Power Base

In his recent report on how technology delivers competitive advantage to insurance carriers, Matt Josefowicz, leader of the insurance practice at Celent, uses a classic temple to portray how the base provided by IT can support the pillars of service and risk management to help carriers attain advantage in the marketplace. “[The study] boiled down both the business side and the technology side of insurance to their deepest core elements,” he explains.

For the business side, the service pillar includes service to agents, policyholders, and internal stakeholders, according to Josefowicz. “This gives everyone the information and capabilities they need to do what they need to do,” he says. The second pillar is more than just enterprise risk management. He contends everything insurers do involves managing risk, citing pricing, actuaries, underwriting, claims handling, reserving, and reinsurance.

Those two sets of business activities are supported by three technology foundations, continues Josefowicz. The most basic foundation involves treating data as a strategic asset, he maintains, and making sure enterprise data is accessible and can be analyzed by business users. “It needs to be relatively clean to anyone who might need it, whether that means customer service people, business users presenting data to agents, or those doing detailed analytics for risk management purposes,” he says. “It all starts with enterprise data. Companies need to realize data is their only strategic asset.”

Most carriers struggle with the quality of their data, Josefowicz believes. “There are a few that have totally consolidated systems and don't have data-quality issues, but there aren't too many of those,” he claims.

The second layer of the foundation is straight-through processing. Josefowicz notes he resisted that term in the insurance space because it has such a specific meaning in the security space. “It basically means no human intervention,” he says. That's not necessarily a desired goal for most lines of insurance, he asserts, much less something that can be achieved. “What we mean by straight-through processing is for data to move in a consistent electronic form through the entire life cycle and never to end up in an informational cul-de-sac or leave the electronic chain,” he says. “It's always in a consistent, accessible electronic form that really supports the data layer.”

The third layer is frictionless communication, indicates Josefowicz, which means making sure all the communication touch points between people and systems and people and other people are as painless as possible. Insurers must make it easy for an agent to submit an application, get information about billing status, share data with a reinsurer, or collect underwriting requirements automatically, he advises.

These three technology categories are found in a variety of initiatives, explains Josefowicz. Celent receives many inquiries concerning BPM and SOA, and Josefowicz suggests the underlying question is how these tools are going to improve IT capabilities in order to support those two business towers. “[The three foundations] are not a formal methodology,” hesays. “It's a visualization of different areas that people are focusing on.”

Data, communication, and connectivity all are areas of focus for insurers, Josefowicz points out. “You see the focus on frictionless communication and straight-through processing in all the SOA stuff that is going on, the focus around agent portals, improving the customer service experience, and even workflow,” he says. “There is a lot of activity on the data side in terms of enterprise data models, data warehousing, and focusing on data- quality issues. They are all interrelated.”