Within every insurance company, there is a wealth of ideas about how to improve processes and deploy technology in creative ways to solve business problems. The challenge for most insurers is to create a pipeline for ideas and then find ways to turn the best into innovative developments that deliver business value.
Fostering enterprise innovation is the objective of the recently created Innovate ITG (Information Technology Group) program at MetLife. “Innovate ITG is designed to encourage employees, regardless of level, to make business practices better,” explains Lynn McGinty, ITG vice president, supporting MetLife Auto and Home. “Those ideas are vetted by a group within ITG, and the most important ones get moved to the top.”
Additionally, innovation at MetLife has been facilitated by a recent change to agile development in the ITG. “We had always utilized a waterfall approach, but have come to realize that it is not the best method in a competitive business where speed-to-market is important,” McGinty says.
MetLife invested in training for agile and is in the midst of instantiating the philosophy throughout the ITG. “Because we had always been extremely collaborative, we have been able to make the transition to agile relatively smoothly,” McGinty says. “Agile did change the way we do testing, requiring us to create a more automated testing process than before.”
McGinty attributes two recent innovations to adoption of agile development. The first is its GM incentive program, rolled out July 6 in Oregon and Washington. In the program, MetLife partners with GM to provide auto insurance to buyers of new vehicles for one year at no additional cost.
“We had to deliver the new product in a 12-week timeframe.” McGinty says. “It took the collective brain and experience of many people to create the right technology solution in such a tight timeframe.”
ITG built a new Web-based application system for GM dealerships in just under six weeks and finished implementing the new product flow through MetLife’s existing policy administration systems on schedule.
“If we had done the project using a waterfall methodology, we would have been writing requirements for quite a while before handing it off to design, coding, and QA,” McGinty explains. “With agile, we could collaboratively influence how this new program would be automated, then deliver it in chunks rather than in one final deliverable.”
Additionally, MetLife Auto & Home recently performed a major re-launch of its Web sales site using Web 2.0 technologies. The redesign used ideas that had percolated from customer experiences and employee suggestions.
“It’s important when you’re doing quote and bind to take as short a process as possible,” McGinty says. “We worked to avoid spots that would cause someone to stop in the process, as well as to find ways to make it enticing so they’ll complete the process.”
State Farm also has put new processes in place to encourage innovation, including a funding initiative for research and development (R&D).
“At an enterprise level, there has always been a tone around innovation. Last year, we created a portfolio around R&D funding that allows anyone within the State Farm enterprise to submit an idea to an ‘idea management’ process,” explains Matt Swingler, service manager in State Farm’s IT Research and Development. That process involves vetting ideas by R&D groups that incorporate people from systems and IT and includes a business sponsor who can provide strategic resources to ideas that are pursued.
“Our charge is to look into ideas and do some initial research,” Swingler says. “There is some prioritization that occurs, but we are also trying to provide a way to fund ideas that hadn’t received funding in the past.”
State Farm has implemented a flexible approach in R&D to bring innovative solutions to production quickly. “In an ideal world, an idea moves from R&D to prototype to experiment to deployment. But based on what we’re seeing, the linear approach doesn’t always work best,” Swingler says. “We may go straight to prototype to prove a given technology or given concept, or we may spend some time researching it, skip the prototype, and build a quick pilot that may be a bit more experimental.”
Innovation funding helped create two smartphone initiatives that have received press coverage in recent months. The first is On The Move, an app that auto-replies to text messages to let senders know that the recipient is busy. The second, Pocket Agent, lets users find an agent, report a claim, get roadside help, and perform other tasks.
“The real motivator behind On the Move was to help eliminate distracted driving,” Swingler says. “That idea came into the funnel and made its way into IT development. We did a fairly robust prototype of what it would look like, shopped it around [inside State Farm] and, once it gained traction, identified the areas in IT that would maintain the app going forward.”
Additionally, in August State Farm introduced an innovative approach to low-pressure sales in an initiative called Next Door in the Chicago market. The Next Door project arose from an idea to create an “open space” that would host community classes and events, and where individuals could get free advice from financial coaches about investments, insurance, and other financial matters.
“Next Door is an opportunity to put resources into the local community without an emphasis on sales,” Swingler says.
The initiative required a physical investment in office space as well as technological investments in networking, Wi-Fi, and tablet devices for visitors to Next Door to use. State Farm declines to cite the amount of investment in the program, but Swingler says the benefits are long term and not necessarily measured in hard dollar ROI.
“We see Next Door as a collaborative learning lab,” he explains. “At the same time, members of the public benefit from the advice available. It’s a good way for us to explore new products, apps, and ideas in an open environment where we can get early consumer feedback.”
Although insurers strive to be innovative, they also must choose new technologies carefully to ensure that IT developments are delivering value to the business. “In a risk-averse industry like insurance, you have to balance innovation with a healthy dose of reality,” says Andy Scurto, president, ISCS.
“The challenge of any R&D organization is that not every idea that comes in will be worth following,” Swingler says. “Vetting ideas for viability and potential ROI is tough. There’s no easy way to do it. We project 18 months into the future, and ideally try to look out three years.”
Separating hype from helpful among emerging technologies is equally, if not more, important for solution providers than insurers. “Although we need to be innovative, we also need to avoid investing in technologies that won’t provide a concrete ROI for insurers,” says Scurto. “Particularly in the social media world, new platforms pop up and disappear virtually overnight.”
For solution providers, the process of practical innovation begins with listening to insurers. “The best ideas come from business that start with, ‘I wish I had,’” says Ananth Krishnan, CTO, Tata Consultancy Services (TCS).
To vet these ideas, the TCS “innovation ecosystem” consists of 19 global technology innovation labs. Dennis Maroney, TCS global insurance practice lead, points to several “accelerator” solutions that have arisen from listening to customers.
“Our accelerators provide a platform to consolidate the different information and tasks related to common processes,” he says. Those include accelerators for underwriting, catastrophe claims management, and litigation.
Scurto stresses that solution providers need to not only listen to customers’ requests, but also identify the underlying business problem that caused the request. “If a customer says they want to do XYZ, and you blindly deliver what they ask for, you won’t’ deliver what they really need in a lot of cases,” he says.
He points, for instance, to the development of user-configurable technology as an example of innovation that can go awry.
“As I do presentations, I hear, ‘I want my business users to make configuration changes.’ Really? That’s an interesting statement, and I really, truly hope you don’t, because your business users are supposed to be writing policies and paying claims. We understand that what’s really being asked for is the ability to get things done quicker, and they [business users] are simply looking for the best way to accomplish that goal.”
That understanding has shaped ISCS’s approach to product configuration. “Instead of focusing on business user control, we focused on a tool that allows IT to quickly make changes in a test environment and manage the aspect of agility,” Scurto says. “The tool allows IT to get the system the way they want it in a test state and then allow people with a broader business view to look at it, within an easily configurable environment.”
Scurto says that, in order to truly identify business needs, vendors need people who understand the business of insurance. “I’ve seen some really good technologists come in and develop some really cool, really innovative stuff, but they didn’t have the deep insurance knowledge necessary to realize their solution wasn’t workable in the insurance context,” he says.
“For instance, they don’t realize that insurance companies need to keep their old products forever, in a lot of cases,” he explains. “You can have claims on products 20 years old—nothing ever dies once you put it in place. Technology needs to support that need, and one way to do that is by making certain developers understand not just the products specific to insurance, but also the regulations that are required.”
At Pegasystems, more than one fourth of the staff is involved in R&D, and the company is experiencing a 30 percent annual growth rate. Pegasystems believes that innovation begins by making its systems “insanely open,” according to Gary Kirkham, principal of insurance industry solutions.
“We want to take advantage of everything out there, from ACORD XML standards to recognizing that our carriers have huge investments in other vendors’ technology. The number of wizards we have created to integrate with vendor systems is massive as a result,” Kirkham claims.
Pegasystems has been on the forefront of the trend toward case management in P&C, utilizing its BPM solutions to bring people and applications together and create logical end-to-end processes around claims, underwriting, and other insurance tasks.
“Case management involves looking at the whole collection of things that have to happen in order for a particular piece of business to be resolved,” explains Steve Zisk, senior manager of product marketing. “In contrast, the traditional view of process management assumes that a designer can determine up front how every case goes to completion. That doesn’t work because every case is unique.”
For instance, an adjuster might be working on a claim where a repair turns into a total loss. “A classical process approach would say that, once I start a repair claim, it has to be handled a certain way. It could not accommodate the change in process from collision repair, so you’d have to close one process out and start another, or find a manual workaround. Instead, case management allows to you change the process mid-stream,” says Zisk.
OneShield looks outside insurance to drive innovation. “It’s a mistake to look just within your own borders,” argues Steve Forte, director, global product management and alliance. “You need to examine a sector like retail—what functionality do vendors like Amazon and Google provide their customers, and how is that shaping what insurance consumers expect?”
That viewpoint led to the development of a “quick quote” functionally within OneShield’s Dragon rating platform. “We wanted to mimic the way someone might look at it [policy quoting] if they are a consumer,” Forte says. “Our product management group went out and looked at purchasing experiences for other products and how easy it is, then compared it to insurance. That led to changes in the flow of applications and the increased use of prefill.”
BPO AND COLLABORATION
Euan King, managing director of Innovation Group’s North America software division, says the company’s global BPO operations, involving the annual processing of over one million policies and six million claims for insurers in ten countries put it in a unique position when it comes to listening to customers. “Very few solution providers can say they use their own technology in their operations to support hundreds of insurers for core business processing, which subsequently provides real-world experience,” he says.
This perspective has led to the Innovation Group finding new applications for existing technologies and capabilities. “We can leverage our supply chain network to provide risk prevention services, particularly in geographies where there is a requirement to maintain your vehicle or risk incurring greater liability, offering a service that will help insurers differentiate beyond price,” King says.
At Vertafore, collaboration is both a process for and product of innovation. In 2011, Vertafore enhanced its WorkSmart platform with WorkSmart Engage, which allows agencies to collaborate with carriers, managing general agents (MGAs), and customers. The cloud-based application provides agencies secure workspaces to organize renewal, submission, and client documents and communications.
“In complex commercial lines cases, there are a lot of documents being exchanged between underwriters, policyholders, and agents,” explains Sharath Dorbala, Vertafore’s senior vice president of product management. “To streamline that process so that every party has complete visibility, you need a tool that is easy to use and where documents are available—anytime, anywhere.”
OLD PROBLEMS, NEW SOLUTIONS
At the same time carriers are looking at how to deploy innovative new technologies, they are looking for new approaches to old problems. Sameer Karode, director of product design for P&C at MajescoMastek, says innovative approaches to IT development can provide easier alternatives to complex projects, such as legacy system replacement.
“One rapidly emerging option is dividing the core system replacement effort into two pieces—a product modeler and the actual core system,” Karode says. “This incremental approach offers an option with reduced risk by enabling the carrier to start by externalizing their insurance product definitions into a central content repository, while still using the legacy core system for transaction processing.”
Calling it a more “pragmatic” strategy to legacy system replacement, Karode says a two-pronged approach provides resource-strained insurers an option.
“Given the economics and reduction in IT budgets, carriers are no longer able to easily gain the required internal support for high-risk and costly legacy replacement projects,” he says. “We are making significant investments into building components that will allow a piecemeal and incremental approach of legacy modernization instead of the ‘old school’ multi-year, mega-million dollar project.”
Insurers are looking to find innovative ways to extend existing technologies. Patrick Surry, global solution owner for customer analytics at Pitney Bowes Business Insight, says this is illustrated by recent interest in uplift modeling.
“Uplift modeling is about attacking a different business problem differently than traditional predictive modeling does,” Surry says. “Whereas a traditional model might predict how a customer is likely to behave in the future, uplift modeling is trying to predict the impact of a particular treatment, like a marketing campaign, on an individual customer.”
For instance, in targeting customer retention, a company would typically create a retention model, compile historical data, and then determine customers who are considered a high risk of not renewing. “From a marketer’s point of view, that is not a useful model,” Surry argues. “What marketers would like to know is whose risk of not renewing I could change the most, and by what action. Maybe it’s an outbound call, maybe it’s a letter—but what customer is going to be most influenced by a particular action.”
Uplift modeling is enabled by advances in analytics, including the ability to make accurate predictions about individual behavior. Additionally, Pitney Bowes Business Insight has created proprietary algorithms to create an uplift modeling solution.
“We have cases where companies are achieving twice the number of saves with uplift modeling,” Surry claims. “Insurers are spending less money, focusing their efforts, and saving customers. We are getting some great ROI stories. And although we’ve looked primarily at marketing, there are other applications of uplift modeling, including collections, risk management—anywhere that you want to predict how a particular action will affect the outcome regarding a particular customer.”
TCS strives to create what Krishnan calls “creative dissatisfaction” among its developers.
“We need to establish the mindset that, although we may have done something good yesterday, we need to be better tomorrow,” he says. “We also have a participatory culture, where we drive innovation and ideation throughout the enterprise with social networks and other connectivity technology.”
“Innovation at MetLife really comes down to the way the ITG is truly a partner with the business,” McGinty says. “The business will come up with ideas and suggestions, and we will work with the business to flesh out those ideas to create solutions that are both innovative and workable.”
MetLife also makes the investment to train IT employees in insurance to ensure that systems development best meets business objectives. “Our IT staff sits in claims offices and underwriting departments and learns firsthand how the business operates,” McGinty says.
State Farm encourages innovation through events, such as “hack days,” where business and IT staff have 24 hours to play with new technologies to solve business problems and explore what’s possible.
“Hack days are a way to showcase an idea or concept and really just have a fun, interactive way to do something completely different,” Swingler says.
Combined with staff recognition for ideas that are implemented, State Farm believes it is on the right track to instill a culture of innovation.
“We’re seeing more focus on innovation and pride in the ideas that become reality,” says Swingler. “People know that when they ‘move the needle’ at a company as large as State Farm, it’s a significant achievement.”