For insurance technology, 2013 was largely a year of false starts. Predicted advances in telematics-powered auto insurance didn't quite materialize, and the government-mandated health insurance exchanges opened with a resounding thud. So, technologists are excused for looking forward to the clean slate offered by a new year. Following are some of the areas industry analysts expect technologists to focus on in the coming months.
Internet of Things
There were hints in 2013 that the so-called "internet of things" -- a buzzy phrase describing the proliferation of networked sensors across consumer products -- has the potential to impact greatly the insurance industry. The concept rolled comfortably into the emerging big data push that led to companies adding analytics software and skills at a breakneck pace. In 2014, these data sources will become difficult to ignore or push into the future as insurance companies staff themselves with advocates for their use.
"Consider the flood of personal data that is now being collected within the industry, ranging from a wide variety of preexisting and knowingly installed usage-based insurance devices, mobile devices with embedded cameras and GPS, medical sensors used by hospitals or even now the personal training apps that collect and transmit a wide range of interactive health information," says The Nolan Company's Steve Callahan. "'Big data' harvested from sources like social media or rewards programs, electronic health records, digitized travel and identification, and RFIDs (radio frequency identification tags) serve a multitude of purposes."
Celent's Michael Fitzgerald points to the introduction (albeit on a very small scale) of Google Glass as an indicator of where consumer technology is headed and how it will seed insurance strategy in 2014 and beyond.
"Limited examples of intriguing uses for Glass have been hinted at, and multiple other gadgets are coming online -- smart watches, fitness bracelets, and medical device monitors, for example -- which will increasingly be worn as the year progresses. This will make the promise of 'anywhere, anytime' sensing technology real and tangible to the general public," he says. "Broader adoption of wearable technology will set the stage for a future, major change to the insurance proposition – moving from a rear-view-mirror, financial indemnity product to a continuous-risk-avoidance-loss-prevention service. Next year will create the awareness and expectations needed to motivate such a change."
But, Callahan warns, insurers face an uphill battle in gaining consumer and regulatory acceptance of moving these kinds of technologies to the core of insurance rating underwriting. High-profile data breaches and leaks -- not to mention the revelations by former National Security Agency consultant Edward Snowden of widespread technological snooping by the U.S. and other governments -- have made the public wary of potential threats to their privacy.
"Reactions are starting to solidify and gain momentum on the perceptions of privacy violations already occurring across the U.S.," Callahan says. "Already police in several states are in court debating their rights to tap into cell signals without a warrant to track subjects. Insurance companies have denied claims based on what they have found on social media."
Here's another buzzword/phrase to watch in 2014, Callahan adds: "code halo," or the invisible information circle around an individual containing a tremendous wealth of personal information.
"How can a year go by without the issue of securing the privacy of individuals' very personal data spread across all of these platforms?" he asks. "Hopefully it won't take an industry equivalent of a WikiLeaks or Snowden to ensure that individual privacy, at least in the insurance industry, is being given much more than a cursory consideration."
Though core systems replacement is a given in any year, insurance companies that are not yet on the road toward more flexible systems risk falling behind their peers that are already in process or done with implementation of systems that enable better customer relations, speed to market, and integration with next-generation technologies.
"With insurers now embracing innovation, focusing on improving the customer experience, and looking to enhance product development, the need for modern core systems has never been greater," says SMA's Mark Breading. "When you throw into that mix the maturing of cloud-based options, the need to extract data for analytics, and the demands for mobile front ends, the core systems picture becomes very interesting."
Banks already see mobile platforms as the interface of choice for the future, adds Novarica's Rob McIsaac, and insurers must also recognize that sea change in selecting and implementing new core systems.
"Banks are increasingly pursuing a 'mobile first' development strategy, which will create added pressure for insurers to keep up," he says. "With pressure for new products, faster turnaround times and more market segmentation, the replacement of old core systems will take on increased urgency. Old systems using old technologies with waning support options may not make a good strategy for long-term growth and profitability at any carrier.
As insurers look to leverage the big data from sensor proliferation by implementing core systems that make that data actionable, cloud-based services are likely to gain popularity among insurers who want to get access to the next generation of technology capabilities without big infrastructure investment.
"We've seen a large shift in attitude about putting data, applications and services in the 'cloud' this year during our discussions with CIOs," says Novarica's Tom Benton. "In addition, there has been a surge in use of services like Dropbox and Box this year. Solutions where data is stored in the cloud will be a big story in general in 2014, but the fact that insurance CIOs are starting to embrace them so early in their adoption will be a big story."