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Insurance & Technology: The Blog

« October 2007 | Main | December 2007 »

November 22, 2007

Stupidity and Negligence Result in Staggering British Data Privacy Breach

On Tuesday Nov. 20 the British government disclosed a staggering breach of data privacy as the result of the loss of two CDs that a junior tax official attempted to send to the National Audit Office by courier. The NAO never received the disks, and they remain lost. The Guardian reports that the disks contained the unencrypted personal information of 25 million citizens, “including their dates of birth, addresses, bank accounts and national insurance numbers…opening up the threat of mass identity fraud and theft from personal bank accounts."

Whether this was the worst data breach in history is a matter of the criteria one applies. As this New York Times article explains, last year’s leak of veterans’ Social Security numbers affected 26.5 million and a former America Online engineer stole information belonging to 92 million people. However, the British breach was shocking not merely for the sheer numbers involved, but the proportion of the population and the nature of the information and its potential for harm.

The incident has created significant political turbulence in the U.K., including calling into question the efforts of the Labor government to institute mandatory national ID cards, which require individuals to disclose sensitive personal information. Responding to Labor Prime Minister Gordon Brown’s apology yesterday, Tory shadow chancellor George said that "Public confidence in the government and its ability to protect information has been destroyed." The otherwise well-regarded head of the tax agency, Sir Paul Gray, resigned Tuesday.

Whatever this means for the British government and governments in general, the incident once again sounds the general alarm about the vulnerability of private data that individuals choose to or are forced to disclose to supposedly responsible parties. And it shows once again that clever security measures focused on defense against malice may be inadequate in the face of official arrogance, laziness, stupidity and plain incompetence.

The effectiveness of security safeguards depends on the compliance of those with access to sensitive data, as emphasized by Dr. Mirielle Levy, head of identity management standards at the U.K.’s Identity and Passport Service (quoted in the ID card story linked above): “You can have all the virus checkers and pretty IT you want, but the real problem is people.”

Posted by Anthony O'Donnell at 09:01 AM | Comments

November 20, 2007

Is the Agent Community the Primary Roadblock to E-Signature Adoption in Insurance?

Never underestimate the value of stating the obvious.

Karen Pauli, a senior analyst in TowerGroup's insurance practice has told me that her latest research -- on the importance of e-signatures and secure documents -- has stirred more reaction than just about any other topic she's covered.

“It seems like a no-brainer, but nobody has said it,” Pauli explains. “Nobody has really articulated the value of electronic signatures and secure documents in business terms.”

In part, Pauli believes that the surge of interest is due to the emergence of so-called Green issues. E-signatures can be leveraged she says to reduce the paper-based processes in place for many insurers.

“Carriers are having to stand up in front of investors and consumer groups and say what steps they're taking to reduce the impact on the environment,” she explains.

Green issues aside, Pauli also received a lot of feedback from the vendor area. Many e-signature solutions providers have told her that they're having difficulty finding traction with insurers.

To me, that's puzzling. E-commerce, of course, isn't some passing fad. And it'd be very difficult for a carrier to build a successful e-commerce strategy without some sort of e-signature or secure form technology.

Pauli suggest that the disconnect is most apparent within the independent agent community.

Among insurers, many direct writers and e-commerce leaders have adopted e-signature technologies. However, according to Pauli, it's almost entirely missing from the independent agency world.

“It is a cultural issue when it comes time to look at agents and brokers,” Pauli told me. “[They] have a very slow uptake on technology.”

Pauli has found that most agency owners and producers are baby boomers and are not big technology adopters. “The vast majority of producers are over the age of 50 and they don't even use laptops. They're still paper-based,” Pauli says.

So what has to happen? Pauli says that the involvement of agency management system vendors could be crucial in developing a critical mass for e-signatures and forms. “You have to get the agency management system vendors to do it. It has to be the whole chain - from the carrier to the agency management system vendors to the distributors.”

Unfortunately, the topic isn't on most vendors' radar. “It's not there because the agents aren't asking for it, because they're stuck in their old way of doing things,” Pauli explains.

Sooner rather than later though, the agent community needs to wake up. If they're truly stuck in their old way of doing things, as Pauli suggests, then it's only a matter of time before the industry as a whole considers the independent agent channel as “the old way of doing things” as well.

E-signatures are one of the most basic and most necessary steps when it comes to selling insurance globally and selling it online. “Otherwise, you are online, but then have to to backfill with a paper process, which is not only counterintuitive, but stupid,” Pauli says.

Posted by Nathan Conz at 04:33 PM | Comments

Pre-Thanksgiving News Update

One more thing to be thankful for as we brush up against the penultimate Thursday in November is that, unlike some other writers, Insurance & Technology’s editors are not on strike.

It’s just as well, too, as the insurance technology news seems to cascade with increasing volume, as if to get it all in before the end of the year. For example, several important new CIO appointments have been made recently, including Mark Oakley’s being named to State Farm’s top technology spot, Eileen Slevin becoming CIO of New York Life, and Ed Steinike taking on the CIO role at ING Americas.

Two other notable personnel changes have emerged from Celent, one a departure and the other a promotion. Craig Weber has been named managing director of the Boston-based analyst firm's insurance practice, replacing Matthew Josefowicz, who has joined financial services consultancy and information services provider Novantas, LLC.

No roundup of insurance technology news would be complete without reference to the industry's laggard status in some respect, and I&T'sNathan Conz delivers the goods with a post based on a conversation with TowerGroup's Karen Pauli about the state of e-signature capabilities.

In regulatory-related happenings, this week the AIA (American Insurance Association) urged Treasury Secretary Paulson to consider an optional federal charter (OFC) as part of the Department’s review of insurance regulation. The AIA's counsel to the Secretary is not likely to be well regarded by some people and their friends.

In other regulation-related news, last week Towers Perrin released the results of a survey that found that insurance CFOs report far greater understanding of principles-based regulation than a year ago. As we reported recently, the move to a principles-based regime for accounting, reserving and reporting signals a sea change in the insurance world and has important technology investment implications.

You can read more about the principles-based regulatory shift at the Web site of the Society of Actuaries ("the other SOA") but, as important as the issue is to the industry, we do not recommend combining the linked text with tryptophan.

Posted by Anthony O'Donnell at 03:24 PM | Comments

Ed Steinike, ING Americas' Consumer-Focused CIO

Industry experts continue to recommend the value of outside expertise as key to insurers’ attempts to become more consumer-oriented, and ING seems to have heeded those recommendations with the appointment of Ed Steinike as its new CIO. If consumer-focused CIOs are a recipe for success, then Steinike is “the real thing”: his last role was CIO of Coca-Cola North America, and he has spent 26 years of his career at General Electric.

“The consumer focus at Coca-Cola was phenomenal, and I think that some of the things we’ve done there may be interesting to take a look at within ING,” Steinike comments.

Steinike joins the carrier at a time when solid IT plans are well underway, put in place by his predecessor Steve Van Wyk, who has been drafted by ING Group to head operations and banking in Amsterdam. Thus, unlike CIOs hired to put out fires, Steinike may enjoy a better opportunity to apply his customer-focused experience to ING’s growth objectives. “It’s a wonderful opportunity for me to join a fantastic company and bring some of what I hope are key strategies and ideas that I have exercised over the years in two big-brand companies,” he remarks.

Steinike also hopes to apply his experience to continue to transform and advance process excellence at ING Americas, and says he is focusing on the company’s business priorities as he ramps up to the challenge. “Right now I have a lot to learn about the business, the teams and the people,” he says. “I’m in the listening and studying mode.”

Posted by Anthony O'Donnell at 03:09 PM | Comments

November 06, 2007

From I&T's 2007 Executive Summit: Best Practices in Speed to Market

As I&T senior editor Anthony O'Donnell said when he introduced the first session of our 2007 Executive Summit, "The Need for Speed: Product in a Day," speed to market is a perennial topic, that we often report on.

However, as Anthony also noted, the topic has seen a kind of resurgence recently. Perhaps that's because many insurers have undertaken related product development initiatives, and as a result, best practices are beginning to emerge — thus driving speed to market discussions in a new direction.

Speaking of best practices, Michael Hicks, VP of US wealth management, Hartford Life took time in his part of the presentation to urge attendees to view speed to market as more than just a technology issue and instead as a two step process—with an invention and an implementation stage.

In the invention stage, when actuaries are determining what exactly they want to develop, Hicks says there are big opportunities to speed up the overall process. Many look at speed to market opportunities in the technology realm, but the opportunity, in the case, is on the front end.

While working at Lincoln National, Hicks says the insurance carrier put together a detailed guide of capabilities. Then the IT organization would work with the product organization to develop understanding around those capabilities.

"It really became a boon to our speed to market because it allowed our actuaries to develop products around existing capabilities and features, versus having to build one-off features that may take significant amounts of time," Hicks explains.

Hick says that Hartford Life has focused their speed to market efforts on the front end of the process as well, by bringing together different departments early on in the process. However, IT had to earn its place in those early discussions.

"Service and IT had to invite themselves to the table and really show what they were going to add from a value perspective," Hicks says. "But bringing those cross-disciplines together and validating concepts really has helped set expectations on the front end. It helps insurers architect solutions and avoid over-engineering and over-complicating the process."

Later on in the presentation, Robert J. Reynolds, director, life product management, Minnesota Life said the key to improving speed to market is to ensure that the right process and the right people are in place. "It's a constant evolution that we're all struggling with and trying to improve upon all the time," Reynolds says, while also identifiying legacy systems as a speed to market barrier, especially as it relates to a lack of reusability.

In part to break through some of those barriers, Minnesota life purchased a new SOA-enabled system. Meanwhile, process changes are underway that will streamline the hand-offs that occur during product development.

"We're going through a revamping of our process right now. There are about 400 people that get involved in a product's development from all over of the company – although there might be about ten to 15 on the core team. There are a lot silos and, to me, that means a lot of hand-offs."

Also important is the culture within a given company. "It's critical that your culture be willing to make the necessary changes to take most advantage of the new technology that is out there, or you will not get there," Reynolds says.

So, in the end, the key may be how a carrier's culture adapts to the new way of doing things. "That is a whole lot of new," Reynolds says of Minnesota Life's new system and its new process, "and there's a whole lot of change management going on to support that. Don't underestimate how important that is. If you don't address that along the way, you could fall flat on your face."

Posted by Nathan Conz at 02:01 PM | Comments

November 05, 2007

From I&T's 2007 Executive Summit: Globalization Is a Reality for Insurers

It often seems as if the theme at insurance industry conferences is nagging and haranguing –- pointing out all the things insurance companies do wrong when it comes to technology. But so far at this year's Insurance & Technology Executive Summit, the messaging has more to do with pointing out opportunities -– areas of potential growth and profit for carriers, if only they can gather the technology, financial and personnel resources to capitalize them. Nowhere is this more striking than on the topic of globalization, and two leading industry figures challenged the Executive Summit audience on Monday to change their perspectives on globalization and what it means for insurance.

Identifying the "three Rs of insurance that drive everything -– risk, revenue and regulation," David West, research area director, insurance, TowerGroup, pointed out that "globalization gives us the opportunity to transfer risk," but added that those risks are extremely diverse and complex in the global arena. They include currency risk (especially in light of the ongoing decline of the U.S. dollar) and operational risk (especially related to outsourcing).
An enterprise risk management approach becomes essential when a carrier is operating globally, West said. "You have to create platforms to measure and monitor risks around the globe, or you will be overexposed," he stressed.
From a revenue perspective, the obvious opportunity is the one to sell new products, West noted. But this requires agility -– "You have to have an agile platform so it doesn't take a year to develop new products," he said.
Scott McKay, CIO and SVP, operations and technology, Genworth Financial, agreed that this is the form of globalization most U.S.-based insurance companies understand, but also pointed to operational globalization (through outsourcing partners, for example), and financial globalization -– "actually the first kind of globalization that impacted insurance companies" through their investment operations, he added.
Also on the financial side, TowerGroup's West argued that globalization can help insurers "reduce costs through rightsourcing -– placing [different] aspects of your business in the right place" and taking advantage of "opportunities to send business or portions of your processes to where it makes the most sense."
There is a regulatory aspect to globalization, too, and West contended that U.S. companies are "not on a level playing field" in this regard. The Solvency II initiative underway in the EU is an effort to equalize things, he added. According to Genworth's McKay, there is actually "regulatory arbitrage going on" around the globe, point to Bermuda as a base for reinsurance as an example.
McKay agreed that a global approach to regulation can be a kind of double-edge sword. While there is a focus on creating a more level playing field, he said, some markets also want to use regulation as a way to gain an advantage –- for example, in the form of lower tax rates.
McKay emphasized that globalization is "going to keep happening faster and faster," and stressed that companies that reject globalization are going to lose out competitively. But that doesn't mean it will be easy for companies that do recognize the opportunities. "Competing in the world today means having the right capabilities," he said. "You've got to serve markets, consumers, and producers. You need strong, highly analytical people, [and an ability to do] modeling on a real-time basis."
Success in the global marketplace also means a company (including its management and workforce) has to "embrace paradox," according to McKay –- understanding that there are a number of tradeoffs between growth and balancing risk. That means addressing questions such as:
- How do I localize for growth but centralize for efficiency?
- How do I work with both entrepreneurial and mature opportunities in business?
- How do you move fast & respond but maintain control?

By Katherine Burger

Posted by Kathy Burger at 06:30 PM | Comments

From I&T's 2007 Executive Summit: Making Insurance Company Transformation Real

It’s not often one hears a note of unqualified optimism on behalf of what IT can contribute to an insurance enterprise, but Deborah Smallwood, chief transformation officer, ICW Group Insurance Services did just that as a reflection on her experience of driving a rapid technology transformation of the San Diego-based property/casualty insurer, as part of her presentation"Just Do It: Making Insurance Company Transformation a Reality," at Insurance & Technology's Executive Summit, held this year at The Phoenician, Scottsdale, Ariz. “We’re the hub of the insurance industry,” Smallwood said of CIOs, whose technology serves as the circulatory systems for insurance companies. “We are in a position to really transform the industry.”

Smallwood was brought on board at ICW to transform that company, after an engagement with the carrier as a TowerGroup analyst and consultant. While the ICW was making money, its leadership felt it needed to change, both in view of a hardening market, and of the likely effects of the burgeoning technological superiority of competing companies over the long haul.

Her evaluation of the company’s current state was not the stuff that optimism is made of. “I found that we had no clear business strategy, no clear alignment between IT and business, no governance, no project management, and that the company was very manual,” she said. “We had over 800 focus reports and numerous data stores.”

Despite the generally backward state of the company’s processes and technology, Smallwood judged from her analysis that, “the gaps were bridgeable.” She was subsequently given authorization to drive a change to bring ICW from “laggard” to “fast follower” status, from a technology point of view. “In six to nine months we had to reorganize to align business to IT, have a single entry point from the business into IT, and develop a common strategy between the business and IT,” she reported.

The initial transformation effort involved enlarging the IT organization from 80 to 130 professionals, along with 25 consultants. ICW also forged partnerships with Insurity, CSC, and IBM. Those partnerships, Smallwood asserted, have driven the introduction of project management disciplines and methodologies, supported the institution of an architectural blueprint and have already been instrumental in “delivering major projects that were out of control.”

One of these was a runaway data warehouse project that has now seen a successfully completed first release. The new data warehouse will, among other things, provide the basis for reducing the number of the aforementioned 800 reports.

Reflecting on the success so far at ICW, Smallwood drew some observations about IT’s role for insurance companies today that she believes should motivate transformational efforts. She said she had learned that, “IT best practices, methods and techniques are mature; ramping up IT is doable, fast and achievable; we are masters at it all and masters of change.”

Smallwood then cautioned that transformation was evolutionary and that “we are never done.” In developing a vision for change, she added, “you always have to know where you’re going, but you need to adapt as you go.”

Posted by Anthony O'Donnell at 05:11 PM | Comments

Editor's Note: Chilling at I&T's Executive Summit

As Todd Masonis, explained this morning what the consumerization of technology is likely to mean for insurers, an almost perceptible chill went over the already air-conditioned room in Scottsdale, Arizona's Phoenician resort, the location of Insurance & Technology's 2007 Executive Summit.

Masonis, the co-founder of Plaxo and the Summit's keynote speaker, described the radically different expectations of the user of the future, the technology literate cohort of Gen-Y, who is difficult to reach by traditional means and is soon to become the attendees' customer. Reflecting on the implications of the new consumer for insurers' customer outreach, and of the underappreciated demographic inevitability of that consumer's emergence, Masonis said, "You should be scared."

Masonis' address capped a morning of sessions that gave informative and sometimes troubling insight into a changing world, and what its metamorphosis means for insurers' technology organizations and for the companies' overall strategic outlook.

After remarks by I&T's editorial director, Kathy Burger on the Summit's theme of "Preparing for Generation Next," the program included the following:

The Need for Speed: Product in a Day?" with speakers Michael Hicks, VP, U.S. Wealth Management Operations, Hartford Life, and Bob Reynolds, director, life product management, Minnesota Life, which gave attendees a look into resurgent interest and success factors in bringing insurance product to market faster and better;

"Winners & Losers in a Global Market," with introductory comments from David West, research area director, insurance, TowerGroup, and a presentation by Scott McKay, CIO and SVP, operations and technology, Genworth Financial, which revealed the inescapable global dimension that now affects all insurers, directly or indirectly, understand of and preparation for which requires rethinking of many traditional assumptions and the introduction of new technologies, competencies and relationships;

"Just Do It: Making Insurance Company Transformation a Reality," a presentation by Deborah Smallwood, chief transformational officer, ICW Group Insurance Services, which covered the former TowerGroup insurance practice leader's task of achieving rapid technology transforming at Insurance Company of the West;

And Todd Masonis' keynote address "What the Consumerization of Technology Means to Insurers," which confronted the audience of senior technology and business executives with a daunting prospect of a radically changed world of interaction between businesses and their customers.

Posted by Anthony O'Donnell at 04:12 PM | Comments

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