Analysts Expound on the Needs of the Mid-tier Insurance Market

By Robert Regis Hyle

In each issue of ITA Pro, we will be asking a group of insurance technology analysts their view on important industry issues. This month, we have four respondents to our question. They include Kimberly Harris-Ferrante, research vice president with Gartner; Karen Furtado, partner with Strategy Meets Action; Rod Travers, executive vice president with The Nolan Company; and Pat Speer, analyst with Aite Group.

This month’s question is: If mid-tier insurers address just one technology issue in 2014, what should it be and why?

Kimberly Harris-Ferrante, Gartner

In 2014 it is imperative that mid-sized insurers focus on customer experience management. Enabling positive customer experiences through improved channel interactions and customer intelligence is critical. Mid-sized insurers have an opportunity to build better and more intimate customer relations than those larger organizations that have more complex business models, channels and are unable to do proper customer segmentation to provide tailored interactions. 

Gartner has found that improving customer relations through the channel network and by providing personalized experiences is key in promoting renewals, customer satisfaction, up-sell, and loyalty—all of which are key business goals of insurers in today’s market. Carving out skill- sets in customer data management, building an omnichannel platform, and delivering segmented products aimed at unique customer demands are also elemental in the road to success for customer-centricity.

Mid-sized insurers would find greater returns on investments by taking this route in the coming year in order to insulate current relationships but target customer segments that are attracted to more intimate and personalized service.

Karen Furtado, Strategy Meets Action

The fundamental technology issue that all mid-tier insurers must deal with in 2014 is the modernization of their core systems. SMA’s research shows that for the past five years the level of investments in core systems has hit record highs among insurers. These investment patterns are encouraging, but this is a huge task for most insurers and should not be underestimated in terms of effort and importance to the future of the business.

On average, core systems can take three to five years to implement. They are complex. To gain the maximum benefits and a long-term advantage, the systems need to be fully implemented within the shortest timeframe possible. Core systems are vital to staying power and progress in this industry.

Once the core system investments have been made and a modern platform is in place, insurers are then able to shift their focus to optimizing their business processes and taking the transformation of the business to the next level. This modern environment makes it easy for insurers to plug in new technologies, such as mobile, analytics, big data, cloud, collaboration, and telematics.

The modern core system platform gives insurers the ability to transform and innovate across the entire enterprise—product development, operational business model, infrastructure support, and management of the entire customer experience. These are the areas that will help mid-tier insurers stay competitive and reach their goals. 

Rod Travers, The Nolan Company

I believe the most important technology issue for mid-tiers right now is IT talent.  Operating models for insurers are changing due to the rapid evolution of technology.  Mobile technologies, social media, business analytics, and cloud computing are driving fundamental change in core business processes. In turn, insurers are depending more than ever on their IT team for innovation and thought leadership. 

Mid-tiers are competing with larger carriers (and other industries) for the best and brightest IT talent, and they must defend their turf.  In my opinion mid-tiers have an advantage.  They offer IT professionals the opportunity to truly make an impact—to make a competitive difference—through innovative use of technology.  In a mid-tier, an IT pro can make change happen more quickly and can personally experience the fruits of his or her efforts.  Many IT professionals are looking for just that kind of opportunity and satisfaction. 

To help retain your great talent and attract more, consider these steps: Set aggressive goals in terms of technology adoption and evolution within your company; reward and publicly recognize those who make a difference; and amp up your recruiting efforts even if you don’t have an immediate need.  Identify new talent that can join your organization early in their career and bring their enthusiasm and fresh perspectives to your team.

Pat Speer, analyst, property & casualty, Aite Group

The technology issue that will be the most important for mid-tier insurers to address is their ability to put a strategic and tactical analytics game plan together that will enable them to accommodate, anticipate, and respond efficiently to change. Against their larger competitors, mid-tier carriers lack many of the data analytics-related technology resources that allow them to determine the most appropriate risk, price that risk accurately, and proactively deal with claims.

The application of analytics to the underwriting process could level the competitive playing field by enabling mid-tier carriers to extend their strategy beyond a book-of-business approach and evaluate risks at the individual level. The result will be a finely tuned, profitable pricing model that takes into account a host of risk variables.

A mid-tier carrier's analytics game plan would not be complete without its application to an area in which efficiencies in loss-adjustment expenses and customer satisfaction performance are essential: claims. The use of predictive analytics to identify potentially fraudulent claims, predict frequency/severity or score claims based on the probable size of the settlement in order to allocate resources to higher priority claims is well worth the investment.

Mid-tier insurers will do well to fully evaluate their analytics options, conducting cost/benefit analysis on use of in-house resources, the engagement of a consultant, working with a vendor in a partnership relationship or a combination of same.