Tag Archives: next-gen insurer

A Look at 3 Leading Next-Gen Insurers

As the June 30 deadline approaches for the 2016 SMA Innovation in Action Award submissions, let’s take a look back at our insurer winners from 2015: Haven Life Insurance Agency, John Hancock and USAA. Their innovative projects and initiatives have demonstrated how they are rethinking and reinventing the business of insurance and furthering their progress toward becoming a Next-Gen insurer. Insurers that are considering submitting an application to the 2016 Innovation in Action Awards program can see from these examples what a winning business and technology project/initiative might look like.

See also: How to Enable the Next-Gen Insurer

The Next-Gen insurer model is based on five foundational areas of transformation: customer, products and services, technology and data, business model and innovative culture. (For more information on the Next-Gen Insurer model and its foundational areas, click here.) Insurers are taking creative approaches in all of these areas, and the 2015 winners are no exception. Winners are listed in alphabetical order.

Next Gen

  • Haven Life Insurance Agency made a real leap forward for the entire insurance industry in the area of products and services by offering medically underwritten life insurance that can be purchased online. Haven simplified an arduous paper-based application process of four to six weeks to better meet the expectations of today’s customer. The company did this by leveraging technology and data – specifically, external data fed through sophisticated algorithms – to greatly reduce the amount of information that the customer has to provide to receive a quote. A partnership with MassMutual gives Haven Life access to the resources of a large organization while retaining the innovative culture that sparked the transformative approach to selling, underwriting and administering life insurance.
  • The John Hancock Vitality Program reimagined the relationship between an insurer and its policyholders, creating a unique customer experience in the traditionally low-touch world of life insurance. The program rewards policyholders for healthy behavior such as exercising and getting annual physicals. These activities can be tracked through wearables technology and data via a free Fitbit or logged online through a computer or a mobile app. John Hancock uses this data in an online rewards program that offers premium savings, among other rewards, changing the business model for this life insurance product. In addition to rewards, policyholders can receive individualized encouragement toward further healthy behavior, a value-added service that represents a real advance in life insurance products and services.
  • USAA pioneered the use of drones in the insurance industry, showing what this technology and data can do for insurers, especially in P&C claims. After mudslides hit Oso, WA, USAA’s deployment of drones for damage assessment established a new and vital service for policyholders in post-disaster situations, pushing the envelope in the foundational area of products and services.

See also: 6 Key Ways to Drive Innovation

The real progress that these three insurers are making toward becoming Next-Gen insurers is evident in the effects these groundbreaking initiatives have on the five Next-Gen Insurer foundational areas. They are also fantastic examples of how thoughtful approaches to innovation can make insurers stand out from the crowd in the industry.

2016 Awards Logo

This is the fifth year of our SMA Innovation in Action Awards program, which honors insurers and solution providers that are putting innovation into action with creative projects, initiatives, technologies or solutions that further insurers’ progress toward the goal of becoming Next-Gen Insurers. We encourage you to apply for the SMA Innovation in Action Insurer Award or the Solution Provider Award to share your successful innovations!

Submissions are due by June 30, 2016. A full program description, FAQs and links to the applications for both awards can all be found on the SMA website.


Shift in Funding for Strategic Initiatives

Take a look at the financials of the insurance industry and industry projections, and it may seem like business as usual. But peek just under the surface at many insurers, and you’ll find a great deal of activity aimed at transformation. Typically, this activity takes the form of strategic initiatives—enterprise-wide programs that require sustained commitment and investment.

Our research reveals that the top strategic initiatives remain virtually the same as 2015: customer experience, analytics, new products and core replacement. This is an indication that the commitment to transformation aligned with these four initiatives is rock solid. However, the manner in which these initiatives are being funded is changing, with more funding coming from new sources outside the IT budget. In 2015, about a third of the funding for strategic initiatives came exclusively from capital investments. In 2016, funding from new sources will increase to more than 40%.

These are the questions to explore: Why change? Why all the investment and resources devoted to rethinking and reshaping the company? The answers are straightforward. Many recognize that we are entering a new digital era, one with technology rapidly advancing and increasingly in the hands of customers and competitors. Emerging trends such as the sharing economy and the rapid adoption of technologies such as cloud and mobile are creating opportunities (and risks) for insurers. In fact, SMA predicts that the introduction of new products, business models and business optimization will accelerate as insurers leverage maturing technologies and capitalize on emerging technologies such as wearables, the Internet of Things and drones. Technology really is driving a lot of the conversation and action at the senior levels these days.

Ultimately, many insurers have a vision of building a company that is agile and able to respond rapidly to market opportunities and threats. The common threads running through the strategic initiatives are the need to be digital and the key role of innovation. Although not the end games in and of themselves, digital and innovation are the enablers that form the foundation for future success. SMA has created the Next-Gen Insurer Model to describe what the future insurance company and what any future success will look like. The 12 initiatives that many insurers are pursuing are the mechanisms that insurers are using to become Next-Gen Insurers. There may be choppy waters under the visible tip of the iceberg, but the activity is very focused and taking individual companies and the industry as a whole in a new direction. In the not-too-distant future— within five years. by our estimate—the visible part of that iceberg will change, as well, and a new industry will emerge.

SMA has just released a new research report identifying strategic initiatives, “Insurers’ 2016 Strategic Initiatives: Advancing Industry Transformation.” The report covers the priorities of these initiatives, sources of funding and their role in helping insurers attain the future as a Next-Gen insurer. 

10 Reasons to Innovate — NOW!

We’re busy gearing up for the annual SMA Summit, where innovation will take center stage. In the spirit of the summit, I started to gather some inescapable facts that could inspire us all to innovate and improve – to truly become the Next-Gen Insurer. But, rather than peddle the same old innovation benefits and business rationale, I thought it would be refreshing to share 10 facts about change and innovation that will directly affect insurance and that may inspire you, surprise you or reinforce why you should be continuously improving by reimagining and reinventing the business of insurance!

  1. Younger generations like Millennials and Generation Z are going to be the biggest consumers in the market in five to 10 years. Make sure you can reach them. They will not use paper applications or have a face-to-face meeting, but they will be searching for options from their phones and cars. A typical mobile user checks her phone more than 100 times a day (Marketing to Millennials).
  2. Innovative workplaces attract the best and brightest talent. Today, word of a stale, outdated work environment spreads fast. Don’t be one of those employers. Invest in talent, but also invest in your infrastructure and creating an innovative workplace (How Great Companies Attract Top Talent).
  3. A majority of insurers (65%) have focused on innovation for five years or less. You aren’t alone, and, surprisingly, you probably aren’t far behind. With the right focus, you can make remarkable strides in a short amount of time (SMA Research: Innovation in Insurance: Expanding Focus and Growing Momentum).
  4. 80% of all crowdsourcing is done by small business and start-ups. Embrace the crowd! It is often the most cost-effective way to generate ideas. Big business loves the crowd, too. Just look at McDonald’s crowdsourced burger or Apple’s crowdsourced mapping tools (Crowdsourcing: Great For Your Business).
  5. The amount of stored data doubles every 24 months. The U.S. Census estimates that the population has grown more than 27% in the last two decades. Changing demographics, aging citizens and diverse populations are changing the face of data accessible to insurers. To stay on top of the situation, you need a data and analytics strategy that makes the most of the new data available (Vernon Turner).
  6. Wearable devices have grown 200% every month since 2012. This doesn’t mean that wearables won’t eventually be replaced by something else or evolve. It does mean that wearables are growing so fast that it makes sense to try to tap into some of that innovation and apply it to your own organization, your processes or even your products (2013 Internet Trends).
  7. It is six to seven times more expensive to acquire new customers than it is to keep existing ones. One risk of not innovating is that you may start losing customers who can find better, easier-to-use insurance options. Studying consumer behavior might be the best indicator of market trends and areas to innovate. Don’t lose renewals because you haven’t kept up with market demands (15 Statistics That Should Change the Business World But Haven’t).
  8. More than 40% of the companies at the top of the Fortune 500 list in 2000 were not on the list in 2010. The digital age shuttered many long-standing businesses. Some experts think that, in the next decade, businesses that do not embrace innovation or adapt to market demands will suffer the same fate. Insurance is not immune to this phenomenon. Today, everything is connected (Sorry We’re Closed: The Rise of Digital Darwinism).
  9. Just 10% of cars were connected to the internet in 2012, but by 2020 it is estimated that 90% will be. It is amazing to think of how quickly we are witnessing innovation expand. What was once an outlier is now a standard (Amazing Facts Everyone Should Know About the Internet of Things).
  10. Internet of Things (IoT) technology has the potential to add $10 to $15 trillion to global GDP over the next 20 years. Like the connected car, IoT will eventually become standard. What insurers do with the new data available and the amazing growth potential will ultimately make or break them (Internet of Things Market Statistics-2015).

These facts are inescapable. Not only is innovation here, but the statistics are astounding. The time to embrace innovation and become the Next-Generation Insurer is now.

Insurance Impacts of FIS-Sungard Merger

Here we go again: Out of the blue, FIS agreed to acquire SunGard. The joining of two more global technology firms creates another giant in the financial services space.

Why so many?

  • Power of scale. Size allows companies to consolidate overhead, with the merger of people, processes, infrastructure and product offerings, allowing for profitable growth.
  • Market dominance. Buying market share and client footprint across industries certainly is faster than organic growth, and it allows for performance balancing across industries as the market swings and shifts.
  • Diversification of offerings and clients. The broadening of offerings, rather than deepening capabilities, allows for an expanded footprint in customers across many industries.

What does this mean to us in insurance?

  • Fills the gap. Combining creates opportunities to bring together a suite of offerings that better align to the changing needs of insurers as they continue to transform and innovate toward becoming the Next-Gen insurer.
  • Reflects financial strength. Many M&As reflect the health and wealth of the financial services industry, especially in insurance. Insurance is a top target industry for many solution providers because of growing technology investments, expanding needs and demand and solutions providing more offerings.
  • Presents fewer options. As we see more solution providers consolidate, there are fewer company options. But on the flip side, the solution providers will bring together all these technologies and services.

So don’t blink, there will be more to come. We will see more consolidation – all with the goal to strengthen offerings, broaden footprints, position for growth and ultimately seize the pot of gold in insurance.

‘Core Transformation’ May Not Be Enough

In the 1920s, Hollywood had a pretty good grasp of what it took to be a leading lady. She had to be able to use exaggerated gestures and facial expressions to convey what was going on without the benefit of sound, and she had to look attractive onscreen. Nobody cared what her voice sounded like – and then came the talkies.

Suddenly, the established actors and actresses had to learn brand new skills and adapt to a new paradigm, because no movie studio was going to continue putting out silent movies when the other studios were putting out talkies. Some stars did well, like Mary Pickford, a silent film star who won an Oscar for her first speaking role. And then there were actresses like Jean Hagen, playing Lina Lamont in “Singing in the Rain,” who sounded like someone stepping on a rubber ducky that had a head cold. Even for the film stars who successfully made the transition, moving from silent movies to talkies was a challenge unlike anything faced before.

Every industry encounters these moments, although some are not as obvious as the talkie revolution. The good news is that insurers, as a whole, are starting to execute on their transformation paths. Customer service is improving, business models are morphing, products are becoming more sophisticated and the core systems that support the full breadth of the company’s business are changing – and all these changes continue to accelerate. As I mentioned in our last core blog, SMA’s recent research on policy administration systems found that 94% of insurers require robust configuration capabilities from a new PAS, because these capabilities provide the foundation for the ability to increase speed to market and speed to service, and solution providers have gotten the message. There are more and more systems on the market that are adopting these dynamic configuration capabilities. In fact, they have now become table stakes when core systems are replaced.

But there needs to be a transformation of the full core, including people and processes – not simply a system replacement project. The full core transformation includes modern policy, billing and claims systems, advancing business capabilities and an adaptive and agile organization.

Among the important ingredients for organizational transformation are the ability to adjust to required new skills, to determine where these skills will be located in the organization and to decide how the delivery of product changes will occur. For example, will you rely on the technology alone to create the differentiation, or will you adjust the organization and the skills? The new configuration capabilities can be used by people who have been trained as business analysts – and these resources are often in short supply at most companies. I have experienced demos where I hear that the configuration capabilities can be used by the business professionals to expedite product deployment. The assumption is that there are resources available in the business to perform this work. In many cases, the reality is that the business does not have the skills, processes or time to perform this work.

Often, the technical areas do have the process and some of the necessary resources, but, if the work shifts to the technical side of the business, then the IT pipeline is just being filled with the same volume of change requests that existed in the past. This is the Gordian knot that must be worked through. Insurers that have previously dealt with forms and rating engines have figured this out – they have a handle on reality and how to manage it. Many have reorganized to centralize the resources that will perform these services. They have architects that understand the hazards of configuration and can help create the “bumper guards” that are necessary to ensure success.

In SMA’s research note, Policy Administration: P&C Plans and Priorities, 52% of insurers stated that it was difficult to find the right mix of business and technical skills to work on the configuration capabilities provided by modern policy, billing and claims systems. New skill sets are required to fully capitalize on the advantages of responsive and agile product development – new hybrid skill sets that include a combination of business analyst skills and an understanding of technical principles. Some insurers use business analysts. Others turn to IT users who have a strong understanding of business capabilities. In today’s environment, there are not many resources that meet these qualifications. Companies that are investing in training are advancing quickly.

A certain flexibility is inevitably needed to cultivate these truly skilled configurators. Insurance companies are organized around yesterday’s capabilities. Insurers need the ability to shift staff between departments – to create new working groups, to manage new priorities, to adapt to new business processes and to engage new skill sets. This flexibility equips an insurer to seize opportunities in the market, establish new modes of customer service and build business models that deliver value-added services that extend well beyond reaction and restoration.

The whole point of core transformation is that changes at the micro level can be used as a stimulus for changes at the macro level. Organizations able to address the technical and business capabilities that transformation demands can also make organizational shifts with enormous impacts. The key is to recognize that you must use some creativity and be willing to take some risks by challenging long-established traditions.


There is a happy ending to “Singing in the Rain,” and it is not through the solution that Jean Hagen’s studio recommends – that being traditional diction training. Jean finds that what she does best, using her unique voice, leads her down the road to success in the new world of the talkies. In the transformative new world, insurers can also find their own road to success, heading toward the ultimate goal of becoming a Next-Gen Insurer. Core transformation, with its combination of synergistic organizational, business and technical capabilities, is a key ingredient to getting there.