7 Technology Trends

Transforming the
Insurance Industry
HOW INSURERS CAN ACHIEVE GROWTH

TABLE OF CONTENTS
Introduction

1. Mobility

2. Big Data and Analytics

3. Telematics

4. Automating Regulatory Compliance

10

5. Improving the Agency Experience

11

6. Social Media and Collaboration

12

7. Distribution Channel Management

14

Conclusion

15

About Vertafore

16

Introduction

The number-one priority for insurance carriers today is profitable growth

and one of the most effective ways to enable this growth is through the use
of innovative technologies. Yet, while they are critical, implementing new
technologies can drain budgets and resources. Carriers must judiciously
determine which technologies are worth the investment today and which
ones deserve a strategic wait and watch approach.
This E-book will describe seven technology trends that will make a
significant impact on carrier growth in a variety of areas:

Top 7 Trends
Transforming Insurance
1. Mobility
2. Big Data and Analytics

How carriers approach their internal processes

How they collaborate with both external partners and internal staff
How they develop and distribute products and services
How they meet regulatory and compliance challenges
In addition to providing an overview of each trend, this E-book includes
recommendations for how carriers can apply these trends to both gain a
competitive advantage and support growth initiatives.

3. Telematics
4. Automating Regulatory Compliance
5. Improving the Agency Experience
6. Social Media and Collaboration
7. Distribution Channel Management

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

1. Mobility
Trend Overview
Mobile devices are here to staylargely driven by a
rapid proliferation of consumer mobile appsand are
affecting how carriers conduct business and interact
with stakeholders.
In fact, more than 30% of carriers provide agent or
customer capabilities via mobile, and more than 60% will
add mobile capabilities for policyholders and agents in
2013, according to Novaricas report, Mobile in Insurance
Beyond Personal Lines: Current Trends and Expectations.
Karlyn Carnahan, Novarica principal, adds that 70% of
property casualty insurers predict that they will offer mobile
capabilities by 2014.
There are a few high-profile, mobile-enabled applications,
such as Progressives For Agents Only website available on
mobile devices and Western World Insurances mobile app
that supports rating, quoting and binding.

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

Carrier Recommendations
While mobile is quickly becoming table stakes for insurance
carriers, implementing mobile successfully requires more
than simply providing downloadable apps to employees,
agencies and customers. Insurance carriers must take a
strategic approach to their mobile offerings, ensuring that
these offerings truly enhance the user experience, provide
the functionality that users want and leverage the form
factor of the device.
For example, rather than provide online forms, which
can be cumbersome to complete without a keyboard,
leverage inherent mobile capabilities such as geo-location
and portability.
Carriers can provide field marketers and agents with
information they need to perform what-if analysis and sell
to and service customers on an easy-to-carry tablet rather
than a more bulky laptop when making client and prospect
visits. Carrier employees can use tablets to write interactive
performance reports during a site visit and improve agency
performance.

Other capabilities that insurers should consider deploying

include mobile apps that support collaboration with
underwriters. Today, about 20% of carriers offer these
capabilities, and an additional 20% plan to deploy them in
2013, says Carnahan.

Mobile is about
positioning
for the future.
Chad Hersh, Novarica

Notes Novarica partner Chad Hersh, Mobile is about

positioning for the future, and significant measurable shortterm ROI is in short supply. But given the rate of change in
tablet adoptions, insurers cannot afford to be left behind.
Avoiding mobile today is like avoiding web browsers in the
late 1990s.

Report Cited
Mobile in Insurance Beyond Personal Lines: Current Trends and Expectations
7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

2. Big Data and Analytics

Trend Overview
Its all about the dataand carriers get it. When
Novarica asked insurance CIOs how they would spend
an extra $5 million in their IT budgets, almost onethird said they would spend that windfall on Big Data.
Its not surprising that a large percentage of CIOs prioritized
Big Data over a wide variety of other IT possibilities since
insurance continues to be a data-driven industry that
creates huge volumes of structured and unstructured data
that carriers must manage.
While insurers recognize that harnessing this
data can provide them with valuable and actionable
insights, they struggle with making the technology
modernization needed to support Big Data and embed
it into real-time applications.
CIOs will need that extra $5 million because infrastructure
modernization can be costly: Gartner predicts that Big
Data infrastructure changes will drive $232 billion in
IT spending through 2016 across industries.

Carrier Recommendations
Big Data presents several challenges to carriers: How to
aggregate huge volumes of data and how to analyze that
data to make intelligent business decisions.

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

Carriers are still grappling with ensuring that they are able
to collect the data they need and then transform that data
into a format that is easily accessible, explains Carnahan
of Novarica. Third-party data is being leveraged across
almost all business processes. Whether it is used to
pre-fill a consumer online quote, verify claimant
information or assess fraud risk, third-party data
provides significant benefits across the policy lifecycle.
U.S. insurers are increasingly leveraging external
data sources in core business processes.
Over the past 20 years, the amount of data
that is sourced from prospects, claimants
or agents has been decreasing while the
amount sourced from third-party data
providers continues to increase. The
business case is simple, yet powerful:
External data sources provide immediate
access to quality, comprehensive data that
can improve underwriting outcomes and create
efficiencies for the consumer, agent and insurer.
Once they have aggregated the right data, carriers
can then take the next step and use that data to
perform predictive modeling and build analytics
into their operating models. Those carriers
using analytical models are generating significant
benefits, explains Carnahan.

Carriers can use predictive modeling for a wide variety

of business activities, including underwriting, marketing
and claims. During the underwriting process, analytics
can provide guidance to underwriters to improve risk quality
assessment and optimize prices. Carriers can identify
customers most receptive to cross-sell offers or those
most likely to defect. They can proactively reduce fraud
by detecting potential fraud earlier in the process and by
detecting otherwise hidden patterns of fraud.
Big Data also has a role in risk management, enabling
carriers to analyze risk characteristics and claims statistics
to decide which accounts would benefit from additional loss
control services. Predictive analytics also are being used
heavily in the claims space to detect fraud and to better
align resources with cases. One workers compensation
carrier was able to predict which claimants were likely to
have extended lost work days. By intervening early with
nurse case managers, the carrier was able to significantly
reduce their lost time days, relates Carnahan.

Big Data has the potential to transform carriers,

notes Carnahan. Carriers need to consider the ROI
and technology implications of Big Data as well as
the impact on their organizations and processes.

Says colleague and Novarica managing director and partner

Matthew Josefowicz: Insurers can profit immensely from
Big Data if they have created a culture where business
leaders trust analytics and act on the insights provided. All
insurers should take steps to create the culture today if it
doesnt already exist in their companies.

Those carriers using

analytical models are
generating significant
benefits by identifying
and acting on unique
insights.

Karlyn Carnahan, Novarica

Another area in which Big Data can help carriers is

monitoring carrier reputation by analyzing comments about
the carrier throughout social media. In doing so, carriers
can addressany issues that may damage their reputation
or brand.

Report Cited
Top Five Disruptors in the Next Five Years for Insurers
7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

3. Telematics
Trend Overview
Telematics and usage based insurance (UBI) are among the
hottest topics in auto insurance. Rather than creating broad
rate tiers by looking backward at the performance of a book of
business, it promises the ability to create more granular pricing
segmentation and improve the accuracy of pricing by using a
customers actual driving behavior as the basis for generating
rates. The feedback provided to drivers also has potential for
actually changing driver behavior to safer levels.

Carrier Recommendations
For carriers considering entering the UBI market, there are a
number of important areas to assess. The technology is still
evolving, and there are several business models to evaluate.
UBI comes with real costs, so carriers need to consider their
options carefully.
The first area to evaluate is whether UBI fits with a carriers
strategic market. Carriers looking for long-term preferred
customers will likely find this a good match with their strategy.
However, carriers that focus on the sub-standard market, or
short-term policies, may not benefit from UBI because of the
cost of the infrastructure needed to support it. Assess not only
which customers are likely to switch to a UBI-based program,
but also what the implications will be for those customers who
dont switch. Drivers that demonstrate superior driving skills
will certainly earn a lower premium. Those drivers, though,

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

who dont switch are likely to experience higher prices due to

the normal skewing of rate distributions. Carriers may need to
plan for a higher defection rate from those customers.
Carriers that are considering moving forward with telematics
have different business models to evaluate. Two dominant
business models are being used in the industry today. Pay as
You Drive (PAYD) typically charges a customer based on actual,
documented miles driven. Pay How You Drive (PHYD) generally
bases pricing on a variety of dimensions related to
the driving behavior of the customer, such as rapid
accelerations and decelerations, the time of day,
the routes driven and the territories driven through.
Carriers can either use installed devices and collect
granular driving data themselves, or can work with
a provider that sends them aggregated datathink
of it as a driving scorethat can be used as input to
rating models.
The PAYD vs. PHYD decision has significant implications
for carriers as it affects the technology requirements and
influences how they can utilize telematics as a service offering
for their customers. If a carrier is planning to utilize an
installed device, additional considerations apply, such as how
to distribute the device, install the device, provide customer
support for the device, collect data from the device and retrieve
the device in the event of customer defection.

A major consideration in UBI rollout is the existence

of Progressives UBI patent, which has been a barrier
to entry for carriers. The Progressive patent is
fairly extensive, covering a method and system of
determining a cost of automobile insurance based
upon monitoring, recording and communicating
data representative of operator and vehicle driving
characteristics [including] an operating state of the
vehicle or an action of the operator. In December 2012,
Progressive announced terms for licensing its UBI
program. Carriers interested in using the Progressive
patent must apply by the end of June 2013. If approved,
carriers will be permitted to rate customers under the
patent starting on or after April 2015.
What should a carrier do during those years of waiting
before they are permitted to use the data for rating
purposes? Some carriers are looking at providing
telematics capabilities as a customer service. They are
planning to use the time to evaluate the collected data,
but not use the data as an input for rating. Examples
of services considered by carriers include safe driver
coaching, automatic crash notification/emergency call,
crash data management, stolen vehicle tracking, geo-

behaviors may be available, and a carrier needs to

assess what should be collected, stored and used
for analysis. Carriers may need new technology
infrastructure to store, organize, cleanse and manage
the data. Additional skill sets may be needed to take
full advantage of this new data through sophisticated
analytics, data mining and modeling.
While it may be tempting to sit back and watch the
UBI market rather than leap in, opportunities across
the value chain exist for insurers that adopt the
technology early, especially now as the main barriers
to entry are falling. Insurers waiting too long potentially
face adverse selection and may be left mostly with
customers who dont suit their pricing model.
Although much has been written about the use of
telematics in the auto insurance industry, other types
of insurance can also benefit from behavior-based
products. Home monitoring devices can track whether
or not a homeowner locks external doors and drive
underwriting since a locked door reduces burglary risks.
In commercial insurance, devices can monitor bridges
or large buildings to identify potential structural issues.

Although UBI is still

not widely available or
even widely understood
among consumers, the
adoption rate of the
technology is slowly
picking up speed as
more insurers develop
UBI programs to add
to their offerings for
both personal and
commercial lines of
business.

Karlyn Carnahan, Novarica

fencing, remote access and vehicle diagnostics.

Once a carrier has completed its strategic assessment,
data management issues must be evaluated and
preparations made. A plethora of data about driver

In life insurance, carriers can offer discounts for

wellness programs based on the number of times a
customer visits a gym per week.

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

4. Automating Regulatory Compliance

Trend Overview

Carrier Recommendations

As a highly regulated industry, insurance carriers have

always built regulatory compliance into their business
processes and adjusted their processes to assure they
remain in compliance as new regulations are enacted.
Whether it is ensuring producers are properly licensed
and appointed, making sure pricing is generated in a fair
and consistent manner or confirming that claims are
handled fairly, compliance practices impact all aspects
of the insurance industry. Carriers that have not built
flexibility into their systems struggle with consistently
implementing regulatory requirements and responding
quickly to data calls.

Automating regulatory compliance serves several

purposes. It provides carriers with almost instantaneous
access to information and minimizes the risk of
non-compliance by ensuring processes are followed
consistently. When regulators ask for information,
carriers must supply it quickly, explains Carnahan.

Carriers need to be able to rapidly add data elements,

modify documents and assure workflows are easily
modified to deliver consistent practices, says
Carnahan.
The carriers best able to anticipate the future regulatory
landscape and implement technology to streamline
regulatory compliance will be in a much better position
than their competitors to address new and emerging
mandates, such as the Affordable Care Act, without
missing a beat or impacting agents or customers.

10

Regulators also look for consistent behavior. In other

words, is the carrier consistently following the law and
operating in a way that is fair and non-discriminatory to
policyholders? Automation ensures that tasks are being
completed consistently by all staffeven novices
because the business rules are incorporated into the
workflows. Automation also provides the underlying
data for reports and documentation about how a task
was performed and by whom.
Carriers with modern core systems have an advantage
in regulatory automation over their peers working within
the confines of a legacy environment. A modern system,
based on business rules or workflows rather than
hard-coded instructions, is much easier to change as
regulations morph.

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

While carriers are

highly motivated to drive
growth today, every
carrier wants to do so in
a way that is compliant
with their regulatory
obligations.

Karlyn Carnahan, Novarica

5. Improving the Agency Experience

Trend Overview
Since agents write more business with those carriers
easiest to do business with, carriers that work with
independent agents cannot achieve their objective
of profitable growth without focusing on the agency
experience. Carriers are taking note, and up to 80% of
carriers plan to enable agents to perform most information
and transactional capabilities through easy-to-access agent
portals, according to the Novarica report, Paper, Phone,
Email, Web, Mobile: Communication Channels in
U.S. Insurance.

Carrier Recommendations
Top carriers listen to what agents value and then leverage
technology to provide that type of experience. For example,
the most important capability for agents is carrier response
to underwriting, followed by speed of underwriting decision,
according to Novarica. Carriers focused on improving those
capabilities with technology successfully drive increased
revenues. Agents also value participation with comparative
raters, especially in personal auto.
More carriers are providing a robust portal environment
that provides functionality to agents, including uploading
applications, quick quotes to bind and issue endorsements,
quick-and-easy access to appetite guides, and proprietary
rules and forms.

Look at your technology

offerings and compare
what youre offering
to what the agents are
looking for in their
top carriersfast,
responsive, easy.
Karlyn Carnahan, Novarica

Real-time upload and download to agency management

systems is important particularly for those carriers working
with large insurance agencies that represent multiple
carriers. However, improving the agent experience is more
than offering real-time connectivity; it requires holistic
approaches that ensure that every agent touch point is
optimized.
Asserts Carnahan, Carriers should be thinking, How
can I enable agents to be more productive and write more
business? The goal is to minimize the amount of time
agents spend on non-revenue generating activities.

Report Cited
Paper, Phone, Email, Web, Mobile: Communication Channels in U.S. Insurance
7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

11

6. Social Media and Collaboration

Trend Overview
Social media is about helping people connect. Consumer
and agent expectations for connection have been
established through social media tools that provide
an opportunity for people to collaborate and share
information. Social media toolssuch as Facebook,
LinkedIn and Twitterare frequently used in marketing
to drive brand awareness and connect with customers.
But other uses of social media tools improve collaboration
and improve decisions and processes both internally with
carriers and externally with the distribution channel.
Today, most collaboration in the insurance industry
takes place in the form of emails and face-to-face
meetings. While there will likely always be a need for
these types of collaborations, carriers can create
efficiencies by moving beyond these communication
avenues and providing a centralized collaboration
platform where people can share documents and
ideas and manage knowledge.

12

More than 70% of carriers that distribute through

independent agents use social media, says Novarica in
its report, Insurer Social Media Strategies for Independent
Agent Distribution, yet more than 40% have no social
media policy in place. Insurers need to institutionalize
their social media interactions with agents in such a way
that they can learn whats important to agents and use
those insights to drive profitable growth.

Carrier Recommendations
Carriers can use collaborative technologies to improve
process time. During agent onboarding, agents could
access a variety of documents they need to get started
with a carrier, such as sales pipeline management and
training. They could also connect with other agents in
discussion forums designed to support knowledge sharing.
Agents could ask questions of their peers, discuss tactics
and generate new ideas. The collaboration platform would
also store agent action plans and reports.

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

11724 NE 195th Street

Bothell, Washington 98011

800.444.4813
vertafore.com

Vertafore delivers software and services that transform the business of insurance. Unique to the industry,
more than 20,000 customers rely on Vertafore to provide integrated technology that connects the entire
industry with the most complete source of solutionsagency management, rating and connectivity, content
management and workflow, research solutions and producer lifecycle managementso their businesses run
better and are more profitable. For more information about Vertafore, please visit vertafore.com.
2013 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc. The names of actual companies and
products mentioned herein may be the trademarks of their respective owners. VCM.EB.7TRE.0613

Many use cases exist in the insurance industry

from creating training communities to large account
underwriting to product development. Carriers are
generating measurable improvements in both process
time and the quality of decisions.
Collaboration portals should be designed to help people do
their job, says Carnahan. Any social media tools must be
intuitive, contain content people care about, provide choice
over relationships and give employees something back that
they value.
Carnahan recommends that carriers begin by determining
the role of collaboration within the context of the

Any social media

tools must be
intuitive, contain
content people care
about, provide choice
over relationships
and give employees
something back that
they value.

Karlyn Carnahan, Novarica

carriers overall business strategy, including its impact

on governance and compliance, cultural implications and
ability to demonstrate measurable success. This includes
creating processes and policies and driving employee
adoption and participation.

Report Cited
Insurer Social Media Strategies for Independent Agent Distribution
7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

13

7. Distribution Channel Management

Trend Overview
In a multi-channel world, existing distribution channels
remain as new channels emerge, complicating channel
management. Today, they are managed as discrete
distribution channels unable to integrate for seamless
agent and carrier interactions.

Carriers are experimenting with a wide variety of

techniques to better manage their agents strategically,
not just on a transaction-by-transaction level. Mobile
sales force applications, social media support tools
and straight through processing are all techniques
that deliver tangible benefits.

Different elements of insurers communications are

shifting at different speeds, and older channels are not
going away, says Josefowicz of Novarica. This creates
additional burden on and confusion for insurer CIOs,
who are required to invest in supporting new channels
without being able to shutter older channels.

Carrier Recommendations
Carriers need to consider how to strategically link
multiple distribution channels beyond the consistent
posting of transactions. They must also analyze how
channels relate to each other, especially for those
carriers selling direct to consumers and through
agents. Carriers must support both direct and agent
channels by motivating agents to generate business,
compensating them appropriately and providing a
suitable level of service to extract more revenue.

14

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

Different elements
of insurers
communications
are shifting at different
speeds, and older
channels are not
going away.

Matthew Josefowicz, Novarica

Conclusion
The future aint what it used to be, Yogi Berra once said,
and for the insurance industry, its true that the future will
likely look quite different from the present.

For insurance carriers, technology trends such as mobility,

collaboration platforms, analysis of huge amounts of
structured and unstructured data, and new distribution
channels can transform how they interact with their
customers, their agents and others in the insurance value
chain. These seven technology trends are deserving of

These seven technology

trends are deserving
of carrier resources;
those carriers
that ignore them risk
being left behind in
a rapidly changing
industry.

carrier resources; those carriers that ignore them risk

being left behind in a rapidly changing industry.

For more information on how Vertafore helps carriers

transform their business and achieve their growth
objectives, visit vertafore.com.

7 TECHNOLOGY TRENDS TRANSFORMING THE INSURANCE INDUSTRY

15

11724 NE 195th Street

Bothell, Washington 98011

800.444.4813
vertafore.com

Vertafore delivers software and services that transform the business of insurance. Unique to the industry,
more than 20,000 customers rely on Vertafore to provide integrated technology that connects the entire
industry with the most complete source of solutionsagency management, rating and connectivity, content
management and workflow, research solutions and producer lifecycle managementso their businesses run
better and are more profitable. For more information about Vertafore, please visit vertafore.com.
2013 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc. The names of actual companies and
products mentioned herein may be the trademarks of their respective owners. VCM.EB.7TRE.0613