Q&A: How Software Vendors View the Insurance Market (Part 5)

What specific areas do you see the most weaknesses among insurance carriers where new technology could offer the most help?

Gary Kirkham, principal, insurance industry solutions, Pegasystems: The efficiency and effectiveness of an insurer’s claims experience can be a competitive differentiator or a competitive liability. A difficult or negative claims experience can be detrimental to an insurer’s bottom line and brand—often to the direct benefit of the insurer’s competition. 

(To read what other vendors have to say on these issues, check out Part 1 of the series, Part 2, Part 3 or Part 4.)

In the ultracompetitive insurance marketplace, insurers that service customers effectively—expediting claims processes to reach an equitable settlement quickly—reap the benefits of a loyal and growing customer base. 

In insurance and many other industries alike, it’s always easier to grow by retaining satisfied customers. On the other hand, as many insurers will attest, it’s much more expensive (and takes longer) to acquire a new customer. 

New technology spawns deeper benefits than attacking obstacles purely with point solutions.  The challenge for most insurers is to maintain an exceptional claimant experience while delivering optimal claims outcomes with minimal impact to the bottom line. This is no small feat for organizations that must remain ever vigilant to mitigate leakage, reduce fraudulent activity and maintain regulatory compliance.

Paul McLaughlin, president, APP Technologies: The lack of true systems integration is still a major issue for carriers. Front-office systems and customer-facing systems don’t communicate well with back-office systems and, even in the back office, there are often possible synergies between information systems (e.g. claims into underwriting, customer relations to claims, underwriting to billing) that are not taken advantage of.

Technology vendors are well aware of these problems and have given considerable thought to how systems can be integrated. Well-built systems are built from the core out to leverage technology standards and have the capability to integrate with other systems a carrier might already have in place. 

We hear about systems that “can’t talk” with others all the time. This kind of restriction is probably one of the most compelling reasons to invest in new technology.  The more a carrier can grease the rails of communication between their systems, the better their operation will perform overall.

Are insurance carriers making the right steps in the area of project management to ensure they are taking the right steps from selection to implementation of software? What do they need to do better?

McLaughlin: Relationship is everything, and a mutual understanding of needs and limitations is critical to the selection and implementation process. The team or individual designated by a carrier to “solve the problem” often keeps vendors at arm’s length, even after vendors have filled out detailed requirement sheets and have completed demonstrations or discussions. The missing piece of the equation is most often the development of a close relationship with the vendors.

Vendors want to make an honest assessment together with their prospective customers, whether they are carriers, TPAs, or self-insured companies. This process can be facilitated tremendously if potential customers help vendors to understand some key aspects of their operation: What is their unique selling point to their customers? What processes and technology are already in place? Where are they confused or unsure?

If a vendor can learn more about the carrier’s culture, mission, and goals then the vendor doesn’t have to guess and the carrier can be confident that they’re talking to a vendor that understands their business, not just their industry.

Having the vendor send knowledgeable staff on-site to meet the key decision-makers but, most importantly, the end users is another important step in the process. Not in spite of, but precisely because of today’s high tech environment, understanding the concerns of all the stakeholders is a key to success.

Kirkham: Project management techniques have helped carriers deal more effectively with their large portfolios of development and maintenance work. Project management has also facilitated better overall corporate governance. 

While these concepts represent progress, continued traditional thinking about applications and point solutions tends to sub-optimize current and future technology investments.

Newer technologies that allow applications to be rapidly configured, rather than hard-coded, lead to more agile business-oriented solutions.  Insurance organizations that deploy these types of solutions tend to dominate their markets with competitive solutions that aren’t available “out of the box.” 

This results in solutions that are brought to market faster and have a faster time to value, because the quicker an implementation gets off the ground, the quicker a project can start transforming the business line that owns it.

These solutions support re-use of processes across regions and lines of business. They also allow carriers to wrap and renew legacy investments, extending their life and lowering their total cost of ownership. Finally, these configurable solutions are flexible and adaptable—ideal for changing markets and evolving regulatory environments.

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

Kirkham: We have become a trusted solution provider across the insurance domain, thanks to our ability to provide more agility, empower business users, and drive new streams of revenue so insurers can transform their business. These organizations include several units of Farmers, Nationwide, and Mass Mutual.  Also, beyond the U.S., AEGON, ING and Wesfarmers General Insurance have seen success. In all cases, Pega has worked closely with these organizations to create new value through our Build for Change technology. Projects have been quickly implemented (90 days or less), paving the way to significant ROI.  In one instance, a new business process has been streamlined so significantly that what used to take 14 days is now completed in 14 minutes. 

Pega’s solutions have enabled several insurers to reach new milestones in operational performance. One has achieved a 90 percent reduction in the time required for training of new customer service representatives (CSRs). In addition, one carrier has attained a six percent increase in CSR quality assurance scores. Finally, in another case, average handling time for callers has been reduced by 20 percent. This is the equivalent of adding 20 percent capacity for zero cost.

McLaughlin: Whether or not we ultimately are successful in doing business with a customer is a result of how well our relationship is nurtured. Because our systems become an integral part of our customers’ operations, we are keenly aware of how important a successful solution is.

Software demonstrations are important for showcasing capabilities, but there is a great deal more to consider about the particular needs of each customer. We take the time to learn about each prospective customer. We ask a lot of questions, try not to make any assumptions, and listen carefully to their concerns. We don’t want to simply pave over dirt roads, if those roads are not headed in the right direction, and we welcome the opportunity to use our knowledge and experience to develop a comprehensive solution, in which our systems are the key component. That being said, some customers prefer a vendor to stay a vendor.

We view each and every prospective customer as a possible lifetime partner so we’re very conscientious about what we say and how we say it. By bringing honesty, curiosity, and effort to the discussion, we are able to develop the partnership. This process is always faster when those efforts are reciprocated.