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July 29, 2008

Wikis Lead The Way

Having just checked out Novarica's recently published “Web 2.0 in Insurance: Finding Real Business Value Today and Tomorrow,” I couldn't help but recall Humana's use of an internal Wiki to help customer service representatives share best practices with one another. (Nor could I help but notice the report's explicitly mentioned disdain for Second Life coverage. Ouch.)

Interestingly, the report found that 39 percent of insurers surveyed said that they were already using wikis in their organizations and found the practice valuable. That number made wikis the top area (tied with AJAX) where insurers saw potential for Web 2.0 to deliver value.

So, I thought this would be a good time to revisit Humana's early pilot program in using a wiki for internal communication. This first appeared in a Web 2.0 cover story in the May 2008 issue of I&T:

Internally, Humana has leveraged the Web 2.0 concept of wikis -- Web-based collaborative editing software -- to become more agile in managing cross-functional teams. Piloted last summer across several Humana groups, the wikis proved their worth, particularly among customer service reps, according to [Greg] Matthews, [director of integrated consumer experience for Humana].

Recently, the health insurer experimented with physically placing customer service representatives in select Humana sales offices and doctors offices. Members loved the concept, Matthews says, because they were able to ask questions about their benefits at the point of treatment. It was, however, a new and different experience for the customer service reps, who previously had interacted with customers only over the telephone. When it came to servicing customers in a face-to-face environment, reps needed to overcome a learning curve, which was accelerated by the online collaborative tools.

"All of their case management [now] was handled through a wiki that they could use to share best practices and ask questions of their peers who were in the same situation," Matthews relates. "What it meant was that we had a real-time learning laboratory and repository for that data that enabled them to make changes on the fly."

For now, the wiki projects have remained internal. Going forward, however, Humana may launch customer-facing wikis, using lessons learned from its internal experiment to improve the process, Matthews says. "In a way, we're sort of in training internally to be able to leverage and make ourselves open to feedback from the outside world," he adds.

Posted by Nathan Conz at 05:45 PM | Comments

July 22, 2008

Telematics Resurgence Predicted

Actuarial consultant EMB is advising insurers to jump on the telematics bandwagon and give auto insurance customers the option to “pay as they drive,” to paraphrase Progressive Insurance’s patented cliché (Pay As You Drive). “Usage-based insurance will become the industry standard in the next five years,” EMB predicts.

Well, maybe. When Progressive Insurance first put together the technology it failed to result in a successful launch. However, the company licensed the technology to (Aviva-owned) Norwich Union in the U.K., and that carrier did launch a program. Now Progressive has launched its MyRate/Pay As You Drive (PAYD) program, available to drivers in Oregon, Minnesota, Michigan and Alabama (it’s hard to see what that last state fits with the rest, but I’m sure Progressive has a wicked algorithm that proves that it does). Meanwhile, Norwich Union has discontinued its PAYD program.

In the wake of Norwich’s pioneering use of PAYD, conventional wisdom was that Americans were more suspicious about anything smacking of surveillance. Perhaps the British weren’t all that different. Other Commonwealth countries have adopted the approach, including an Aviva program in Canada. And now Progressive is taking its chances in states where perhaps there is less antipathy to what might be perceived as Big Brother-like intrusions into the private space.
EMB’s recommendations are largely focused on the technical issues:

Insurers must develop a method of obtaining data, either through driver self-reporting, existing tools such as OnStar, or new tools such as proprietary hardware that plugs into the on-board diagnostic port (OBD) and uses the car's internal computer to track driving behavior. Then, challenges arise around how to retrieve and store the information, which data matters, and how to develop predictive models that meet customer acceptance and regulatory scrutiny, all while considering the privacy of the customer.

Clearly, the consultancy takes the privacy issue seriously, but it doesn’t allude to any distinctly American attitude about privacy. That was disappointing because the first thing I wondered when I heard EMB’s prediction was whether they would comment on the cultural issue. I don’t have any information about other PAYD programs in Britain, or in Canada and South Africa.

However, the failure of Norwich’s program resurrects the question of cultural barriers to PAYD programs. News reports say that Norwich claimed that consumer demand was affected by a slow uptake on the part of automobile makers. The suggestion is that pricing included installation charges for the "black box" that records the telematic information; if cars came ready made with the capability, costs would be lower and not tied directly to premium. Assuming that factor affected demand for Norwich's product, it still may not reflect the whole picture.

Many social commentators claim that technology has already killed privacy and we just haven’t noticed yet. As we begin to notice, will we be ready for PAYD? Will tough economic times push careful drivers over the PAYD edge? Will parents wanting to monitor their teen drivers be the thin end of the wedge? Or will Americans (and others) continue to resist intrusions to their privacy? Or—another possibility—will hackers find a fraud greenfield in PAYD and similar programs, making those programs less attractive to the insurers?

It will be interesting to see how EMB’s prediction plays out. Wagers?

Posted by Anthony O'Donnell at 06:25 PM | Comments

For The People: Allstate’s President of Social Networking

Recently I alluded to Allstate Financial’s creation of a “president of social networking” position and the appointment of Desiree Rogers to the position. I wondered aloud about just what Rogers’ role would entail, writing:

From the press release (we're hoping to speak with Rogers herself in the near future), it's difficult to tell just what kind of social networking-specific expertise Rogers has. Although, she did reportedly launch several strategic customer service and technology integration efforts at Peoples Gas and North Shore Gas. Further, is Allstate's definition of "social networking" consistent with what the term means to Facebook and Myspace users, or is the carrier defining the concept more broadly?

Since I wrote that post, I’ve been able to interview Rogers for an Executive Close-Up article for an upcoming issue of I&T. And from the interview, I got the impression that Rogers, who is well known in the Chicago area for her community involvement, will focus her efforts on overall vision and organization, and less on the technology specifics behind the effort.

Let me be clear though, it’s not that she won’t be involved in all aspects of the project, it’s just that her expertise lies more within the realm of customer experience than it does in the technological details of Web 2.0 technologies like XML and Ajax.

from my interview...

Rogers: “Basically, my career has been working with companies and working internally with companies to ensure that they are as customer-centric as they can be. In this case, the mechanism for getting closer to the customer or communicating with the customer is a social network. I was hired because I have been in regulated businesses before where I’ve had to work on something that might be new, both externally in the industry and also internally in a company.”

In many ways, choosing a relative outsider to head up an effort such as this seems like the way to go. Allstate already has a capable IT team –- one that I’d expect could design a well-developed social networking site – and third party partnerships can be made to fill in an gaps in technological expertise.

What’s needed at the top of a project like this is someone to ensure that the social network is intuitive, and simple enough for Allstate Financial customers and potential customers to use. It can’t be built from the perspective of a computer programmer, but from the perspective of a common user. That’s particularly true in this instance because the social network project is aimed in part at individuals of retirement age who are likely to be less tech savvy than the general population.

As Rogers puts it:

from the interview:

I think it’s very important to have someone... looking at things from a customer’s perspective and is able to ask the right questions and make sure that we don’t deviate and build something that may be a technological marvel and may look like the greatest social network on paper ever, but doesn’t work in terms of securing that relationship and that feel we want with our customers.”

Posted by Nathan Conz at 03:55 PM | Comments

July 15, 2008

Video: A Tour of Aviva USA's Second Life Island

A few weeks ago in this space, I wrote about innovation and the work Aviva USA has done inside the virtual world of Second Life. And while my subsequent article on the project is, no doubt, a perfectly written and extremely informative piece of staggering genius, reading about Second Life can only tell you so much. It's really something you have to see to understand.

In that spirit, here's a video tour of Aviva USA's island:

Posted by Nathan Conz at 03:59 PM | Comments

Rethinking Policy Admin Replacement

It seems only fair that there should be some compensatory dividend for enduring a prolonged winter this year but that is certainly not the case for the P&C industry. In the midst of this soft market, floods and wildfires already resulted in massive losses before the first tropical storm of the year had made its appearance.

Bad business results are untimely for companies struggling to modernize, especially mid-tier P&C companies. It would be nice, then, if they could achieve their goals without unnecessarily high systems investments. The prevailing thinking about policy administration may not help.

Despite the welcome availability of newer systems built on more open architecture, the industry mindset is still stuck on the "monolithic" mode. Carrier business and IT execs still think in terms of policy administration rather than the specific capabilities they need. As Deb Smallwood of Smallwood Maike & Assoc. puts it, carriers are thinking from back office to front, rather than from front to back. She advises that insurers focus on the capabilities they need and not assume they need a multimillion dollar, whole-hog policy admin replacement.

Vendors can hardly be blamed if they cater to this perception. However, says a CIO friend of mine, "while they will try to sell you the whole system, if pressed they will sell bits of functionality in modular fashion."

That would save carriers buying redundant code where they have already achieved some degree of modernization or simply where they have viable capabilities.

Of course all this fits with the direction technology architecture is taking toward more plug-and-play integration, service-orientation and zero functional redundancy. To get there, the vendors who have the technology may need to make it easier for carriers to shop a la carte, and the carriers themselves need to ditch their legacy technology conceptions along with their systems.

Posted by Anthony O'Donnell at 03:11 PM | Comments

July 08, 2008

A Different Kind of Boot Camp

I've recently started work on an upcoming I&T feature story on recruiting and retaining IT talent. I'm just now developing a focus but, already, I can tell that there will be no shortage of sources for the story. Just after taking a quick glance at the "workforce" folder in my e-mail inbox, I see that Aflac, Northwestern Mutual and Medical Mutual of Ohio's Antares Management Solutions (Antares, a wholly owned MMOH subsidiary, acts as an outsourcer to other insurers and also handles much of the carrier's internal IT work), among others have earned Best Places to Work in IT honors from Computerworld.

As I research the topic more, I find that I'm most interested in stories that aim to not only retain current IT workers but recruit and train new ones as well. At Antares for instance, a program has been established to attract young IT professionals to the company straight out of college and -- through a 12 week training program affectionately known as the "Antares Boot Camp" -- teach them the basics of insurance IT as well as some marketing and finance.

According to a document produced by Medical Mutual of Ohio's media relations team, Paul Apostle, vice president, enterprise technology development and innovation and Andy Balazs, vice president, enterprise technology, advancement infrastructure and operations have even joined HR personnel on recent visits to area colleges in order to recruit graduating students into the program.

In addition to technology skills, the carrier places a premium on communication skills when selecting potential employees. The boot camp meanwhile, is meant to not only develop young employee's technical skills, but also business skills around communication and an understanding of marketing and finance.

from the document:

When finalists are accepted into boot camp and hired, they are put before a team of technical managers who offer a dose of reality, firing questions at the new recruits.

"The thing we try to impress upon the recruits, " said Jason [Craft, an Antares HR generalist], "is that making the transition from the academic world to the business world is critical. We explain our core business. Executives like Paul Apostle explain what we do as a company, not only from a technology perspective, but also from the viewpoint of marketing and finance. We teach recruits the business from a 'holistic' perspective," said Jason.

After the 12 week program, the recruits are transferred into assigned work groups and integrated into the Antares workforce.

MMOH also suggests that the training program works as a recruiting tool. Not only does it help prevent what the company has labeled "brain drain," or the flight of area college graduates to other regions, but former program participants are beginning to go back to their alma maters and build up word-of-mouth about the Antares Boot Camp program and Medical Mutual of Ohio.

Posted by Nathan Conz at 04:44 PM | Comments

Fiserv Refocuses

The insurance technology vendor world keeps making news, most recently with the announcement that Fiserv will sell a majority share in its insurance businesses. While the news came too early to validate arguments that Oracle's and EDS' recent moves would heat up vendor consolidation, it does reinforce the notion that investors have confidence that insurance companies will continue to spend liberally on technology.

In this case, the investors were not a large technology firm but a venture capital company. Trident IV, a private equity fund managed by Stone Point Capital, will invest approximately $540 million to gain a majority interest in Fiserv's insurance businesses.

More than a reaction to changing market conditions, the Fiserv/Trident IV deal represents an attempt to focus resources. Following its $4.4 billion acquisition of CheckFree, Fiserv is focused on consolidating its e-banking, payments and billing and related businesses. While retaining a very large minority interest, Fiserv can continue to benefit from what have been its insurance businesses while transferring their management to Stone Point, a company which specializes in the insurance industry.

"Fiserv's leadership has sold part of the group but not all of it because they believe in where the business is going and want to participate in that growth," comments Eddie Jones, Fiserv senior vice president of marketing and product management. "However, they have big issues on their plate and see the opportunity to bring in Stone Point Capital for their intense insurance experience. Bringing that kind of focus to the insurance business is seen as a big positive."

Insurance customers will now be dealing with an entity known as Fiserv Insurance Solutions Inc., but Jones notes that the company will rebrand in the near future.

The commitment of Stone Point/Trident IV, like that of Oracle, HP, et al., demonstrates the vitality of the insurance technology market and should bring further value to the industry. When it comes to particular customers of particular vendors, especially small customers of small M&A vendor roadkill, results may vary. However, on balance, entities pouring resources into competing for insurance customers is likely to do customers good.

"I see the stronger players, those which have the resources and wherewithal, adding benefit to the industry by providing depth of solutions, hopefully investing heavily in R&D and reducing the number of vendors insurance IT executives need to deal with," says Bill Jenkins, CIO of Penn National (Harrisburg, Pa.).

"Needless to say , these benefits depend on the acquiring company's long term strategy and philosophy. If they see such acquisitions as 'fast money' or as a 'cash cow' and do not look to enhance or invest in the future, they will end up reducing the number of competitors and could stifle completion and innovation," Jenkins adds. "Overall, I believe the benefits of the 'strong' outweigh the
negatives."

Posted by Anthony O'Donnell at 03:26 PM | Comments

July 01, 2008

A Social Network Exec

Despite I&T cover stories on insurers and how they are embracing Web 2.0, I still often wonder just how important such technologies and concepts will be for the industry over the long-term. Even more, I wonder just how seriously insurance companies themselves take emerging Web 2.0 technologies like social networking. A recent appointment at Allstate though, has reaffirmed my faith on both counts.

According to a June 26 press release, Allstate has appointed Desiree Rogers as president of social networking for the Northbrook, Ill.-based company's Allstate Financial business unit, which offers life insurance, supplemental accident and health insurance, annuity, banking and retirements products to individual, institutional and worksite customers.

from the release:

In her role, Rogers will be responsible for building a social network that connects middle-market consumers—often alienated and confused by a myriad of financial products and services—with other like-minded Americans to share experiences, insights, and wisdom. Social networks are a new approach to harness the collective experience of consumers through interactive communities, affinity groups and new external relationships.

It's expected that Rogers will begin in her new role this month and she's set to report to the Allstate Financial business unit's president and CEO, Jim Hohmann. Rogers has developed quite an impressive resume, as a former president of Peoples Gas and North Shore Gas and, prior to that, as director of the Illinois Lottery. She's also been named one of the 50 most powerful African-American women in business by Black Enterprise.

From the press release (we're hoping to speak with Rogers herself in the near future), it's difficult to tell just what kind of social networking-specific expertise Rogers has. Although, she did reportedly launch several strategic customer service and technology integration efforts at Peoples Gas and North Shore Gas. Further, is Allstate's definition of "social networking" consistent with what the term means to Facebook and Myspace users, or is the carrier defining the concept more broadly?

Undoubtedly though, it will interesting to see just what kind of role Rogers ultimately plays at Allstate and just what kind of social network she helps create. After all, president of social networking is not a well-established executive role within insurance companies (at least not yet). And for matter, there are not too many social networking projects underway or completed in the industry to use as blueprint. It stands to reason then, I think, that she'll largely get to write her own script.

Posted by Nathan Conz at 04:27 PM | Comments

The Hazards of Estimating Hazards

A story in today's Wall Street Journal addressed the controversial application of predictive catastrophe modeling for rating. The pieced raised many of same questions addressed in our coverage last year of the growing controversy of the use of certain models in the Florida property insurance market: How scientific are the models, or at least their application? Are the models' assumptions chosen to benefit the insurance industry unfairly at the expense of residents of Florida and other states? Is the fundamental science about the effects of rising sea surface temperatures too uncertain to be built into predictive formulae?

Without examining the models at a very technical level, it's hard not to conclude that the parties on either side of the controversy simply seek to allow models to be run using assumptions that favor their interest. The story alludes to the arguments of, on the one hand, residents who face prohibitive premiums and, on the other hand, insurers who appear to act on the maxim "you can never be too careful."

One scientist is cited as saying that some of the CAT models fail to take into account "scientific uncertainty" and thus can be overreaching in their conclusions. Seems reasonable, but surely saying that insurers can't charge for losses they can't be more sure of is asking them to bear the costs of uncertainty.

Nobody should have to pay more insurance premium than necessary but how accurately can one calculate what's necessary from a natural catastrophe point of view? Not accurately enough, judging by this year's performance. The Journal would have done well to reference an article from the previous day (Property Insurers Confront Rising Catastrophe Losses) which acknowledges that the losses in the first half of the year have eaten up premium, leaving carriers at the break-even point before the Atlantic hurricane season has even begun. Costs are still being calculated from the Mississippi River Basin floods, and the West Coast is in the midst of the latest round of wildfires — with nearly the entire summer still ahead.

It may be too much to expect the public to understand the hard/soft market cycle but one would think that the public might start to take a more rational view of risk when viewed in the context of climate change. Perhaps the CAT model vendors should seek an endorsement from Al Gore…

Posted by Anthony O'Donnell at 03:00 PM | Comments

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