Tag Archives: Karen Furtado

Advanced Telematics and AI

Solution providers are quickly advancing innovative approaches to the next generation of emerging technologies that are affecting both insurers and policyholders. SMA has acquired a unique historical view of how solution providers are innovating within insurance through our annual SMA Innovation in Action Awards – and we have seen how it has changed over the six years of the program. The two winners of this year’s SMA Innovation in Action Awards for Solution Providers are excellent examples of how the use of technology like telematics and artificial intelligence (AI) is maturing in the insurance industry.

TrueMotion’s smartphone usage-based insurance (UBI) product combines mobile technology, machine learning and data science to help insurers better understand and mitigate risk, acquire more profitable customers and increase customer loyalty as well as giving individual users feedback on their driving habits. TrueMotion’s solution illustrates how solution providers are expanding the possibilities of existing technologies. Telematics is firmly established as an insurance technology and continues to spread from personal to commercial lines of business. TrueMotion’s innovation lies in the refinements it has made and how it is using telematics, sensors and mobile technology to effect measurable improvements to drivers’ behavior. Not only does TrueMotion use the sensors in a user’s own smartphone in place of an on-board device (OBD), the company can determine when a driver is actually behind the wheel based on the position of his phone. This solves a weakness in OBD-based telematics: how to link good or bad driving habits to a specific driver rather than a specific vehicle, while still excluding trips that driver makes as a passenger.

See also: Strategist’s Guide to Artificial Intelligence  

The sophistication in data collection and the advanced analytics on the back end allow TrueMotion to give drivers immediate feedback for more effective behavioral modification. TrueMotion also takes an innovative approach in monitoring how the user interacts with her phone while driving, allowing for real-time alerts if distracted driving reaches dangerous levels.

Solution providers are also moving beyond emerging technologies in the physical domain, like connected vehicles and drones, to those of the virtual realm, like artificial intelligence, cognitive computing and blockchain. These technologies have been slower to gain a foothold in the insurance world, partly due to a slower development timeline and because their insurance applications were still to be determined. That is already changing. Today, interest in artificial intelligence and machine learning, in particular, has skyrocketed.

Intellect SEEC’s Intellect Risk Analyst is an AI-based risk discovery and assessment software for the commercial insurance industry. It aggregates data from more than,800 structured and unstructured data sources and applies rules set up by the underwriter. Machine learning analyzes the resulting underwriting decisions and refines its data aggregation and analysis capabilities in response.

This solution gives insurers an accessible way to apply big data and AI to their existing transactional processing – in this case, underwriting. Integrating big data with advanced AI technologies gives underwriters access to new information and insights on the proposed risk. These new insights for risk assessment and pricing, together with the continuous improvement of data aggregation with machine learning, are powerful assets for underwriting.

See also: It’s Rush Hour in Telematics Market  

In these continually changing times, it becomes critical for all members of the insurance ecosystem to collaborate on new ways of doing business. Technologies that are focused on improving risk and harnessing the power of AI and machine learning, for example, showcase how resources and technology are interacting to change the insurance landscape.

Innovation is flourishing across the insurance industry, and there are still great opportunities ahead. As solution providers continue to grow their use of advanced technologies into new territory, the potential value of their partnership increases for insurers. We expect to see solution providers’ innovations play a key role in the transformation of the insurance ecosystem.

Innovation Maturing Into Major Impacts

Maturity in innovation means the innovative approaches taken by companies throughout the ecosystem are becoming more comprehensive and systematic. SMA has acquired a unique historical view of innovation in insurance through our annual SMA Innovation in Action Awards – and we have seen how it has changed over the six years of the program. Small-scale experimentation with a single emerging technology like drones has been replaced by building an entire product or division around advanced technologies like machine learning. Insurers are also taking concrete and proactive steps to establish an innovative culture within their organizations. This year’s award winners provide great examples of these shifts and show how innovation is becoming firmly established in insurance.

An excellent example is Liberty Mutual Insurance, the winner of a SMA Innovation in Action Award for company-wide innovation. They created a sustainable innovation model across the enterprise to successfully deliver transformational value to their operations and customers. Their innovative initiatives include developing a digital, direct-to-consumer insurance product aimed at skiers and snowboarders, multiple skills for Amazon Alexa that break new ground in how consumers interact with their insurance company, and a number of next-generation telematics programs.

See also: Innovation: ‘Where Do We Start?’  

Liberty also implemented cutting-edge analytics and emerging technologies in support of their Liberty Mutual Benefits carrier, winning an award for innovation in a single initiative. Building the data structure from the ground up gave Liberty Mutual Benefits the opportunity to create a data-driven organization with a focus on speed to market and innovative thinking – in effect, an InsurTech within the larger Liberty Mutual structure. Liberty Mutual Benefits leverages the open-source analytics platform Hadoop, artificial intelligence, visual analytics, and machine learning to extract the greatest value from big data and store it in a data lake rather than a traditional data warehouse.

Innovation at Liberty is not only happening within their innovation division, Solaria Labs, but throughout their business, with various external partnerships as well as investments through their strategic venture arm (Liberty Mutual Strategic Investments). Liberty Mutual is demonstrating how innovation as an organizational value can both drive competitive advantage and create new solutions for customers in the digital age.

TAL, Australia’s largest life insurer, took their own approach with an innovation initiative. The first achievement of that program is a new breed of customizable life insurance, CoverBuilder, which won one of this year’s awards. TAL CoverBuilder allows consumers to build their own personalized life insurance policy by adding or removing blocks of coverage. Designed by consumers through interactive online processing and education, new policies can be written without the help of a financial advisor. They can see how each choice they make affects their premium and benefits, and educate themselves about their life insurance options at the same time. As a result, they both understand and value the coverage that they put in place.

TAL’s new product approach is tailored to the self-directed digital consumer. They found that these new customers valued customization rather than simplicity and were willing to learn about many coverage options in order to personalize their coverage. TAL’s nimble pivot allowed them to better serve these customers. They furthered their offering by partnering with Qantas for early rollout, marrying their life insurance expertise to next-generation business models such as wellness programs.

Grange Insurance created an internal practice to institutionalize innovation through cultural change, regular events, and multiple channels. Their formal innovation practice elicits active participation across the enterprise, using an ideation platform for crowdsourcing innovative ideas, regularly scheduled hackathons, gamification, and communal discussion boards. All business and IT associates are incented to participate, backed by strong support from the senior leadership team.

Some of the new ideas, like their skill for Amazon Alexa and an associate mobile app, are already in production. Many others are in the development pipeline following hackathons focused on increasing customer retention and potential uses for chatbots. Grange has also benefited from adapting their cultural mindset to structured, scientific experimentation and accepting failure as a key learning step toward successful innovation and creativity.

Grange’s direct, inclusive approach to innovation complemented their established business practices. The first hackathon dealt with policyholder retention, taking a new look at an old problem. Together with advanced technologies like natural language processing and chatbots is simple, low-tech collaboration: communal whiteboards for brainstorming and communication across siloes, with enthusiastic participation by top executives.

See also: Insurance Coverage Porn  

This year’s insurer award winners are well-established companies with long histories, not greenfield insurers. Together, they have been writing insurance for 335 years. As exciting as the InsurTech world is, it is not the only home of innovation. In fact, the shifts that the winners have taken show how they can take advantage of the best of the new world without giving up their existing expertise. The convergence of these two ways of thinking positions them as Next-Gen Insurers. What is clear from these examples is that these shifts are possible, valuable, and indeed central to the future success of these organizations.

So, we urge insurers of all sizes and lines of business to look closely at these examples of convergence, where innovation complements an insurer’s established strengths. The opportunities are out there in every aspect of your business – and are paying dividends to the business of insurance.

Change Accelerates in Core Systems

The core systems replacement cycle is speeding up. Twenty years ago, even if you spent your entire career working at the same insurance company, you might expect to go through the implementation of a new core system once, maybe twice. Technology – and the speed of business that it enables – is changing that.

Technology is advancing at an exponential rate, and that includes the technology underlying the business of insurance. Moore’s Law predicts that processing power will double every two years. Other technologies exhibit similar exponential advances. Before solid-state drives emerged, the cost of hard-drive storage dropped by half annually. In 1997, 1 GB of memory would set you back about $100. Ten years later, the price had dropped to less than $.50 per GB.

See also: Finding Success in Core Systems  

When processing power was limited and storage was expensive, we were constrained in how we used core systems. The exponential advancement of these and other technologies removes the obstacles that had previously restricted their use – which opens many, many new avenues of technological advancement and business innovation. In the next 10 years, we can expect similar advances in the technology that we are using today.

Ten years is a critical number in insurance technology. In 2007, new insurance core systems did not have a variety of capabilities that are necessary to deal with the challenges of today. Mobile and policyholder collaboration is now a mandate. Advanced use of data and analytics has become a base-level requirement. Insurers now need to be able to handle a wide variety of specialized lines of business such as cyber, as well as shared economy elements like hybrid products to provide coverage for UberX and Lyft drivers. Consequently, more insurers expect that a core system implemented today will be up for replacement in less than 10 years. In 2011, nine out of 10 insurers anticipated a new policy administration system would last for more than a decade. Today, only six out of 10 insurers agree.

This is a tremendous shift in the market’s perceptions among P&C and L&A insurers alike. It reflects the accelerating pace of change and the exponential advances in technology. Insurers looking to the future – at the changing business models and products in the market – are unsure that an older core system will be able to face the challenges brought by digital and greenfield insurers as well as other insurtech advances. At a minimum, the core systems of today must continue to improve in upgradability to keep up with the advancing capabilities insurers need to match the pace of market changes.

Shorter lifespans mean insurers are rethinking how they allocate resources for core systems modernization. When faced with obsolescence in less than 10 years, insurers are more attracted to options that require less up-front planning and capital. This has translated into a greater number of cloud-based core systems as well as a shift toward more subscription-based pricing models.

The speedy implementations and quick time to value possible with cloud-based core systems appeal to insurers for the same reasons. Quick time to value is essential for insurers to be able to take advantage of new market opportunities, and implementations that take months rather than years can increase insurers’ adaptability. These buying trend changes aren’t displacing insurers’ purchases and implementations of larger, enterprise-wide core systems. The new trends simply give insurers the quick wins they need while they continue to advance enterprise-wide core systems modernization projects.

See also: The Death of Core Systems  

My recent report, Bridging to the Future With Core Systems Modernization, explores that trend and other ways that insurers are using modern core systems to increase the adaptability of their businesses. Core systems replacement and modernization is one of the seven SMA Bridges to the Future – and is critical for insurers to prepare for the opportunities and challenges of insurance in the coming years.

When we look at how quickly our world is changing, 10 years doesn’t seem so long. It reminds me of a prescient quote from Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.” And he said that more than 20 years ago.

Insurers Are Catching the Innovation Wave

As the June 30 deadline approaches for this year’s SMA Innovation in Action Awards, I’m looking forward to seeing the innovative strides that insurers and solution providers have made in the past year. The market is changing so quickly that adaptability is key.

The SMA Innovation in Action Awards recognize insurers of all types and sizes who are rethinking, reimagining and reinventing the business of insurance. In recent years, we have recognized a number of traditional, established companies that are propelling themselves forward. They have combined the best strengths of our industry today with the best new ideas from insurtech and the digital world. And this convergence of the old and the new is the true path to success.

See also: Key Trends in Innovation (Parts 4, 5)  

Our winners have showcased this type of mindset by blending their existing projects and goals with very targeted uses of insurtech, emerging technologies and new data sources.

  • Experiment with new technology and customer experiences. John Hancock’s Vitality Program (2016 winner) engages policyholders through gamification and personalized guidance to increase their healthy activities, like exercise and annual physicals. Policyholders can report data online or through a free wearable fitness tracker. In the next phase of this project, John Hancock has expanded the customer engagement model to now provide discounts on healthy foods from participating stores. Each time the policyholder buys a healthy food, the discount and brand appear on the checkout receipt, reinforcing John Hancock’s role as their partner in healthy living. In addition to the creative application of emerging technologies, John Hancock is shifting from a transactional relationship with their customers to one based on value-added services.
  • Engage with emerging technologies. Texas Mutual (2016 winner) tackled a loss-prevention challenge, engaging workers to learn and follow onsite safety procedures by creating virtual reality scenarios to train construction workers. Texas Mutual’s Safety in a Box app was designed for easily accessible, familiar technology: the user’s mobile phone with a free cardboard viewer. Texas Mutual also distributed viewers at construction industry conferences and filmed in both English and Spanish to reach a broader audience.
  • Incubate innovation. Incubating Haven Life (2015 winner) internally allowed MassMutual to test a new business model: selling life insurance completely online in about 20 minutes. Underwriting Haven Life’s policies relies on external data fed through proprietary algorithms, reducing the time and complexity for the applicant.
  • Look at the big picture – but start small. Motorists (2016 winner) completed the first phase of its plan to achieve complete organizational transformation within 10 years. The ultimate goal is to operate as an “85-year-old startup” designed for innovation and collaboration, and the company redesigned a key workspace to foster this cultural shift. It built around cutting-edge technology to enable work to shift seamlessly across time zones and continents. This first step is intended to encourage more collaborative work styles to spread throughout the company, bringing Motorists closer to its vision.

One of the best parts of our awards program is to showcase how innovation is flourishing within our industry – and not just with greenfield insurers or those partnering with insurtech firms. Together, John Hancock, Texas Mutual, MassMutual and Motorists have more than 400 years of experience in writing insurance. They demonstrate how no company is ever too established to embrace change.

See also: 3 Ways to Leverage Digital Innovation  

For more information on the SMA Innovation in Action Awards and to create your own submission, visit www.strategymeetsaction.com/awardsSubmissions are due by June 30.

We will also be focusing on the power of convergence at our annual SMA Summit in September.

Are Core Systems Nearing an End?

After Opening Day of baseball season last week and the release of SMA’s new report on core systems buying trends, I realized that you could equate the progress being made in core modernization with that of a baseball game. Could it be that that we have entered the seventh inning stretch of this phase of the core modernization journey? Are we preparing to start a new game?

Our latest research, published in Core Systems Purchasing Reaches the Tipping Point: What’s Hot – And What’s Not, has identified a definite slowdown in the purchase of core systems in the U.S. market. P&C insurers purchased 38% fewer new core systems in 2016 as compared with the year before. The flurry of new purchases that we saw in earlier “innings” (over the past five to seven years) is wrapping up as insurers focus on implementing those new systems, improving their existing core environments and looking ahead to understand the new requirements driven by the changing insurance market.

See also: How to Transform Core Systems  

The changes throughout and around insurance are pressing the industry toward a new perspective: a new ballgame. This game is just beginning and will play out over three to five years as the trends we are studying in insurtech and emerging technologies take hold. Insurers must evolve to promote the ever-expanding interaction with external data, investment in a more engaging customer experience and new product constructs shaped by the shared economy. This creates a set of capabilities from core systems that are considered the future-ready “MatureTech” solutions for the industry.

Each insurer needs to assess how its products and services align to the shifting market and the advances it will have to make to respond to the new opportunities. We are witnessing changes that are substantial enough to advance the capabilities that insurers require from in their core systems. And in the world of core systems, as in the industry at large, we need to start preparing for this new game.