by Juergen Weiss | October 16, 2011 | Comments Off
While preparing for the kick-off of Gartner’s Orlando Symposium I have been thinking about the relevance of this year’s theme for the insurance industry. The theme “Re-imagine IT” fits very well to the current state of the insurance industry which is in many regions still suffering from a difficult business environment. Emerging technologies such as cloud computing, mobile technologies and social media as well as an exponentially growing data volume will create many challenges for insurers. Insurers need to figure out how they deal with these business and IT changes in order to remain competitive and to strengthen the relationship with their clients. This environment creates on the other hand a wealth of opportunities of IT departments. for demonstrating their value to the business. During the next four days Gartner will discuss with clients how these forces will shape the IT market environment for customers and vendors and what this means to the business. If you can’t join us onsite, I encourage you to follow the Gartner Symposium news on the internet.
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by Juergen Weiss | September 13, 2011 | Comments Off
Jeff Haner here. It’s been fascinating for us to watch the surge in activity around policy administration solutions. As we talk with Gartner clients, I’ve been surprised at how many are, quite simply, embarrassed about the amount of time it is taking to implement their new policy administration solutions. There seems to be a common misconception, perhaps fed by marketing claims or experience with simpler systems, that the move to a new policy administration system can be finished in months, or even weeks. While short implementations can be accomplished under certain circumstances, based on the trends that Gartner sees, most insurers of any size that are moving off legacy systems will be looking at about a year to complete their first deployment, and at least another year or two to fully migrate to their new system. Longer timeframes are not uncommon.
When insurance IT leaders share the lessons they’ve learned from these experiences, we frequently hear two themes: the importance of business requirements, and the negative impact of customization. In a recent research note where we analyzed key policy administration requirementswe we came to the conclusion that those insurers who invested in documenting their business requirements in detail beforehand had fewer issues and were able to deploy faster. In another note we found that nsurers who succeeded in selecting systems that were a good match for their needs were able to rely more on out-of-the-box functionality and minimize time needed for customization. They also experienced fewer maintenance issues with subsequent upgrades.
The implementation of a new policy administration system is a very significant, difficult undertaking. If you’re in the market for a new policy administration solution, be prepared by understanding your requirements well, select a system that is a good fit for your needs, and be sure to set expectations within your organization that change of this magnitude is not easy.
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by Juergen Weiss | June 9, 2011 | 1 Comment
Kimberly Harris-Ferrante here. At Pegasystems’ Pegaworld this week, I started thinking about the role and how BPM suites fits into the insurance IT environment. The event brought together over 300 attendees for insurance and healthcare this past week in Orlando, Florida. Sessions explored best practices in BPMS implementation, lessons learned, and decision criteria for project justification. One thing emerged as a key finding – BPMS is not a one trick pony. The applications of BPMS is diverse and expansive, crossing IT and business as well as various business functions such as customer service, policy servicing, and claims. The potential is limitless as long as insurers have creativity and good vision of the processes that they want to automate and improve. This is evolutionary to an industry which is plagued with legacy systems, redundant systems, and LOB/global silos.
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by Juergen Weiss | June 6, 2011 | Comments Off
The latest Insurance Banana Skins survey by the Centre for the Study of Financial Innovation (CSFI) and PwC indicates that regulation will dominate risk management concerns within the insurance industry in 2011. Compared to the last survey, regulation jumped from rank 5 to rank 1 leaving capital and macro-economic trends behind. I’m not surprised about this result because it is pretty obvious that the industry has entered the age of re-regulation with a myriad of new regulations such as Solvency II. We have written numerous research notes on Solvency II, SEPA and other regulations such as the UK’s Retail Distribution Review. While all those regulations have major impacts on the IT landscape and usually call for significant investments I wouldn’t focus on the risk aspects only. These regulations also create major business opportunities for those organizations that are not treating them like a mere check-box exercise. Take Solvency II for example which will force insurers to pay more attention to operational efficiency and reconsider common business models. Insurers should always see both sides of the medal instead of complaining only about the costs and risks of regulations.
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by Juergen Weiss | May 27, 2011 | Comments Off
One of the interesting results of Gartner’s 2011 CIO survey was that almost two-thirds of the insurance CIOs don’t see their organizations pursuing unique or differentiated business strategies in their industry. In other words: Everybody is doing the same. I believe that this is a potential threat for the insurance industry – to be challenged by new market entrants or disruptive business models. Two examples come to my mind which illustrate that risk. Google has opened up last week its advisor service, offering comparison of financial services products in North America. While the product portfolio includes no insurance products yet I’m pretty sure this will change within the next few months. Google with its dominant role as search engine may lead to further disintermediation between financial service providers and their customers. What if Google or other companies decided to extend their service offering in the future? The second example is actually from my home country Germany where the startup company Friendsurance was launched. The basic idea is to use the peer-to-peer insurance concept to create a win-win situation for both customers and insurers by lowering premiums and reducing administrative overhead. This could become another potentially disruptive business model which will further transform certain product lines such as household insurance into commodity products. As long as the insurance industry doesn’t fundamentally change their attitude towards innovation we will see much more of these initiatives.
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by Juergen Weiss | May 13, 2011 | Comments Off
The digital economy has suffered a number of serious blows during the last couple of weeks and months. Data breaches from Sony, Epsilon and others. System outages from Amazon’s Elastic Compute Cloud (EC2). Denial of service attacks on WordPress and many other web sites. These recent incidents prompted the U.S. government to propose a new Cybersecurity Legislation. What would insurance have to do with all these issues? Quite a lot in my opinion. Take for example the latest Amazon EC2 outage which lasted for four days and caused severe damage to those corporates relying commercially on Amazon’s cloud offering. Insurers need to figure out whether they are willing and able to expand their current coverage to include these new cyber risks as well. Yes, of course, cyber insurance has been around for a couple of years but never really took off commercially. Critics have stated that cyber insurance policies are often too limited and inappropriate to cover all the new cyber risks. It is time that insurers better educate their commercial and retail clients about the risks of doing business via the internet. A recent survey by Towers Watson showed for example that most companies aren’t buying network liability policies despite increasing cyber threats. The current hype around cloud computing will certainly accelerate the demand for these types of insurance products and may even impact service level agreements of cloud providers and other organizations facilitating the digital economy.
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by Juergen Weiss | April 27, 2011 | Comments Off
Two recent news made me thinking about the increasing threat for life and P&C insurers to lose the control over their distribution channels. Google announced in March the acquisition of BeatThatQuote, a U.K. based price comparison website while three German insurers acquired the German price comparison website Aspect Online. It’s an undeniable fact that price comparison websites or aggregators as they’re sometimes referred to are becoming increasingly important. In a recent Gartner research note we discussed that general insurers in the U.K. realized already more than 50% of their motor insurance sales via aggregators. And in another retail customer survey we found out that advice from friends and family is already more important during the pre-sales phase than advice from traditional channels such as insurance agents or brokers. Insurers are facing the risk of becoming disintermediated and losing the control over their distribution channels. This will primarily be the case for commodity product lines such as motor and household insurance. Our research indicates though that consumers are in general price-sensitive and tend to shop for the best deal. Eroding customer loyalty and the willingness to switch between insurance providers more often will be the consequences. This is a trend we call consumerization at Gartner. Many insurers haven’t realized that consumerization will impact many aspects of the insurance value chain including product definition, marketing and sales as well as after-sales services. It’s in our opinion time to rethink their strategy and to assess the role of technology to address some of these challenges.
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by Juergen Weiss | April 13, 2011 | Comments Off
A recent survey by the Economic Intelligence Unit and Deloitte on Solvency II among 60 UK-based insurers painted a rather sad picture on the readiness of the industry for Solvency II. According to the survey only 46% of all UK insurers are confident that the industry will meet the Solvency II deadline. With the official deadline of January 2013 being less than 1 1/2 years away this is a disastrous result and confirms again our experience that many European insurers are too late with their prepararations. In our latest predicts we assumed that at least 25% of European insurers won’t have concluded their IT preparations in time.
This survey actually is an indicator that our estimates are way too conservative. We actually observe a significant lack of IT and business alignment all over Europe which raises a number of questions. What will for instance happen with non-compliant organizations after 2013? Will EIOPA (the European Insurance and Occupational Pensions Authority) consider to make Solvency II less complex? Will Solvency II turn into a never-ending story with long transition periods as being suggested by the Omnibus II regulation?
All these questions shouldn’t distract insurance IT and business managers from one fundamental fact. Solvency II will be one of the most transforming factors for the insurance industry over the next 10 years. Organizations that underestimate Solvency II and treat it as a check-box exercise will suffer from competitive disadvantages. One proof point can be found in the latest QIS5 study results. Insurers with an internal model calculated approximately a 20% lower solvency capital ratio than their peers with a standard model.
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by Juergen Weiss | April 5, 2011 | 2 Comments
There are 159,228,799 blogs worldwide according to Blogpulse. So this blog is number 159,228,800. The purpose of this blog is to provide insurance practitioners interested in Gartner’s insurance research with a platform to exchange industry views and opinions. I’m interested in your feedback about our research and any other thoughts you may have. Welcome to blog number 159,228,800, welcome to Gartner’s insurance blog!
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