What specific areas do you see the most weaknesses amonginsurance carriers where new technology could offer the mostassistance?

Frank Neugebauer, CIO of Burns & Wilcox:Tight coupling of the user experience to vendor implementations. Assuggested in your blog post, coupling the user experience to theback end limits the ways information can be expressed, bothvisually (e.g., by device type) and non-visually (e.g., Webservices). The vendor community is really improving this byproviding Web services, but insurance carriers are still too quickto use the vendor’s UI. Taking control of the user experience—whilenot a technology—is the answer here.

(To read what other vendors have to say on these issues, checkout Part 1 of the series, Part 2, or Part 3.)

With respect to reporting and data warehousing, it’s my firmbelief that carriers aren’t relying on process “logging” enough.Warehouses observe things that happened in the past. However, thosethings are realized through specific processes that themselves canbe tracked as they happen—more like logging. For example, I don’tneed to plow through my various policy admin systems to see howmany quotes were issued (after the fact) if I’m watching the systemin real time.

The problems that result are significant; huge EAI troubles,slow data feeds (overnight is too slow), and inaccuracies resultingfrom assumptions made about historic data that’s in a formatdifferent than the warehouse. SOA orchestration—and observing thoseprocesses—can help significantly. I believe this is the nextstep.

Ruth Fisk, director of insurance solutions for HylandSoftware: Over the past few years, insurance carriers havebeen zoned in on the customer—offering better products, improvedresponsiveness, more access to information, you name it. But, as aresult, sometimes the distribution channels were overlooked.

The good news is carriers have already recognized that customerself service can dramatically improve how efficiently they dobusiness. Now, they need to jump on the same opportunity foragents.

Self service to the distribution channel is a game changer forinsurance carriers. It’s not necessarily a new concept—agentportals have been around for years. But, the opportunity thatcarriers have is to make these portals more comprehensive,extending them to be true point-of-sale or point-of-servicesolutions.

Sometimes, I’ve seen insurance carriers not go down this pathbecause they fear it will hurt how the distribution channel viewstheir ease of doing business. In my opinion, the reality is thatit’s the exact opposite. When the distribution channel has the mostup-to-date, complete information to get the business and the rightcontent management tools to ingest more information to process thebusiness, everybody wins. The agents are bringing in more businessfaster and getting paid faster, while perceiving the carrier asbeing agent-friendly.

In this business, it’s all about using information to empower.When insurance carriers empower their distribution channels in thisway, they will differentiate themselves by having a lower totalcost per sale and happier, more loyal agents.

Courtlandt Gates, CEO of Clearwater Analytics:In our area of core competence—investment portfolio accounting andanalytics—many insurers currently rely on a combination ofinstalled point solutions and spreadsheets that are not‘integrated-by-design’ and require internal databases, layers ofmiddleware, custom coding, and manual intervention, which arecostly, complex, and risky. At the same time the importance of theinvestment portfolio from a strategic perspective and the absoluterequirement for portfolio transparency are top of mind for ChiefFinancial Officers and Chief Investment Officers and emergingaccounting issues are top of mind for treasury and accounting.

Forward looking insurers are exploring a combination oftechnology and outsourcing to deliver accurate, timely, actionableinformation to key constituents in accounting, finance, treasury,investment management, and senior management. In many cases thislevel of transparency is beyond the capability of the currentprocesses and incumbent solutions.

We believe it is critical for the four key parameters ofinvestment reporting—accounting, compliance, performance, andrisk—to be constructed on the same set of aggregated and reconciledtax lots. We further believe that investment reporting should bedaily and Web-based.

Technology is clearly the most graceful way to meet theseobjectives. The application of technology has the added benefit offreeing scarce human resources from manual processes and providingthem with the time and information to make better decisions.

Are insurance carriers making theright steps in the area of project management to ensure they aretaking the right steps from selection to implementation ofsoftware? What do they need to do better?

Fisk: For many years, IT and project managementhave driven technology projects from selection, procurement throughto implementation. Yet oftentimes, even if they have the bestintentions to bring high-value solutions to the hands of theirusers, unfortunately, they are not always the most relevanttechnologies to address the business need.

A trend I’m seeing more of is a collaborative environmentbetween the business and IT sides. In fact, there is a shift of theproject management role to be led even more by the business side,something that’s been a major positive move in the industry.

This has clearly improved the insurance organization to get theright software in the first place. But, an even larger positiveeffect is on the life after implementation.

Software that’s not fully utilized, or “shelfware” as we callit, has historically been a huge problem in insurance. But becausethe business side understands the specific pains they’re targeting,not to mention how they want them addressed, solutions aren’t justselected on how many features are available. Rather, they’re alsoselected based on things like total cost of ownership, whichincludes how easy software is to modify based on process changes,role-based views, etc.

Also, a proof of concept and modeling solutions during selectionprocess is becoming commonplace. I think this has to do with a newexpectation on the vendor—that just as the carrier is invested inthe success of the solution, so should the vendor. The carrierwants to see how much the vendor actually cares about addressingthe business need beyond a flashy interface and process modeling isoften a good way to do that.

Gates: We see a broad range of approaches toproject management in the selection and implementation of software.The common themes for successful project management are anunderstanding of the problems to be solved, asking the rightquestions and managing the critical path.

With regard to understanding the problems to be solved, werecommend a holistic approach with cross-functional buy-in. Forexample, in the realm of investment reporting there are numerousconstituents with interest in the underlying portfolio data and thereporting that can be built upon it.

Projects that replace an existing accounting solution can alsomeet critical requirements in investment management. On the topicof asking the right questions, it is important to be as specific asthe individual problem to be solved. For example, if it isimportant for accounting and risk numbers to tie-out, address thatissue directly. If it is important to track compliance according toboth internal policies and state guidelines, include that specificrequirement.

On managing the critical path, we are strong proponents ofWeb-delivered software or software as a service, because the impacton IT is significantly reduced and much of the heavy lifting can behandled by the service provider.

Neugebauer: Carriers that use projectmanagement offices and a formal development methodology generallyare better off. The idea of an RFP is very much inadequate exceptas a means to get a more meaningful demo. What’s really required,far further in the process, is a solid vision and set ofrequirements. While that takes a lot of time, starting with the endin mind is far more productive that letting the vendors define yourrequirements as you go.

Do most insurance carriers look at youas a partner in the solution process or as a vendor?

Fisk: It may sound cliché, but it’s true:Insurance carriers want a trusted advisor, not a vendor. I’ve hadinsurance companies ask me for advice on how a process should work,implying that I’m not just there to provide a product to automatewhat they already have in place. Rather, I’m giving them a toolthat can improve the process they have in place. In other words,what I do isn’t about selling a product to automate an existingprocess, like claims, anymore. It’s about working with theinsurance organization to optimize that process and others like it,with the right technology enabling it to happen.

This brings up an interesting point. What makes a trustedadvisor today? Is it knowledge of the product, or knowledge of theinsurance industry that’s more important? In my opinion, you can’thave one without the other.

Insurance carriers should expect a vendor to know theproduct—not just for what it is, but also for what it isn’t. Toooften, products are oversold into being the panacea for solving allthe technology needs of an insurance organization. And, on the flipside, insurance carriers should choose a vendor that really getstheir business processes and what makes them successful. Only withthese two pieces in place are insurance carriers not risking justbuying technology for the sake of technology.

Neugebauer: I’ll answer from my point of viewas a CIO. I see some vendors as partners and some as vendors. Overtime, the vendors essentially put themselves into one of those twocategories. If they understand insurance and provide insight andsolid solutions, they are partners. If all they do is sell, thenthey’re vendors.

Gates: Successful relationships are built onhonesty, trust and open communication. By virtue of ourbusiness philosophy and our service model we see ourselves as apartner rather than a vendor in the conversion and in the ongoingrelationship.

From a business philosophy perspective, we are committed tolistening to our clients and prospects and solving problems thatare urgent and pervasive. We are transparent about our existingfunctionality—the functionality on which we are working—and thepriorities in our roadmap for the future.

On the subject of our service model, the data and softwareresides on our servers and we take complete responsibility forportfolio aggregation, reconciliation, and reporting which consistsof daily, Web-based, accounting, compliance, performance and risk.Our clients have dedicated account managers who are deeply familiarwith the investment portfolios, the relevant accounting bases, andthe reporting and analytics. This is a very different relationshipthan one where the client is operating software installed on itsown servers.