7 Technology Trends

Transforming the
Insurance Industry
HOW INSURERS CAN ACHIEVE GROWTH

Mobility 4 2.TABLE OF CONTENTS Introduction 3 1. Improving the Agency Experience 11 6. Social Media and Collaboration 12 7. Telematics 8 4. Distribution Channel Management 14 Conclusion 15 About Vertafore 16 . Big Data and Analytics 6 3. Automating Regulatory Compliance 10 5.

This E-book will describe seven technology trends that will make a significant impact on carrier growth in a variety of areas: Top 7 Trends Transforming Insurance 1.Introduction 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. Automating Regulatory Compliance 5. Social Media and Collaboration 7. Yet. this E-book includes recommendations for how carriers can apply these trends to both gain a competitive advantage and support growth initiatives. while they are critical. 3. Improving the Agency Experience 6. Distribution Channel Management 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 3 . Telematics 4. Mobility 2. Big Data and Analytics • 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. 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.

Insurance carriers must take a strategic approach to their mobile offerings. provide the functionality that users want and leverage the form factor of the device. 4 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY Carrier Recommendations While mobile is quickly becoming table stakes for insurance carriers. mobile-enabled applications.1. There are a few high-profile. rather than provide online forms. more than 30% of carriers provide agent or customer capabilities via mobile. 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. In fact. quoting and binding. agencies and customers. and more than 60% will add mobile capabilities for policyholders and agents in 2013. ensuring that these offerings truly enhance the user experience. 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. Novarica principal. such as Progressive’s For Agents Only website available on mobile devices and Western World Insurance’s mobile app that supports rating. which can be cumbersome to complete without a keyboard. Mobile in Insurance Beyond Personal Lines: Current Trends and Expectations. Karlyn Carnahan. For example. Carrier employees can use tablets to write interactive performance reports during a site visit and improve agency performance. implementing mobile successfully requires more than simply providing downloadable apps to employees. . leverage inherent mobile capabilities such as geo-location and portability. adds that 70% of property casualty insurers predict that they will offer mobile capabilities by 2014. according to Novarica’s report.

Novarica ” Notes Novarica partner Chad Hersh. –Chad Hersh. But given the rate of change in tablet adoptions.Other capabilities that insurers should consider deploying include mobile apps that support collaboration with underwriters. says Carnahan. Avoiding mobile today is like avoiding web browsers in the late 1990s.” Report Cited Mobile in Insurance Beyond Personal Lines: Current Trends and Expectations 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 5 . insurers cannot afford to be left behind. about 20% of carriers offer these capabilities. and an additional 20% plan to deploy them in 2013. and significant measurable shortterm ROI is in short supply. “Mobile is about positioning for the future. Today. “ Mobile is about positioning for the future.

insurers are increasingly leveraging external data sources in core business processes. claimants or agents has been decreasing while the amount sourced from third-party data providers continues to increase. “Those carriers using analytical models are generating significant benefits. verify claimant information or assess fraud risk. agent and insurer. yet powerful: External data sources provide immediate access to quality. While insurers recognize that harnessing this data can provide them with valuable and actionable insights.” explains Carnahan. third-party data provides significant benefits across the policy lifecycle.2. almost onethird said they would spend that windfall on Big Data.S. Big Data and Analytics Trend Overview It’s all about the data—and carriers get it. 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. 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. Carrier Recommendations 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. . When Novarica asked insurance CIOs how they would spend an “extra” $5 million in their IT budgets. U. comprehensive data that can improve underwriting outcomes and create efficiencies for the consumer. 6 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 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. Whether it is used to pre-fill a consumer online quote. The business case is simple. they struggle with making the technology modernization needed to support Big Data and embed it into real-time applications. explains Carnahan of Novarica. carriers can then take the next step and use that data to perform predictive modeling and build analytics into their operating models. the amount of data that is sourced from prospects. Third-party data is being leveraged across almost all business processes. Once they have aggregated the right data. Over the past 20 years.

” “ 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. enabling carriers to analyze risk characteristics and claims statistics to decide which accounts would benefit from additional loss control services. “Big Data has the potential to transform carriers.” Those carriers using analytical models are generating significant benefits by identifying and acting on unique insights. including underwriting. Report Cited Top Five Disruptors in the Next Five Years for Insurers 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 7 . carriers can addressany issues that may damage their reputation or brand. They can proactively reduce fraud by detecting potential fraud earlier in the process and by detecting otherwise hidden patterns of fraud. marketing and claims. Carriers can identify customers most receptive to cross-sell offers or those most likely to defect. All insurers should take steps to create the culture today if it doesn’t already exist in their companies. Big Data also has a role in risk management.” notes Carnahan. “Carriers need to consider the ROI and technology implications of Big Data as well as the impact on their organizations and processes. Novarica Another area in which Big Data can help carriers is monitoring carrier reputation by analyzing comments about the carrier throughout social media. relates Carnahan. Predictive analytics also are being used heavily in the claims space to detect fraud and to better align resources with cases. ” –Karlyn Carnahan. By intervening early with nurse case managers. analytics can provide guidance to underwriters to improve risk quality assessment and optimize prices.Carriers can use predictive modeling for a wide variety of business activities. During the underwriting process. One workers compensation carrier was able to predict which claimants were likely to have extended lost work days. In doing so. the carrier was able to significantly reduce their lost time days.

3. Pay How You Drive (PHYD) generally bases pricing on a variety of dimensions related to the driving behavior of the customer. The feedback provided to drivers also has potential for actually changing driver behavior to safer levels. or short-term policies. collect data from the device and retrieve the device in the event of customer defection. such as rapid accelerations and decelerations. PHYD decision has significant implications for carriers as it affects the technology requirements and influences how they can utilize telematics as a service offering for their customers. The PAYD vs. Assess not only which customers are likely to switch to a UBI-based program. provide customer support for the device. Those drivers. so carriers need to consider their options carefully. However. additional considerations apply. Carriers can either use installed devices and collect granular driving data themselves. UBI comes with real costs. 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. install the device. the routes driven and the territories driven through. . The technology is still evolving. may not benefit from UBI because of the cost of the infrastructure needed to support it. Carriers looking for long-term “preferred” customers will likely find this a good match with their strategy. Carrier Recommendations For carriers considering entering the UBI market. and there are several business models to evaluate. 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. Telematics Trend Overview Telematics and usage based insurance (UBI) are among the hottest topics in auto insurance. Pay as You Drive (PAYD) typically charges a customer based on actual. If a carrier is planning to utilize an installed device. The first area to evaluate is whether UBI fits with a carrier’s strategic market. such as how to distribute the device. Carriers that are considering moving forward with telematics have different business models to evaluate. though. the time of day. Drivers that demonstrate superior driving skills will certainly earn a lower premium. but also what the implications will be for those customers who don’t switch. Carriers may need to plan for a higher defection rate from those customers. carriers that focus on the sub-standard market. Two dominant business models are being used in the industry today. there are a number of important areas to assess. 8 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY who don’t switch are likely to experience higher prices due to the normal skewing of rate distributions. documented miles driven. Rather than creating broad rate tiers by looking backward at the performance of a book of business.

data mining and modeling. which has been a barrier to entry for carriers. Novarica fencing. Insurers waiting too long potentially face “adverse selection” and may be left mostly with customers who don’t suit their pricing model. and a carrier needs to assess what should be collected. ” –Karlyn Carnahan. Progressive announced terms for licensing its UBI program. Carriers interested in using the Progressive patent must apply by the end of June 2013. In commercial insurance. the adoption rate of the technology is slowly picking up speed as more insurers develop UBI programs to add to their offerings for both personal and commercial lines of business.” In December 2012. 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. The Progressive patent is fairly extensive. Home monitoring devices can track whether or not a homeowner locks external doors and drive underwriting since a locked door reduces burglary risks. cleanse and manage the data. opportunities across the value chain exist for insurers that adopt the technology early. crash data management. Carriers may need new technology infrastructure to store. stored and used for analysis. covering “a method and system of determining a cost of automobile insurance based upon monitoring. If approved. automatic crash notification/emergency call. remote access and vehicle diagnostics.A major consideration in UBI rollout is the existence of Progressive’s UBI patent. While it may be tempting to sit back and watch the UBI market rather than leap in. “ Although UBI is still not widely available or even widely understood among consumers. data management issues must be evaluated and preparations made. Additional skill sets may be needed to take full advantage of this new data through sophisticated analytics. recording and communicating data representative of operator and vehicle driving characteristics … [including] an operating state of the vehicle or an action of the operator. Once a carrier has completed its strategic assessment. Examples of services considered by carriers include safe driver coaching. but not use the data as an input for rating. A plethora of data about driver In life insurance. 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. carriers will be permitted to rate customers under the patent starting on or after April 2015. devices can monitor bridges or large buildings to identify potential structural issues. especially now as the main barriers to entry are falling. stolen vehicle tracking. organize. 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 9 . carriers can offer discounts for wellness programs based on the number of times a customer visits a gym per week. geo- behaviors may be available. They are planning to use the time to evaluate the collected data.

When regulators ask for information. every carrier wants to do so in a way that is compliant with their regulatory obligations. 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. 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. Automating Regulatory Compliance Trend Overview Carrier Recommendations As a highly regulated industry. Automation also provides the underlying data for reports and documentation about how a task was performed and by whom. 10 Regulators also look for consistent behavior. Novarica . 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. modify documents and assure workflows are easily modified to deliver consistent practices. 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY “ While carriers are highly motivated to drive growth today. ” –Karlyn Carnahan. Whether it is ensuring producers are properly licensed and appointed. is much easier to change as regulations morph. 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. Carriers that have not built flexibility into their systems struggle with consistently implementing regulatory requirements and responding quickly to data calls. based on business rules or workflows rather than hard-coded instructions.4. carriers must supply it quickly. explains Carnahan. In other words. “Carriers need to be able to rapidly add data elements. 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. without missing a beat or impacting agents or customers. Automating regulatory compliance serves several purposes.” says Carnahan. It provides carriers with almost instantaneous access to information and minimizes the risk of non-compliance by ensuring processes are followed consistently. such as the Affordable Care Act.

Improving the Agency Experience “ Trend Overview Since agents write more business with those carriers easiest to do business with. Insurance 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 11 . Mobile: Communication Channels in U. More carriers are providing a robust portal environment that provides functionality to agents. the most important capability for agents is carrier response to underwriting. ‘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. For example. Phone. quick quotes to bind and issue endorsements. quick-and-easy access to appetite guides. including uploading applications. according to Novarica.S. Mobile: Communication Channels in U. and up to 80% of carriers plan to enable agents to perform most information and transactional capabilities through easy-to-access agent portals. However. Look at your technology offerings and compare what you’re offering to what the agents are looking for in their top carriers—fast. carriers that work with independent agents cannot achieve their objective of profitable growth without focusing on the agency experience. Web. Asserts Carnahan. improving the agent experience is more than offering real-time connectivity. especially in personal auto. Carrier Recommendations Top carriers listen to what agents’ value and then leverage technology to provide that type of experience. Insurance. responsive. Novarica ” Real-time upload and download to agency management systems is important particularly for those carriers working with large insurance agencies that represent multiple carriers. Phone. Carriers are taking note. –Karlyn Carnahan. and proprietary rules and forms. Email. Agents also value participation with comparative raters. easy. “Carriers should be thinking. Email.S. according to the Novarica report. Carriers focused on improving those capabilities with technology successfully drive increased revenues. Report Cited Paper. Paper.5. it requires holistic approaches that ensure that every agent touch point is optimized. followed by speed of underwriting decision. Web.

Social Media and Collaboration Trend Overview Social media is about helping people connect. such as sales pipeline management and training. Carrier Recommendations Carriers can use collaborative technologies to improve process time. Consumer and agent expectations for connection have been established through social media tools that provide an opportunity for people to collaborate and share information. The collaboration platform would also store agent action plans and reports. most collaboration in the insurance industry takes place in the form of emails and face-to-face meetings. 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. During agent onboarding. LinkedIn and Twitter—are frequently used in marketing to drive brand awareness and connect with customers. They could also connect with other agents in discussion forums designed to support knowledge sharing. agents could access a variety of documents they need to get started with a carrier. yet more than 40% have no social media policy in place. 12 More than 70% of carriers that distribute through independent agents use social media. Today. Social media tools—such as Facebook. says Novarica in its report. While there will likely always be a need for these types of collaborations. 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY . 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. discuss tactics and generate new ideas.6. But other uses of social media tools improve collaboration and improve decisions and processes both internally with carriers and externally with the distribution channel. Insurer Social Media Strategies for Independent Agent Distribution. Agents could ask questions of their peers.

more than 20. Unique to the industry. All rights reserved. content management and workflow. Washington 98011 800. Inc. Inc. © 2013 Vertafore.0613 .444.com Vertafore delivers software and services that transform the business of insurance.000 customers rely on Vertafore to provide integrated technology that connects the entire industry with the most complete source of solutions—agency management. VCM. research solutions and producer lifecycle management—so their businesses run better and are more profitable.11724 NE 195th Street Bothell. please visit vertafore. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.7TRE.4813 vertafore. Trademarks contained herein are owned by Vertafore. and its subsidiaries. For more information about Vertafore.EB. rating and connectivity.com.

including its impact on governance and compliance. ” –Karlyn Carnahan. “Any social media tools must be intuitive. This includes creating processes and policies and driving employee adoption and participation. “Collaboration portals should be designed to help people do their job.” Carnahan recommends that carriers begin by determining the role of collaboration within the context of the “ Any social media tools must be intuitive. Novarica carriers’ overall business strategy. cultural implications and ability to demonstrate measurable success. contain content people care about. contain content people care about.Many use cases exist in the insurance industry— from creating training communities to large account underwriting to product development.” says Carnahan. provide choice over relationships and give employees something back that they value. provide choice over relationships and give employees something back that they value. Report Cited Insurer Social Media Strategies for Independent Agent Distribution 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 13 . Carriers are generating measurable improvements in both process time and the quality of decisions.

Mobile sales force applications. Distribution Channel Management Trend Overview In a multi-channel world. Novarica .7. and older channels are not going away. complicating channel management. existing distribution channels remain as new channels emerge. Carriers must support both direct and agent channels by motivating agents to generate business. “This creates additional burden on and confusion for insurer CIOs. and older channels are not going away. “Different elements of insurers’ communications are shifting at different speeds. They must also analyze how channels relate to each other. they are managed as discrete distribution channels unable to integrate for seamless agent and carrier interactions. Today.” says Josefowicz of Novarica. 14 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY “ Different elements of insurers’ communications are shifting at different speeds. Carriers are experimenting with a wide variety of techniques to better manage their agents strategically. especially for those carriers selling direct to consumers and through agents.” Carrier Recommendations Carriers need to consider how to strategically link multiple distribution channels beyond the consistent posting of transactions. ” –Matthew Josefowicz. compensating them appropriately and providing a suitable level of service to extract more revenue. who are required to invest in supporting new channels without being able to shutter older channels. not just on a transaction-by-transaction level. social media support tools and straight through processing are all techniques that deliver tangible benefits.

technology trends such as mobility. and new distribution channels can transform how they interact with their customers. These seven technology trends are deserving of These seven technology trends are deserving of carrier resources.Conclusion “The future ain’t what it used to be. it’s true that the future will likely look quite different from the present. analysis of huge amounts of structured and unstructured data.” Yogi Berra once said. For insurance carriers. collaboration platforms. 7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY 15 . For more information on how Vertafore helps carriers transform their business and achieve their growth objectives. those carriers that ignore them risk being left behind in a rapidly changing industry. and for the insurance industry.com. those carriers that ignore them risk being left behind in a rapidly changing industry. their agents and others in the insurance value chain. carrier resources. visit vertafore.

Inc. For more information about Vertafore.000 customers rely on Vertafore to provide integrated technology that connects the entire industry with the most complete source of solutions—agency management. Inc.0613 .7TRE. content management and workflow. © 2013 Vertafore. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. All rights reserved. and its subsidiaries. rating and connectivity. Washington 98011 800. research solutions and producer lifecycle management—so their businesses run better and are more profitable.com Vertafore delivers software and services that transform the business of insurance.4813 vertafore. Unique to the industry. please visit vertafore. VCM.EB.11724 NE 195th Street Bothell. Trademarks contained herein are owned by Vertafore.com. more than 20.444.