As the saying goes, we've come a long way.

When we look at the advances and consider technology's momentum,it's easy to get excited about what we'll experience in the next 30years. No doubt new opportunities await, but in order for insurersto be in the best position to take advantage, they must understandthe whole story, and the resounding theme of that story is thattools without content are just toys.

Simply put, we must understand that technology will neverproduce a silver bullet, and that it is only as robust andbeneficial as its human support is knowledgeable. As competitive astoday's market is, carriers can't afford to be lulled into a falsesense of security about automation. If anything, because of thespeed automation allows for, they must be even more vigilant toensure they are addressing their business concerns correctlythrough technology, harnessing it effectively and asking the rightquestions of the vendors who are making the pitches.

A Glimpse Ahead

Technology's momentum will continue to fuel the speed, overallefficiency and accuracy of what we do. With great benefit to thebottom line, I believe we'll see more technical features that helpwith composite ratings, statistical coding and the management andmanipulation of the thousands of business rules that govern theindustry. However, we can't expect tools to replace theknowledgeable worker. Rather, we can expect the paradigm tocontinue to be one marked by insurance solutions being built forinsurance professionals by insurance professionals.

Clearly, advancements in data and analytics present greatopportunities for insurers to distinguish themselves. With strongerrisk assessment tools, carriers can get to know customers better,push the envelope with a broader suite of services, and sharecomposite information across multiple lines. Suddenly the world ofunderwriting also becomes more independently profitable, and in aneconomic climate where investment income is harder to come by, it'sdifficult to argue how important this is to the growth andprofitability to insurers. For companies that manage technology'sadvances well, the ability to take products to market even fasterand address consumer demand with more agility will catapult them tothe forefront of their competition.

Managing “technology's advances well” is the key,though. In my experience, I've seen too many carriers fall prey tothinking they could handle it themselves or to a vendor who madebig promises without the supporting knowledge. Truthfully, theopportunities that technology can and will provide are only halfthe story, but it's the half most often fed to carriers by vendorseager to get a foot in the door. With shiny toys dangling in theirfaces and promises of easier profits perfuming the air, companiesare sidetracked and the right questions never get asked. Theproblem is this half-story puts the onus on technology with noaccountability and no narrative by the people who are supposed tobe creating and supporting it.

My advice to insurers as they greet the future is to do so witha steely resolve to go back to their roots, embracing thebusiness of insurance before they address the tech scene.They should first acknowledge the crucial role of humans in themodern equation and then come to terms with their own limits sothat they can move to outsourcing with confidence. Finally, theyshould bring all that business mettle to the conference table wheninterviewing prospective vendors, asking precise, business-drivenquestions that will ultimately distinguish those worthy of becomingpartners from the posers.

People Make theDifference

I am convinced that the more automated we become, the morelong-term success relies on is the quality of the people that wehave and the partners that we choose to do business with.Certainly, we can field applications that support straight-throughprocessing that appear to shave human interaction out of theequation. But, those straight-through processing capabilitiesare only as good as the people who worked on designing andimplementing them.

Keep in mind, insurance is still a business built on risk anduncertainty. Automation has made it faster; predictive modeling hasmade it smarter; but understanding the development lifecycle andthe multiple aspects that go into it are absolutely vital. There isno tool (or set of tools) that can replace industry knowledge orthe scrutiny provided by an expert.

Internally, insurance companies must seek out and cultivatethose who know what's going on behind the curtain. The diamondemployees today are those who have expert knowledge and can presideover the topics that fuel our fire, such as actuarial services,underwriting, policy administration, claims management, fraud, andrisk profiling.

Externally, too few vendors come to the table with a deepknowledge of the insurance business or expertise in it. Many havetechnical backgrounds or are transplants from other industries. Asa result, their tools, while full of sizzle and pop, lack substanceand aren't comprehensive enough to manage the nuanced subtleties ofthis business. In many cases, their technology was built foranother industry altogether and is being shoehorned to fitinsurance. Staffed with employees lacking deep industry experience,these types of vendors are unable to support what they sell orcustomize at the level carriers require to maintain differentiationin today's market.

More than ever, there's a need for people who know insurance andcan put specifications together, test them, and create a system.When I read advertisements for tools today, I'm often left with theimpression that an assistant could walk in, push a button andimplement a complex system. I can say from years of experience—muchof it sitting across from a hyperventilating executive whosemulti-million-dollar implementation failed because a vendor lackedsufficient knowledge—this is most certainly not the case.

The Business of Staying True to Ourselves

With proficiency and knowledge in short supply, it's temptingfor insurers to want to manage their own technology, but Irecommend a long hard look in the mirror before committing to thatcourse. Insurance is a complex business, and doing it well requiresfocus on the job at hand. The main purpose of an insurance companyis to determine a fair price based on the risk of the insured, notbuild software applications and support intricate platforms.

Getting back to the roots of business means making it thepriority—and committing to it and its multiple idiosyncrasies. Whencompanies try to handle their own technology, they becomesidetracked from the main job at hand: insurance. Worse, they runthe risk of eroding (or just wasting) the industry knowledge theirexecutives and employees have. When pulled off business developmentprojects to research the latest in available technology, their bestemployees' focus is no longer where it best serves the carrier.

In addition to the practicality of it, outsourcing the technicalaspects can be a more economical option when companies findpartners who are, themselves, committed to providing market-leadingenterprise software and services. With them, carriers run much lessrisk of draining precious resources on failed implementations orpoor support. These are the vendors that become true partners anddedicate themselves to improving their customer's business withtechnology that is intuitive to a carrier's needs. Finding one ofthese types of partners need not be so difficult, either.

Finding the Right Partner

When carriers shift their emphasis from technical to business,they are in a much better position to approach their softwarechallenges. Instead of asking technical questions, panels taskedwith finding a partner should ask business questions. Similarly,RFPs should be crafted by a carrier's most agile business people,not those in technology departments. Engaging those with technicalprowess is smart. Including them on search committees isbeneficial, but handing the process over to them is a bigmistake.

Once at the table with a vendor, selection committees must bringtheir business acumen and focus with them. Too often vendors getaway with deflecting questions by talking about the sizzle, butforfeiting the steak. Executives gnash their teeth once resourcesare drained and vendors have failed them, but the question thatcould've prevented it—What is your success rate?—is rarely posed.Often, the ethic of success is the most important, yet it's noteven addressed. Instead, the question is, “What can yourtools accomplish?” It's as if we have become enthralled andfascinated by the new and exciting at the risk of forgoing theessentials required to run the business.

Companies should be asking how many implementations that vendorhas had and follow up by asking about the success rate. They shouldalso ask about the size of those implementations, because 50successful launches may not equal five if they were all for smallerfirms. Additionally, they should ask how statutory changes arehandled, how much repeat business they have, the strength of theirfinancial backing, the ability to customize and scale systems, andthe level of participation their clients have in creating newapplications. Do you have complex functions such as out-of-sequenceprocessing, composite rating, all lines of business in all states?Most importantly, they should ask how many staff members have aninsurance background. An inability to answer any of thesequestions to satisfaction is a signal to move on in thesearch.

Parting Thoughts

The elegance of insurance lies in its complexity. There are alot of moving parts that are in a constant state of flux andautomating them correctly is no easy feat. Technology's trackrecord in this industry and its ongoing presence should provideconsiderable comfort to those looking ahead and conjuring newstrategies for growth, but expecting technology to provide all theanswers is a risky proposition that ultimately cedes power awayfrom businesses themselves.

Technology's flash has made it seem that anything is possiblewith the push of a button, but there's much more to it. Carriersthat nurture their own diamond employees and recognize the sameculture in a vendor are sure to find success—one that balancesindustry know-how with technology's momentum and understands thathard work and perseverance are still the most useful tools in anytoolkit—are the ones that will continue to dominate theindustry.