Last week I had the opportunity to participate in the Commercial Lines Special Interest Group meeting in Jersey City, NJ. Despite a wintery mix impacting transportation, we were joined by six carrier participants to discuss their successes, challenges, and unique perspectives on commercial lines and the industry at large.
After spending some time getting to know each other over coffee, Novarica’s Martina Conlon presented findings from our research. We began with an overview of the commercial lines marketplace and the key drivers of growth in an industry with single digit growth. The group then reviewed highlights from Novarica’s recent report, Emerging Technology in Insurance: AI, Big Data, Chatbots, IoT, RPA, and More.
Among the major themes of the open discussion were: measuring IT’s value, leveraging Agile, finding an AI partner, exploring applications for big data, modernizing core systems and workflow, and confronting security challenges.
Finding metrics to value IT’s contribution to the business
There was some cynicism regarding the measurement of a project’s success. All parties have an incentive to deem a project as a success: the vendor wants a positive use case, the CIO wants to retain their job, and the CEO wants the board to believe that the money was well spent.
Nevertheless, the participants agreed that the use of operational metrics to value IT’s impact is imperfect. Some participants felt that product development metrics lacked clarity, as they could be improved with an increase in IT resourcing. While others believed that straight-through processing and submission acceptance metrics were misleading, as business rules drive those outcomes. Nevertheless, the participants believed it was important to define the metrics before beginning any project, so benchmarks could be adhered to throughout the initiative.
Leveraging Agile to enhance team chemistry
The conversation then turned to Agile which everyone used for some things but no one used for everything. Agile is particularly useful for data, analytics, portal, and UI. Agile’s testing practice ensures that the code is of high quality and that non-performing/non-functional code isn’t promoted to production.
It helps because it forces SMEs to be regularly involved. For the business user, it works well because the engagement occurs over quick bursts of time. Frequent updates through daily meetings help to engender team chemistry. Trust is quickly built between IT and the business that ensures effective communication. The benefits of Agile herald back to the days when IT was distributed throughout the business — while today it is centralized. Agile rebuilds the bridge between business and IT that were lost when co-location ended.
Finding an AI partner in commercial lines
The discussion revealed that general purpose AI tools like IBM’s Watson suffered in comparison to AI-based InsureTechs. To be effective, AI tools must be trained. Many carriers believe that teaching tools like Watson can be too taxing, but InsureTechs who focus training around a narrow use case, such as damaged vehicle image processing, could find growing acceptance in the market.
Exploring the data domain
Carriers shared their experience leveraging external data. Outside of the usual suspects (e.g., LexisNexis, CoreLogic, and Verisk), InsureTech players such as Carpe Data and Terrene Labs were mentioned. Innovative use cases for workers’ comp were discussed, including utilizing Facebook and sanitizing data from group health providers.
In response to a carrier’s query, Novarica’s Jeff Goldberg opined that it is common for insurers to build their own data environments rather than purchase a vended solution. Carriers typically build a data warehouse with data marts and visualize through Qlik or Tableau. There are data models available to help design the ODS and warehouse.
Modernizing core systems and workflow
Both Novarica and CIO experience concurred that legacy environments generally rely heavily on ImageRight for workflow. The problem with ImageRight’s workflow is that the underwriter notes and annotations are embedded in the images, and thus cannot be analyzed. As they replace their core systems, carriers are taking advantage of modern prepackaged workflow.
From a core systems perspective, Novarica saw an evolution towards a microservice-based architecture and the deconstruction of policy systems. Small and midsize carriers want to take their core system out-of-the-box and modify it, while large insurers can optimize their customer experience by installing headless, externalizing workflow, and customizing the UI.
Confronting security challenges
CIOs were unanimous in their frustration with the regulatory and resource burden cause by New York state. None of the mid-sized carriers had a dedicated CISO; all named the CIO. For the signatory, it was either CEO or President.
Carriers recognized that they are all at risk, as the hackers may not be targeting specific companies —
rather they may be sniffing for vulnerabilities. Many of the carriers were selling cyber-risk policies and reinsuring the risk. There was concern that the courts may take an expansive view of the coverage.
Novarica’s Commercial Lines Speial Interest Group meeting was a productive forum to exchange thoughts and experiences on the problems directly facing commercial lines carriers. For more on upcoming Novarica events, visit https://dev-novarica.pantheonsite.io/events/.
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