While insurers are often cautious in their adoption of emerging technologies, carriers in the US seem to be investing in four solutions:  cloud computing; mobile; analytics and social networking. We will see these crossing the Atlantic?

Insurers remain cautious in their adoption of newer technologies, but when solutions are perceived as being potentially game-changing, the rules can change. This month we take a look at four technology areas in which insurers are beginning to invest serious attention and, in some cases, serious cash.

CLOUD COMPUTING

Referring to the future of cloud computing at this year's Interoptechnology expo in New York in November, keynote speaker Mark Templeton, CEO of Citrix, asserted that "the Holy Grail is to deliver IT services on-demand." He could hardly have chosen a better metaphor for the elusive and even illusory area of cloud computing. The very name "cloud computing" conjures images of the distant, indistinct and unrealistic. It invites insurance CEOs to wonder whether CIOs have their heads in the clouds if they think it's a good idea to relocate sensitive data to that ethereal realm.
It can be argued though, that despite involving a third-party handoff, cloud computing and its software-as-a-service (SaaS) incarnation ultimately present the same challenges as any attempt to place business processes and sensitive data on a network. The question then isn't whether the cloud works, but whether it works well enough yet.
"The hype always leads the reality, and the reality is usually just ahead of the unintended consequences -- I think we're still discovering what the hype curve of cloud is," comments Drew Bartkiewicz, VP of cyber and new media risk, The Hartford Financial Services Group (Hartford; $9.2 billion in annual revenue). "There's an enormous amount of energy, talk and marketing about cloud, but it continues to mean different things to many people. As cloud [computing] and its risks continue to be defined, the insurance industry has an advantage in being a laggard in this respect."

CUNA Mutual has begun a sales force automation project that leverages SaaS, but CIO Rick Roy regards the technology as immature for mission-critical uses. "When I think of core applications such as actuarial, underwriting, claims and policy administration, I don't believe the technology is at the compliance level that we, as the insurance industry, need to achieve," he remarks. "Perhaps the concept can evolve to where the trade-off between risk and reward is compelling, but at this point I don't see cloud computing as an enterprise wide implementation within insurance and financial services, mainly because of security and privacy concerns."

MOBILE COMPUTING

When it comes to effective adoption of emerging technologies, there is a fine line between too early and too late. For much of the insurance industry, mobile technology currently is straddling that line. On one hand, customers, who have increasingly adopted mobile technology in their everyday lives, are beginning to expect more mobile capabilities from their insurers. On the other hand, the mobile landscape, while advanced, is still a developing field. That's why Chad Hersh, a principal in Novarica's insurance practice, describes mobile as a "lukewarm" technology, not a "hot" one. "To a certain extent carriers are doing a decent job of not foolishly jumping in where the technology is not yet mature," he says. "However, this is not an invitation to be complacent, as the technology will mature quickly, and carriers need to be prepared."

Soon the insurance industry will have to become more mobile. Too early is quickly becoming too late. "Mobile technology will continue to grow and evolve regardless of insurers' interest, as 3G, 4G, smartphones, LTE, WiMax and other technologies take flight," Hersh continues. "It is inevitable that insurers' customers will demand more mobile capabilities; all the carriers can control is whether or not they can meet that demand." In response to growing customer demand, San Francisco-based Esurance is leveraging Microsoft's .NET platform to migrate its online applications, including claims-related functionality, quoting, and policy management and billing services, to the Windows Mobile 6.1 operating system. The mobile claims initiative went live in May 2009; according to Deepak Srinivasan, Esurance's director of systems engineering, additional mobile capabilities are scheduled for future release. Srinivasan adds that the carrier's existing mobile claims portfolio includes the ability to submit a question about a claim via SMS text message and a feature powered by SeeProgress' AutoWatch service that enables customers to view their cars as they are being repaired. Srinivasan credits Esurance's SOA-based environment with helping streamline the mobile project, allowing for quick migrations with only minor changes required. "Services-oriented architecture really comes into play when we have all these systems, which are easily extendable," he explains.
If the efforts of Esurance and other insurers, including Nationwide and USAA, two carriers that introduced iPhone applications this year, are any indication, the risks of developing capabilities on a mobile platform that has not yet reached full maturity are quickly being outweighed by the demands of agents and customers who are becoming more and more dependent on their mobile devices in their everyday lives. "Other industries, including banks and other financial services firms, airlines, retailers, etc., are setting consumers' expectations," Novarica's Hersh notes. "Consumers, in turn, are, or more precisely, will be, forcing insurers' hands."

RISK ASSESSMENT

The consensus among industry analysts is that insurers' adoption of predictive analytics will continue to expand through 2010; vendors happily concur. Analytics suffered along with other technologies in early 2008 as insurance companies began to take measure of the developing financial crisis. But, "As 2008 closed insurers saw analytics, along with other IT solutions, as a possible answer to the recession rather than a cause," comments Stuart Rose, global insurance marketing manager for SAS. As a result, adoption of analytics has increased in the past year, he says.

According to Rose, insurers' predictive analytics initiatives in 2009 concentrated on fraud detection, customer retention and pricing. Those issues will continue to be priorities in 2010, he thinks, but carriers also will emphasize claims analytics, renewal impact analysis and social network analysis. Zurich North America Commercial, a member company of Zurich Financial Services Group (US$37.2 billion in premium and policy fees) and a SAS customer, reports driving a multitude of analytics-related initiatives. "We use SAS for both gathering data and building models, and our value drivers are things such as loss-ratio improvement, risk management and customer retention," explains Joel Appelbaum, chief analytics officer, programs and direct markets, Zurich North America Commercial. "We use analytics to determine the kind of audit procedure or service offering we would provide," Appelbaum continues. "For example, if an account is growing fast, it may trigger an auditor to do an exposure evaluation;  we never had a cost-effective way to do that before." Using predictive models, Zurich also is able to anticipate claims spikes and send risk engineers to insured properties to proactively prevent losses, according to Appelbaum.
"Profitable growth is another huge value driver for us," he adds. "We're identifying the right price to charge for accounts with similar characteristics and developing a technical price based on the characteristics of the risks. We will direct our agents or brokers to certain niches or accounts to sell or cross-sell additional lines of business."
Zurich also uses predictive analytics to drive ease of doing business for distributors, Appelbaum notes. "We used to ask for financial information during a referral process and see if a given risk merited extending a deductible," he explains. "With predictive analytics we can predict which prospects are more likely to be profitable and withstand a certain level of deductible; we don't need additional information that is cumbersome to the business process."

SOCIAL NETWORKING

Insurers have been dipping their toes in social networking for several years. But it no longer seems enough merely to have a presence on a social networking site.

"Carriers are increasingly focused on using social media to access new markets and customer segments and to get the word out," says Joe Guastella, principal, insurance, Deloitte Consulting. "Now we're actually talking to the compliance people about that. ... It's a bit of a learning curve, but social media will develop quickly as an integral part of a company's presence and possibly distribution." As such, carriers increasingly are customizing their social media sites. New York Life ($14 billion in 2008 operating revenue), for example, has joined forces with LinkedIn to offer a customized experience. "We have been participating in a beta program with LinkedIn that shows an agent recruiting view of the company to those in sales and a corporate jobs view to others," relates Kenneth Hittel, VP, corporate Internet department, for the New York-based insurer, which also maintains a Facebook page.

According to Ben Foster, senior strategy and content manager - social networking for Allstate Life Insurance, a business unit of Allstate ($29.4 billion in 2008 revenue), there is huge value for a company that can create a personalized social Web experience. "The social Web can help us deliver a highly personalized experience that could so radically improve products, services and experience that leading brands in our industry could become as beloved as brands like Nike, Whole Foods or Apple," he asserts. In addition to a Facebook page and multiple Twitter accounts (each with its own objective), Allstate also supports proprietary community microsites, where people can share ideas about "keeping families safe, saving money and preparing for what's next," Foster relates. Meanwhile the dynamics of social media are forcing carriers to communicate much more openly, both internally and externally, than ever before. "People are more proactively asking us things, asking our opinions," says New York Life's Hittel. "Communication is much more conversation-based." Under the auspices of carriers, agents also now have a pervasive social media presence; although regulatory concerns are always present. "They cannot conduct business on the site," Hittel explains, referring to New York Life's Facebook page. "When they communicate with anyone from a business perspective, they use their dedicated agents' e-mail, which we can monitor. We meet all of our SEC and FINRA requirements." Adds Deloitte's Guastella, "It is a sign of maturity, if you will, the fact that social media have been raised to the attention of compliance officers rather than just on the distribution side. Previously people were just brainstorming on how social media could help distribution and community presence. Now it has been elevated to something needing oversight and management as part of company operations. That represents a maturation of its perceived role in the company."