Innovation for Operational Efficiency - Notes from the Roundtable

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2 March 2020
Karlyn Carnahan, Marty Ellingsworth, Michael Fitzgerald, Donald Light, and Karen Monks

There is a collision taking place between the need to build the firm of the future, and the equally pressing need to cut wasted spend, reduce costs, and focus on value. Over the last few years, many insurers have focused their innovation efforts on building the firm of the future – creating new products, focusing on the user experience and investing in insuretechs.These investments are critical for long term survival. But with persistently low revenue growth and rising expense ratios, insurers have to find ways to balance that need to reimagine the business for the long-term with the need to remain disciplined and profitable in the short term.

We recently conducted an executive roundtable, bringing in leaders in the industry to discuss ways that they were successfully using innovation to drive operational efficiency for today while laying a foundation for the future.

Innovation for Operational Efficiency – What Do the Numbers Say?

The roundtable started with Donald Light reviewing findings from Celent’s annual survey of North American Property/Casualty CIOs regarding their plans and priorities for 2020 – with special reference to innovation and operational efficiency. Karen Monk contributed some insights from a parallel survey of North American Life CIOs. There was lively discussion among the attendees on several of the findings, including: the impact of corporate priorities on IT plans; how IT resources were allocated among maintaining the current application stack, and upgrading that stack. There was also lively discussion on innovation initiatives; and the role insurtech solutions played in their firms. Some pointed out that innovation may be more aspirational in nature and can be very hard to pull off. Culture gets in the way unless leaders actively work to shape the culture to support a digital mindset.

Core System Replacement – Battle Scars and War Stories

Keys to successful core system replacements were shared by two executives who currently are leading such efforts. Jennifer Baziuk of The Commonwell and Louis Régimbal of SSQ outlined what their organizations did to deliver their transformations on time and under budget. In the case of The Commonwell, Jennifer identified an early decision to replace the entire administration suite – policy, billing, and claims – as a necessary requirement. Implementing pieces of functionality was impossible given their needs and the complexity of their technical architecture. Louis echoed this approach in their replacement of their individual life platform.

The other common success factor was a commitment to implementing the package as is, allowing rare exceptions to out of the box functionality. Jennifer mentioned that she and her business executive partner reviewed over 1,000 change requests and decided that almost all would be delivered in their “Day 2” release. She also mentioned that the implementation project included funding for the Day 2 items and identified this as a major reason they were able to enforce such tight change control.

Both also discussed the adjustments their organizations made beyond the technical system implementation. Louis stressed the need to understand current processes and then redesign them using the additional capabilities that were being delivered. Jennifer summed up the breadth of the changes involved noting that one executive summed up their effort saying, “we asked you for a different system.You gave us that, and different people as well”.

Moving to the Cloud – Come for Variable Costs, Stay for the Speed, Analytics, and Security

In this session Kay Smith, Director IT Strategy at Coverys, joined Donald Light to describe Coverys’ journey from running a set of unrelated core systems (from various insurers Coverys acquired), to installing Duck Creek on premises, to migrating to Duck Creek OnDemand (a cloud-based, end to end SaaS solution). Kay described Coverys’ factors in its analysis for choosing between staying on prem vs. migrating to Duck Creek OnDemand, including: data storage, ease of upgrades, security, HIPAA compliance, and operational efficiency. Kay also described how Coverys implemented Duck Creek OnDemand, and its future plans. Several other attendees contributed their own experience with similar decisions.

The discussion initially focused on the technical aspects of moving to the cloud.Although not as difficult as a full replacement, it is still not a trivial effort to rebuild connections and test configurations.The conversation pointed out a wide variety of other aspects that change when moving to the cloud. Financial metrics change as costs move from CapEx to OpEx.Skill sets in the IT shop need to change as well.Internally, there will be new governance processes, new metrics to manage, and expectations need to be managed across the internal users.

What does Customer Mean to You?

The panel on customer centricity began with a lively discussion with the endpoint assertion that the consumer is the “real customer” no matter how they were reached and regardless of product and service. It next became apparent that there is no easy way to identify a “real customer” across myriad channels, business applications, and products. The gap of wanting to know the customer versus not being able to see a customer split across products and channels was universally recognized. Solutions for using third party vendor capabilities to create customer knowledge were brought up for front door needs like lead generation and supporting distribution, but the complexity to manage this successfully for lifetime value, claims and compliance were seen as not ready for production yet in most companies, if any. The need to be able to learn and remember consumer preferences and manage multiple channel requirements simultaneously is the path forward and a customer data platform augmented with third party data will be able to help.

To BPO or Not to BPO: Assessing Prospective BPO Partners

The reasons why insurers outsource have changed over time. Whereas cost used to be the primary and often only reason an insurer outsourced processes, today the reasons could range from cost (still top) to gaining access to best processes practices and tools or providing opportunities to enter a new market and get products to market quickly. The two panelists provided great examples of these changes. Jessica Dowdy from Nationwide shared how Nationwide’s reentry into the Pension Risk Transfer (PRT) market after exiting the market years ago meant that their legacy system would not meet their needs. Rather than revamping the old system or buying a new one, they opted to use a TPA who is a PRT specialist. Darryl Siry of Prosight Specialty talked about how special circumstances led them to outsource originally – they had a six month back log of policy issues – but over time they have used their outsourcer to provide leverage as they make strategic moves to automate their processes after implementing a new policy administration system. The discussion touched upon the selection process, metrics used to gauge the vendor’s work and outcomes, pricing changes, lessons learned and recommendations for others considering outsourcing.


Insight details

Life & Health Insurance, Property & Casualty Insurance
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Insurance, >>Life/Annuities Insurance, >>Property / Casualty Insurance
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Geographic Focus
North America