These three Insurance Technology pundits are Ellen Carney, Barry Rabkin and Ara Trembly. All three of these people make their living consulting to technology vendors in the insurance space. They are all well-connected in the industry, and they all have valuable insights.

Barry’s blog is called ‘Rabkin’s ROI – Rants, Observations and Insights from an Insurance Technology Analyst‘. Barry has a unique point of view as a result of 30 years of experience in what he calls the ‘InTech’ world.

Both Ellen and Ara have blogs on the Insurance Networking site. You may have to register to access the blogs, but it’s well worth the five minutes. You can also sign up to receive IN’s enewsletter. Lots of good information. Here’s an excellent post by Ellen listing the findings of a recent Forrester research study re how insurance execs are planning their IT spending; and an insightful one by Ara discussing the demise of homegrown insurance systems (or not).

These people are bona fide world class experts in the field of information technology in the insurance industry, and you can peek inside their brains for free! Relevant and useful information to help you make better business decisions. It’s a wonderful world.

So I gave him a call.

Bob:  Customer knowledge across lines of business has been an issue since we worked together at Aetna all those years ago. When I went to Digital, it was an issue we tried to address with data warehouses. Then, years later at EMC when I was the Insurance Industry Marketing Manager, we tried to address it with CRM and Enterprise Storage Networks. Is customer knowledge across lines of business still the holy grail for insurers?

Ken:  Maybe not considered to be the holy grail, but still very, very important in many different aspects.  First and foremost is the data. I believe, as do many companies, that data is still king. It indicates past performance of customers and predicts future traits in terms of buying patterns, needs, claims modeling and rate setting for pricing of products. Literally as we speak, Travelers is doing some heavy spending on data analytics and modeling based off this data. I have never seen an insurance company to date making such a tremendous commitment to acquiring and analyzing the data as they are currently doing.

Bob:  How is Safeguard Guaranty solving this issue?

Ken:  Well, we’re lucky in that we have no legacy systems to deal with. We’re putting systems in place that can truly capture customer data in an Enterprise fashion versus traditional segmented type systems by line of business or market segment.

Bob:  Do you think insurance industry executives are finally ready to tackle this beast?

Ken:  Certain firms like Travelers, Progressive and Geico are definitely committed to this, but many of the others are not yet prepared from a human resource/expertise perspective to understand the value of solving this issue… let alone ready to commit the substantial dollars needed to resolve it. They won’t do it, until the reality of losing their market share to companies like Travelers, Progressive and Geico hits them smack between the eyes.

So, it’s still an issue in much of the industry, and in Ken’s perspective, vendors need to educate their insurance clients on the competitive dangers they face, and the potential solutions available.

Research shows that insurance industry executives are more likely to seek advice from technology vendors than their counterparts in banking and most other industries. I haven’t seen any convincing arguments regarding why this is the case; but anecdotal evidence from our clients supports it.

A recurring theme in media predictions and analysts’ research is that insurers are investing in better underwriting and improved risk management. These offer good and necessary improvements, but only on the tactical level, i.e. incremental improvements in efficiency.

Technology providers ought to focus on changing the way insurers operate strategically and help them to place greater emphasis on customer lifetime value. It requires some creativity and a change of mindset. It’s amazing to me that this is still an issue. Twenty years ago, when I was in Digital Equipment Corp.’s Insurance Industry Consulting Practice, we were addressing ways (mostly data warehouses) of building 360 degree views of insurers’ clients across lines of business.

It may be that, given the current environment, insurers are finally feeling enough pain to take the steps necessary to  increase value and profitability by better knowing their customers. It takes more than just a vision to make things happen, though, especially with such a high level of uncertainty in the air.

I’d like to hear from insurance executives, research pundits and IT providers out there:

1. Is customer knowledge across lines of business still the holy grail for insurers?
2. How are you solving this issue?
3. Do you think insurance industry executives are finally ready to tackle this beast?

“Insurers must prepare now for stress on their data management and compliance processes.”

Thanks, Mike!

Federal Regulatory Reform of Insurance – The First Salvo

Post by Mike Fitzgerald
June 19th, 2009

The Obama administration published its white paper on financial services industry reform this week, Financial Regulatory Reform: A New Foundation, Rebuilding Financial Supervision and Regulation (http://www.financialstability.gov/docs/regs/FinalReport_web.pdf) .  This will now serve as a baseline against which the legislative process can act.  So, while this is not law yet, there are some broad trends which can be noted in the approach which will have implications for insurance firms and their technology response.

A high level review of the document reveals the broad goals for insurance industry regulation and the proposal of two regulatory agencies which will directly affect the way business is done.  Taken from the report, the principles underlying the recommendations specific to insurance are:

1. Effective systemic risk regulation with respect to insurance
2. Strong capital standards and an appropriate match between capital allocation and liabilities for all insurance companies
3. Meaningful and consistent consumer protection for insurance products and practices
4. Increased national uniformity through either a federal charter or effective action by the states
5. Improve and broaden the regulation of insurance companies and affiliates on a consolidated basis, including those affiliates outside of the traditional insurance business
6. International coordination.

I anticipate much angst around points four and five, especially as these directly challenge the state regulatory set up and its effectiveness and efficiency.  On a broad level, no one can argue that these are worthy goals, but how they are accomplished will be contentious.

The establishment of two regulatory agencies is proposed – the Office of National Insurance (ONI) and the Consumer Financial Protection Agency (CFPA).  The duties of the ONI are fairly well detailed.  From the report: “The ONI should be responsible for monitoring all aspects of the insurance industry. It should gather information and be responsible for identifying the emergence of any problems or gaps in regulation that could contribute to a future crisis. The ONI should also recommend to the Federal Reserve any insurance companies that the Office believes should be supervised as Tier 1 FHCs. The ONI should also carry out the government’s existing responsibilities under the Terrorism Risk Insurance Act.” The ONI will also serve as the U.S. representative to the International Association of Insurance Supervisors with “the authority to enter into international agreements, and increase international cooperation on insurance regulation.”

The potential impact on insurance of the CFPA is less clear.  The report states that it would “protect consumers across the financial sector from unfair, deceptive, and abusive practices in credit, savings, payment, and other consumer financial products and services”.  Insurance products, particularly life instruments such as variable annuities, are not specifically mentioned.  The emphasis is on preventing a repeat of the perceived improprieties seen in the mortgage and credit card areas.  However, it does not specifically exclude insurance and “other consumer financial products and services” is a very broad area.

Some of these lines will be drawn as Congress develops its legislation.  Many, especially where Federal responsibility ends and state requirements begin, will only be determined once the Federal system is in place and active.  The practical impact to the insurance industry is that there is another sheriff in town now and he will be demanding our time and attention.  Companies must prepare now for stress on their data management and compliance processes. (See the Celent reports Insurance Data Mastery Strategies http://reports.celent.com/PressReleases/20081126/DataMasteryStrategy.asp and Insurance Data Mastery Solution Spectrum http://reports.celent.com/PressReleases/20081203/DataMasteryVendors.asp).

Pending upgrades to data management tools should happen now and any planned data conversions completed.  Companies without a robust reporting environment should invest in these capabilities as the up front investment will be less than the continued expenses associated with a “catch up” approach.  In 2010, plan for short timelines for compliance and a more confusing and expensive regulatory landscape.

Everything has changed and BTN’s 10 Tech Companies to Watch keeps pace with the times. In years past, the ranking called out innovative startups with the potential to impact the financial services landscape. This year’s list recognizes triumph via acquisition, the eminence of efficiency, and the importance of security.

From the ‘deals’ category comes this year’s most influential event, and BTN’s number one pick, Fidelity National Information Services’ planned acquisition of Metavante  likely to unleash competitive pressures that rewrite the core processing landscape in the U.S. Also ranked in recognition of the power of strategic purchases are Mastercard, with its Orbiscom buy; Sybase365, which packs on mobile payments dominance with paybox; Oracle’s deal for Sun; and M-Com, likely to set in motion a mobile banking juggernaut thanks to its alliance with Fiserv. Efficiency plays can be found in Verari Systems, with its uber-efficient data centers in a box, and Encomia, which rids the lending process of paper. The final three companies: Secerno, Silver Tail Systems and SAS, all make the cut as security plays of a sort, with SAS given the nod for its impending release of a truly enterprise-wide GRC platform.

This year’s selection process was daunting. If only the list were longer we’d include uGenius, for its take on convenient deposits; First American, for its place at the heart of automated valuation; Passageways, for its community bank compliance training; Billeo, as a promising payments play; and Hyland Software for its ECM SaaS efforts. These recovery-focused efforts will hopefully engender a future dominated by the renewal of forward-looking R&D.      —Rebecca Sausner, Editor-in-Chief

1. Fiserv / Metavante

For Jack Henry and Fiserv, it was the rudest kind of alarm for an April morning. Archrival Fidelity National Information Services agreed to buy Metavante, turning the already cutthroat bank IT vendor game into a battle royal.

2. Silver Tail Systems

When a company builds a website security product designed to detect and prevent fraud perpetrated via website attacks, the market ought to take notice.

3. Sybase 365

Hearing about all the cool advanced mobile payments applications in production around the world – particularly in developing countries – is enough to make an American mobile banking executive feel a little inadequate.

4. Mastercard

MasterCard acquired Dublin-based software company Orbiscom in January for $100 million, hoping to empower card holders with a new generation of tools that include budgetary features and security controls. If the deal delivers, it will be a game changer.

5. M-Com

The last year has been an interesting one in the mobile banking world, as players that used to lead the pack appeared to struggle and newcomers booked deals that gave them major leverage in the U.S. market. Enter M-Com, which inked a deal to power Fiserv’s Mobile Money product line.

6. Verari Systems

Where banks park their data these days is at the heart of countless technology initiatives – whether it’s in the cloud, in a newly-virtualized server environment, or, in the case of Verari Systems’ customers, in the parking lot.

7. Encomia

Everyone’s got an opinion on what caused the mortgage meltdown, but Andy Dubinsky’s is one of the rare public criticisms of the market embedded with a forward-looking solution.

8. Oracle/Sun

If Oracle’s planned purchase of Sun is successfully completed, it will gain a connection to myriad software platforms built on JAVA by a number of other tech firms. That would put Oracle on the 50-yard line of systems integration, data management projects, the advancement of remote employee and consumer access, and a number of other major tech initiatives impacting thousands of banks in the United States and abroad.

9. SAS

SAS this year will leverage its considerable analytic capabilities and four-figure client base to plot a sweeping grab for market share in this highly competitive segment by releasing a series of new GRC-oriented software.

10. Secerno

UK-based Secerno makes the Top 10 list based on its unique take on database security. The company calls it active database control – as opposed to database activity monitoring – but it essentially comes down to real-time whitelisting of allowed queries, and blocking those that aren’t approved.