elevation and air pressure, the distance and drop of flight – he knows where the bullet will end up in the real world, not on paper.

So forget the original question – let’s have a new one – you are an Insurance CIO with an apple on your head and a lot to lose, who takes the shot at the apple? Who do you choose? Interesting thought…….

Does Claims BI Just Mean “Bodily Injury?”

Anyone in the insurance claims industry that works on BI is not talking about Business Intelligence. Rarely is BI ever applied in insurance claims to mean business intelligence because most carriers only use business intelligence generically to examine closure rates, expense payments, and contact rates. Business intelligence is most often used primarily to analyze data in other business units like agent performance, product profitability and policy discounts.

By properly applying business intelligence and measuring analytics in the claim handling process, carriers have the opportunity to review and grade adjusters for improvement and development of claim adjudication best practices. Monitoring and reviewing claim handling practices will ensure adjusters are performing quality investigations resulting in fair and proper claim settlements for the carrier and the insureds.

A claim is the core of why people purchase insurance products – to get reimbursed when they incur a loss. A claim becomes a personal touch point with the insured, as well as a prospective insured when third parties are involved. How many carriers have used claimants switching to them after a claim to advertise their service? Leveraging analytics to generate business intelligence on claims processes, insured retention, and claimant satisfaction, as well as measuring things like allocated loss expenses, the number of claimants with attorneys, and post closure actions, can be used more directly and efficiently to impact the success of claims handling.

Of course you may not want all of your insureds since there are those that are working to use insurance claims to make money. Properly applied analytics and techniques can detect patterns and trends in claim participation, injuries, supplemental repairs, etc. I know of one specific case where analytics found that a claimant was paid five times for a single leg amputation, and another where a doctor was treating an average of 1,600 patients per day. Business intelligence can also capture the effectiveness of independent medical exams on claim settlements, better understanding and control on reserves, back to work rates, and therapies to move claimants from total disability to partial disability.

The next logical step is moving into predictive modeling.  Properly applied claims analytics helped one western insurer realize their return on investment in a matter of months, when they could proactively augment and deploy needed field staff to respond to several catastrophic storms.

By improving best practices, identifying fraud early, and employing predictive modeling, not only will customer satisfaction be effected, but this will also trigger claims closing more quickly and at lower costs, increasing the number of claim files adjusters can handle and lowering loss ratios. In this tough economy, lowering loss ratios by even as little as 1% can have a big impact on a company’s bottom line.

Don’t Let Your Enterprise Overhaul Plan Implode Like the Red Sox….A Disgruntled Fan Vents

You have your architecture design all laid out; the proper resources have been secured and contracted for the duration; the development starts off a little rocky, but quickly smooths out, and you’re sailing along through the project.  Everything’s firing on all cylinders while you’re blowing through all the deliverables with ease, and you can see the potential success coming; you near the end of the project in System Integration Testing – when it all falls apart like the 2011 Red Sox.

On paper, the project plan looked flawless with plenty of time allotted for each stage, including contingency.  Your Agile development method had been tried and tested, and everyone understands his or her role.  You can do everything right to position your company for success, yet fail in the execution.

There are many factors that contribute to the success or failure of a project:

• Focus and Concentration
• Expertise
• Reserves
• Communication
• Team Chemistry

It all starts with focus and concentration.  A system replacement project is a full-time job, and if people become distracted by other issues, such as production support responsibilities or competing projects, those distractions impact the quality and timeliness of the system replacement. Just like a pitcher who’s distracted by off-field issues or his next contract can start throwing meatballs, your project resources can be sucked into other issues and neglect their tasks at hand.

Aligning individuals with the correct task for their skill sets is key.  It’s difficult for a project to be successful if resources are overwhelmed by learning new technology. Confused employees beget faulty implementations that must later be fixed or replaced. If a player’s used to playing center field, and you stick him in left with a large wall behind him and much closer to home plate than he’s accustomed to, you’ll be stuck with defensive problems that cost games.  Similarly, it’s also important to have depth and reserves available to fill-in.  Should resources be unable to complete the work, you need competent people available to step in and allow the project to continue without causing a misstep.  If one of your best young pitchers goes down with a back injury, or your “All Star” third baseman is sidelined with a hernia, you need to have people available in AAA who can step in and hold their own to keep things moving in the right direction.

I love the Agile development methodology.  There’s constant communication – everyone meets every day, short sprints of development and delivery meetings, easy to follow tracking reports on tasks, publicly displayed reports on progress – everyone knows what’s going on. Constant communication yields accountability and support. If people see that they may be lagging behind, they’ll put in more time to compensate. If others are ahead of schedule, they may be able to help those whom are lagging. However, the danger is that if one group does lag behind, it can also draw others into that quicksand. They may say, “If the others are behind and no one cares, why should I kill myself to get my own work done?”  Therefore, it’s important to keep everyone motivated with accountability and let everyone know where everything stands.  This methodology also applies to enterprises as a whole.  If your pitchers are throwing so poorly that they can’t get past the fourth inning, it can create derision in the clubhouse. Your DH might start telling players, “If you can’t get the job done, we’ll have to play relievers instead.”  Or, if your new “star” left-fielder can’t get on base and use his speed to score, you need to communicate to the team why those players are still in those positions.  The oft-quoted definition of insanity is “doing the same thing over and over again and expecting different results.”

Not enough can be said about team chemistry.  Team chemistry is most important when the chips are down.  That’s what helps get you out of the doldrums and put you back on top of your game.  The team needs support from management, not only in providing the proper tools to accomplish their tasks, but also to let off steam for a respite and work together on something completely different.  Take a Friday afternoon off for the team to play volleyball on the back lawn with a BBQ lunch, or a laser tag session to get their minds thinking about something else and staying fresh.  In order to achieve success, everyone must pull together.  Get them to socialize with each other and build that rapport where they want to support each other.  Keep everyone working closely, lock them in the same room if you can, because that will help build those close relationships amongst the team.  You can’t have everyone only concerned about their performance and not working together.  You can’t have 25 guys-25 cabs.  When it gets to the end and you’ve lost 19 of the last 24 games, there’s no character there to save you.  Team members will give up on each other and graduate to a self-fulfilling prophecy of loss.  A player might say, “If pitching lets up another long ball, I’m not going to try my hardest to catch the ball.”  The defense gets lazy, balls aren’t played properly, and more runs score.  In those situations, you need to “Cowboy Up” and do whatever you can to win.  You need to cheer for each other and not expect the worst to happen.  If you expect the worst, you’ll make it happen.

Simply putting the plan together doesn’t mean it will be successful. You have to do all things well in order to make it happen and achieve success.

(Personally, this blog entry has been very cathartic.)

Virtualization in Insurance

The Power of a Desktop in the Palm of Your Hand

Is Desktop-as-a-Service a Subset of IT-as-a-Service?

I read this blog recently, and it prompted some reflection on the possible applications for time- and cost-saving benefits in the insurance industry.

There are two basic types of insurance carriers from an IT perspective

1. Carriers that sell insurance and use IT to support their business goals
2. Carriers that are an IT shop that also sell insurance.

Though these types of carriers are very different, virtualization is a concept that benefits both.  Virtualization enables carriers with smaller IT shops to effectively leverage improved support efficiencies and more flexibility and allows larger IT organizations to redeploy resources for bigger projects like core system upgrades.

“Virtual desktops,” the keystone of visualization, free a user from hardware burdens by introducing “greater synergy, efficiency, and agility.” This allows users to embrace a mobile and more flexible work style.  This versatile technology applies to a variety of scenarios. With the help of an iPad or Galaxy tablet connected via WiFi to the local area network (LAN) and radio-frequency identification (RFID) tags, doctors have all of their patients’ records at their fingertips. A similar approach benefits insurance agents when visiting customers. With mobile desktop in tow, Claims Adjusters carry their office with them, and Underwriters spend more time in the field reviewing referrals with Agents.

Desktop-as-a-Service as a Subset of IT-as-a-Service has its own benefits. With virtual desktops, new users easily and quickly enter an established network with their own legacy systems already on their desktop.  It becomes easier for an agent to catch a plane to another office, log in, and there’s his desktop, ready to provide personal office functionality.

Lastly, as a part of efficiency improvements, virtualization minimizes the cost of hardware upgrades not only for those of whom work remotely, but for all users in an office.  Because all applications run on servers, users operate smaller systems without a large hard drive and processor.  In addition, any application and operating system problems users experience are addressed without requiring IT to visit the remote machine.

Sorry, Nick Burns the computer guy! You’ll be out of a job.

Hello, Newman.

The U.S. Postal Service is in dire financial straits and, like many businesses, in danger of shutting down completely if it doesn’t cut costs.

By now, most carriers have been conducting business with their policyholders and agents offering electronic delivery of everything from applications to renewal notices. But there are those that still require some transactions to be conducted by “snail mail.” If the U.S. Postal Service were to shut down as early as this year, what would they do?  Would the burden of these transactions then be rest with the agents, and if so, how would they react?  Would those carriers be the carrier of choice when they’re not so easy to do business with because of these manually necessary steps.

Obviously, the first step for most carriers is delivering policy documentation leveraging a modern document generation tool, very quickly followed by a method to accept premium payments online and set up automated account withdrawals. Both of those are fairly straightforward projects that can be done relatively quickly and easily.  But the more complicated transactions of policy amendments and audit reporting are where many carriers lag behind. That’s where the postal shut down would really hurt. Policies like Worker’s Comp or General Liability that require businesses to report remuneration and sales figures on a regular basis rely on communication, and if that cannot be done electronically, it will become much more complicated and a longer process if paper documents have to be sent around.

You don’t want your agents to become your Underwriting Assistants and bill collectors.  You want them to stay out there pushing your products and generating business.  You want to be the carrier that’s easy to do business with and the independent agent’s carrier of choice.  If not, you may find that you’ll need to start a postal department to handle all those deliveries to policyholders.