Insurers Brighten the Path With IT

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 30 years. No doubt new opportunities await, but in order for insurers to be in the best position to take advantage, they must understand the whole story, and the resounding theme of that story is that tools without content are just toys.

Simply put, we must understand that technology will never produce a silver bullet, and that it is only as robust and beneficial as its human support is knowledgeable. As competitive as today's market is, carriers can't afford to be lulled into a false sense of security about automation. If anything, because of the speed automation allows for, they must be even more vigilant to ensure they are addressing their business concerns correctly through technology, harnessing it effectively and asking the right questions of the vendors who are making the pitches.

A Glimpse Ahead

Technology's momentum will continue to fuel the speed, overall efficiency and accuracy of what we do. With great benefit to the bottom line, I believe we'll see more technical features that help with composite ratings, statistical coding and the management and manipulation of the thousands of business rules that govern the industry. However, we can't expect tools to replace the knowledgeable worker.  Rather, we can expect the paradigm to continue to be one marked by insurance solutions being built for insurance professionals by insurance professionals.

Clearly, advancements in data and analytics present great opportunities for insurers to distinguish themselves. With stronger risk assessment tools, carriers can get to know customers better, push the envelope with a broader suite of services, and share composite information across multiple lines. Suddenly the world of underwriting also becomes more independently profitable, and in an economic climate where investment income is harder to come by, it's difficult to argue how important this is to the growth and profitability to insurers. For companies that manage technology's advances well, the ability to take products to market even faster and address consumer demand with more agility will catapult them to the forefront of their competition.

Managing “technology's advances well” is the key, though. In my experience, I've seen too many carriers fall prey to thinking they could handle it themselves or to a vendor who made big promises without the supporting knowledge. Truthfully, the opportunities that technology can and will provide are only half the story, but it's the half most often fed to carriers by vendors eager to get a foot in the door. With shiny toys dangling in their faces and promises of easier profits perfuming the air, companies are sidetracked and the right questions never get asked. The problem is this half-story puts the onus on technology with no accountability and no narrative by the people who are supposed to be creating and supporting it.

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

People Make the Difference

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

Keep in mind, insurance is still a business built on risk and uncertainty. Automation has made it faster; predictive modeling has made it smarter; but understanding the development lifecycle and the multiple aspects that go into it are absolutely vital. There is no tool (or set of tools) that can replace industry knowledge or the scrutiny provided by an expert.

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

Externally, too few vendors come to the table with a deep knowledge of the insurance business or expertise in it. Many have technical backgrounds or are transplants from other industries. As a result, their tools, while full of sizzle and pop, lack substance and aren't comprehensive enough to manage the nuanced subtleties of this business. In many cases, their technology was built for another industry altogether and is being shoehorned to fit insurance. Staffed with employees lacking deep industry experience, these types of vendors are unable to support what they sell or customize at the level carriers require to maintain differentiation in today's market.

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

The Business of Staying True to Ourselves

With proficiency and knowledge in short supply, it's tempting for insurers to want to manage their own technology, but I recommend a long hard look in the mirror before committing to that course. Insurance is a complex business, and doing it well requires focus on the job at hand. The main purpose of an insurance company is to determine a fair price based on the risk of the insured, not build software applications and support intricate platforms.

Getting back to the roots of business means making it the priority—and committing to it and its multiple idiosyncrasies. When companies try to handle their own technology, they become sidetracked from the main job at hand: insurance. Worse, they run the risk of eroding (or just wasting) the industry knowledge their executives and employees have. When pulled off business development projects to research the latest in available technology, their best employees' focus is no longer where it best serves the carrier.

In addition to the practicality of it, outsourcing the technical aspects can be a more economical option when companies find partners who are, themselves, committed to providing market-leading enterprise software and services. With them, carriers run much less risk of draining precious resources on failed implementations or poor support. These are the vendors that become true partners and dedicate themselves to improving their customer's business with technology that is intuitive to a carrier's needs. Finding one of these 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 software challenges. Instead of asking technical questions, panels tasked with 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 technical prowess is smart. Including them on search committees is beneficial, but handing the process over to them is a big mistake.

Once at the table with a vendor, selection committees must bring their business acumen and focus with them. Too often vendors get away with deflecting questions by talking about the sizzle, but forfeiting the steak. Executives gnash their teeth once resources are drained and vendors have failed them, but the question that could've prevented it—What is your success rate?—is rarely posed. Often, the ethic of success is the most important, yet it's not even addressed.  Instead, the question is, “What can your tools accomplish?” It's as if we have become enthralled and fascinated by the new and exciting at the risk of forgoing the essentials required to run the business.

Companies should be asking how many implementations that vendor has had and follow up by asking about the success rate. They should also ask about the size of those implementations, because 50 successful launches may not equal five if they were all for smaller firms. Additionally, they should ask how statutory changes are handled, how much repeat business they have, the strength of their financial backing, the ability to customize and scale systems, and the level of participation their clients have in creating new applications. Do you have complex functions such as out-of-sequence processing, composite rating, all lines of business in all states? Most importantly, they should ask how many staff members have an insurance background.  An inability to answer any of these questions to satisfaction is a signal to move on in the search.  

Parting Thoughts

The elegance of insurance lies in its complexity. There are a lot of moving parts that are in a constant state of flux and automating them correctly is no easy feat. Technology's track record in this industry and its ongoing presence should provide considerable comfort to those looking ahead and conjuring new strategies for growth, but expecting technology to provide all the answers is a risky proposition that ultimately cedes power away from businesses themselves.

Technology's flash has made it seem that anything is possible with the push of a button, but there's much more to it. Carriers that nurture their own diamond employees and recognize the same culture in a vendor are sure to find success—one that balances industry know-how with technology's momentum and understands that hard work and perseverance are still the most useful tools in any toolkit—are the ones that will continue to dominate the industry.