Novarica Blog

Public Data Sources and Fraud Detection


Rob McIsaac

As the world has gone ever more digital, the opportunities to create new products, new services, and better customer experiences have moved forward aggressively. An unfortunate consequence of the increasingly digitized experience, however, has been growth in fraud which can approach carriers from a variety of directions. Insurers are not alone in facing this, of course; higher transaction businesses, including banks, are further down the road of experience and adoption. Looking towards these businesses can provide carriers with interesting models and “lessons learned” for adoption in their own unique circumstances.

Across all parts of financial services, companies are using ever-better technologies, including artificial intelligence capabilities, to explore public data sources and offer some intriguing opportunities to better manage blocks of business. As a complement to more traditional reviews of data (e.g., patterns of transactions, IP address analytics), the use of public data analysis can allow carriers to see things in new and different ways. Some carriers, as noted in this recent Digital Insurance article, have begun partnership programs with entities (e.g., InsureTech start-up Carpe Data) to do deeper dives than have previously been possible.

Of course, these explorations expose new issues, including regulatory scrutiny and potential privacy concerns, as carriers move further into a previously untapped area. These considerations are very real since management of claims (and fraud) are a critical contributor to the overall profitability of a block of business. Also, since carriers operate in a highly competitive ecosystem, this can be viewed as another manifestation of what we’ve previously described as an “analytics arms race.” Carriers need to be aware of both their own absolute position and their relative positioning against competitors, lest they create an economic disadvantage for themselves.

Another aspect of this analytics focus is the focus on the potential working relationship with InsureTech entities. Allstate’s efforts are explored in this recent article. In many ways, R&D for technology companies and financial services firms can now be spelled M&A. Watching developments in the startup world can provide both acquisition targets and inspiration to more mature, mainstream entities. The lure of Silicon Valley can be strong indeed; next week, I’m fortunate to be leading a group of 20 carrier CIOs and CTOs on an innovation tour of The Valley. The tour is designed to specifically explore ideas such as these. Lessons learned from prior events have been highly instructive for participating carriers.

The world is spinning faster than ever. Having the right tools and the correct insights are critical as companies look to concurrently navigate the complexities of a dynamic space and create competitive advantage.

Connecting Customers and Annuities


Chris Eberly

There was an interesting call out from the MetLife CEO in a recent A.M. Best article regarding the concern around finding recipients of annuity payments where there is little to no valid information to do so. Often, people who are beneficiaries of insurance products can’t be reached by carriers, so making proper payments can be a significant challenge. This issue can be viewed as an IT problem to utilize how to best match up the data internal to the carrier to external data to then find valid addresses or phone numbers to track people down.

It is clear that a strong data strategy is key to support business challenges like this. However, there is another way to look at this message, which is that as an industry we must modernize and put our customers first. We need to take the extra step to put the industry, as a whole, in a better light. Ultimately, the message must be that insurance carriers and “Big Insurance Companies” care about their customers and stand behind their products enough to go the extra mile to deliver.

For an industry that has been challenged with low sales numbers or market headwinds, this is an important message. Americans are increasingly struggling with the dilemma of figuring out how to retire or manage through life changes past their primary career. Being able to trust companies to help and provide a guaranteed level of income beyond social security can be an important aspect of a retirement plan. On this theme, Prudential announced the launch of a direct-sale deferred income annuity through the group insurance business. This certainly supports a known need in the industry to help back secure retirement, but it also recognizes the need for carriers to move beyond their existing products and channels to grow and fill demand.

It is great to see carriers challenging themselves, challenging each other, transforming services, and putting customers at the center of their activities. These investments will undoubtedly enhance the market and support carriers as they continue to endure headwinds.

Is OEM the Real Usage-Based Insurance?


Matthew Josefowicz

CB Insights recently published a nice summary of alliances between automakers and insurers that provide insurance as part of the lease. Some insurers have also partnered with startups pushing a differentiated car ownership model, like Carma and FAIR.

These offerings have the potential to nibble away at the personal auto market from two different directions. At the top, high-net-worth consumers who lease luxury cars are likely to be less price-sensitive and more highly value the convenience of a bundled lease/insurance option. At the bottom of the market, fractional or shared car drivers may opt out of car purchasing and separate insurance purchasing all together.

These emerging models are an interesting twist on the idea of usage-based insurance. Consumers don’t necessarily want more transparency and interaction with their insurers in search of the perfect rate for that day. They may just want insurance as an OEM to the brand they have a real relationship with, or as a set-it-and-forget-it subscription product.

One can argue about whether this is necessarily a good or wise move on behalf of consumers, but it’s hard to argue that it’s not easier. Insurers should take a careful look at their value propositions to their target customers and make plans to compete based on what their customers value.

Group Benefits Insurers Focusing on Operations Efficiency and Distribution


Rob McIsaac

Group benefits insurers face continuous pressure on margins, while true sales growth remains challenging. This, in combination with the price sensitivity of plan sponsors, makes operations efficiency and improved marketing across multiple channels key drivers pushing insurers towards improved digital capabilities.

Carriers are seeking modern systems that can better support rapid product development and self-service capabilities, along with pricing and product changes. These modern systems are also crucial for attracting and retaining top distribution talent. By automating benefits administration and enrollment, and integrating with other core systems, insurers can address competitive concerns from both functional and financial perspectives.

Analytics are widely used for voluntary products, with applications that include enrollment, claims fraud identification, member conservation, sales reporting, underwriting, and more.
Carriers are also considering where to go next as there is no clear standard for group benefits information exchange. While ACORD has proposed an enrollment standard, traction is uncertain.

Insurance carriers are heavily focused on their bread-and-butter issues of product design, enrollment, marketing, and continuing to improve administrative systems. Even though innovation is taking a back seat to execution, carriers are expressing increased concern over, and interest in, the need for digital capabilities.

Group benefits CIOs and business executives should consider the following top technology priorities: solid product design that attracts a broad audience, ranging from entry-level offerings to more complex, high-end products; sales, marketing, and enrollment tools to support complex products and automate processes; robust and flexible group administration capabilities to understand characteristics and sales opportunities; multi-channel marketing and sales to gain market efficiencies and leverage cross-selling opportunities; and additional administrative capabilities in peripheral areas to improve transaction and payment handling.

More on this can be found at:

Mixed Rates for Workers’ Comp in 2018


Jim Klotz

As discussed in a recent article in Carrier Management, the USI’s recent report is valuable in affirming the unsettled and competitive landscape of the workers’ compensation industry continuing into a new year. This isn’t a year over year trend; it is a reality of the industry, and there is no indication it is going to change. The reaction to these market conditions is evolving.

Carriers are well advised to increase or begin investments in analytics to understand their results at the most granular level. Finding the sweet spots of opportunity are being defined in very targeted ways. Big Data, predictive analytics, and understanding the impact of MedTech provide carriers with better insights.

This leads to micro market segmentation and the need for variable sourcing. Getting into this profile of business strategy requires agility that isn’t always well supported by carrier’s core technologies. Beyond the nimbleness of product offering there will be a need to quickly expand and contract into markets. Carrier IT departments should be moving to variable costs capabilities, including staffing and infrastructure. IT departments planning to directly retain fixed assets and have no variable staffing model will create an expense posture that will foster unacceptable business constraints which will be unacceptable.

The Freedom of Choice for RIAs and their Clients


Chris Eberly

Three common initiatives across annuity and life carriers today are to improve speed to develop products, create an easy and fluid customer experience for submitting new business, and process new business with little to no manual intervention. The implementation approaches, requirements, and challenges vary by carrier, but there is a clear desire to improve experience and efficiency. Carriers are achieving these targets by performing process reviews, implementing new platforms, and often delivering new digital experiences.

As carriers head down this path a possible benefit may be to solve a problem recently covered by a recent article by InsurnceNewsNet, titled “For RIAs, A Vexing Insurance Dilemma.” The article outlines while many RIAs would like to include life and annuity products in customer portfolios they feel the products aren’t always suited for their fee-based business, or require sending their customer to an insurance specialist which releases control of the customer for insurance products. In addition, the insurance products that are available to RIAs may not best support the needs of their customers. As carriers invest to improve experience and speed to develop new products, many RIAs may be able to more effectively include insurance products in their customer portfolios.

The need for carriers to move away from legacy platforms, products, and processes is growing as the needs of distribution and customers evolve. By combining an efficient operation model with products that reach and meet the needs of changing distribution channels and customers, carriers will see a much needed improvement in market share and overall market expansion for life and annuity products.

Complexity Increases Along With Underlying Security Threats


Mitch Wein

The European’s new data security regulations called the General Data Protection Regulation (GDPR) goes into effect in May. This law is similar to some of the regulations emerging in various US States, like the New York State Cybersecurity regulations, but in some cases goes further. It attempts to give Europeans control over their personal data. Any firms collecting European citizen data is subject to the regulations, including US multinational insurers. GDPR mandates the hiring of a data protection officer (DPO), much like the New York State Cybersecurity regulations mandate a CISO. Insurers will be competing with any company holding EU citizen data, which is virtually all companies doing business in Europe.

The DPO is similar to CISO’s in some important ways. They will need to own data audits for compliance, train employees on data privacy, and serve as a point of contact for European regulators. Under NY Sate law, CISO’s own the security program, which is defined broadly by NIST standards, act as a point of contract for the NY Department of Financial Services (DFS) and own the security education programs in their firms. Like CISO’s in the US, and as outlined in a recent article in Insurance Journal, there will be a shortage of DPO’s in Europe. Since Germany had similar laws historically, they will be in high demand across the continent.

There are some other key differences in the US State regulations and the EU laws. The primary one is the “right to be forgotten.” The EU is requiring deletion of all data related to an individual if they request it and there is no longer a business or regulatory reason to hold the data. The US provisions are different. This is a non-trivial requirement, since data is copied across instances for backups, cloud storage, and various data storage repositories.

Finally with Brexit, we know that the UK will end up with similar but different laws completely. This is much like the US states, adopting various versions of the NAIC model law and the NY State law. Complexity is increasing along with the underlying threats.

The challenges around security regulation continue to multiply!

Should Your Next Core System Implementation Be Headless?


Chuck Ruzicka

Carriers, from MetLife to startup pet insurer FIGO, have been going headless, i.e. implementing new digital insurance products that leverage underlying commercially available core systems with their own user interfaces. Carriers are looking to provide a differentiated user experience, and they are realizing that headless implementations on top of modern core systems can give them speed to market and reduce the work required to implement self-service portals.

Traditional Portal Options: Build vs. Buy
One of the most attractive aspects to a “build” approach for consumer portals is the perception of lower implementation costs due to full ownership and zero license fees, though cost of design and legacy system integration is often underestimated. Buying or licensing pre-built software provides the convenience of accelerators and predefined architecture; however, carriers also cede some control over UI and customization. Another option with vended solutions is to extend core systems via role-based security. This option reduces complexity, but it often results in a less than desirable user experience and does not support direct integration with agency management systems and comparative raters.

Carriers Go Headless
Headless implementations extend services of the core system to enable self-service and combine the best aspects of both building and buying. Insurance transactions are basic and not differentiators, and core systems do these well. These platforms are reliable and scalable, and calling proven services both maximizes reuse and allows carriers to support multiple channels. Going headless gives carriers control over UI, providing differentiation and lower maintenance costs by eliminating the need to support a heavier portal application.

Carriers choosing to implement a new digital product can often accelerate the process by freeing themselves from the webpages and navigation used for other products supported within the same organization. While the rest of the organization uses the existing UI, changes can rapidly be made to the UI for the new digital product while still leveraging the same back-end services.

Solution Architectures Are Moving to Support a Headless Approach
Increasingly, solution providers are building out microservices to enable flexibility, improve reuse within their own solution set, and address concerns voiced by carriers over the difficulty of accessing functions with legacy systems. Few solution providers have a full set of microservices, but the granularity and availability of services is rapidly increasing.

Some solution providers have realized that microservices can increase complexity and create IT systems management issues. Consequently, a few solution providers are developing solutions to facilitate management of microservices and extension of carriers’ core systems to third parties in their eco-system.

Looking Forward
Will the complexity of these microservices lead to improved customer experience, increases in service management issues, or lower IT costs? Time will tell. But, in the short term, headless implementations are often closely correlated with improved product agility and speed to market. It is unlikely that we will see policy administration systems devolve into collections of services that can be bought independently; however, it is possible that core system replacements will become significantly less painful as replacing or adding services occurs more frequently and with less effort than full PAS replacements.

For more on consumer portals, see Novarica’s recent report, Best Practices for Customer Portal Implementation.