Know Your Vendor

While thumbing through the February edition of CIO magazine, we came to this article: “A tsunami of IT project disasters is on the horizon“. You already feel better about that core system replacement you’ve been contemplating, don’t you?

If that didn’t cheer you up, this certainly will:

We’re talking spectacular failures that disrupt supply chains, delay the reporting of financials, and blow up the careers of seemingly competent executives … These are the types of failures that are created when enterprises “go-live” with an implementation that, in hindsight, will be deemed done in a reckless fashion.

We love the smell of Chicken Little in the morning.

The article goes on to list four harbingers of doom (the actual phrase used in the article), along with three tips for avoiding the impending apocalypse:

  • Make it real.
  • Establish go-live criteria early.
  • Independent view.

If you’re up for it, you can read the entire article. Regardless, we humbly off three other means of averting the cataclysmic consequences predicted in CIO.

Count ‘Em

No enterprises have to fail. No careers of seemingly competent executives have to be blown up. No hindsight will be necessary. And there will be no recklessness involved or accused if you follow these three simple rules:

  1. Know your vendor. How long has your vendor been around? How many customers does it have? What do those customers have to say about the vendor?
  2. Know your vendor. Is your vendor financially and organizationally stable? Is it heavily leveraged? If so, who are its investors? How long have they been invested? Are they getting a return on their investment? Does the vendor’s responsibility to give its investor(s) a return affect its pricing? Are you sure?
  3. Know your vendor. How many implementations has your vendor done? How many were successful? How many were on budget? How many of its customers came to them after another vendor’s implementation failed?
We Get It

We understand the prospect of a system replacement is scary. If it didn’t make you a little nervous, we’d be worried about you. That’s why we’d like you to know our worrying goes into making each implementation as smooth and successful as it can be. If it weren’t, our customers would go elsewhere.

But they don’t.

Cognitive Dissonance

There was an opinion piece published in May by PropertyCasualty360˚. The title of it is, “Plethora of challenges face the insurance industry on the road ahead”. Most of the piece was fairly predictable. But this caught our attention:

Another troublesome challenge for the insurance industry is overcoming cognitive biases, such as recency or legacy biases. These biases cause policyholders to believe that because nothing bad has occurred, nothing bad will occur — until of course it does. Underappreciation of loss occurrence leads to underinsurance and a lack of resilience. Both are unfortunate, yet preventable.

We get the concept of cognitive bias. But we also recall the notion that insurance is not bought. It’s sold. And if inadequate levels of coverage are being sold because of policyholders’ cognitive biases, doesn’t that constitute greater claims liability for the insurance companies that underinsure their policyholders? There’s a kind of self-defeating circularity to that logic. Rather than cognitive bias, it seems to suggest cognitive dissonance.

Psychic Friction

According to Psychology Today:

Cognitive dissonance is a term for the state of discomfort felt when two or more modes of thought contradict each other. The clashing cognitions may include ideas, beliefs, or the knowledge that one has behaved in a certain way … The theory of cognitive dissonance proposes that people are averse to inconsistencies within their own minds.

In the case of insurance, cognitive dissonance may occur between these two modes of thought in the mind of a policyholder: (1) I live in a flood zone; therefore, I may be susceptible to considerable water damage. (2) I don’t want to pay for adequate insurance coverage to fully indemnify that considerable water damage.

It’s almost a cliché that the insurance industry is slower than most to adopt emerging technologies. But it does adopt emerging technologies, even if it does so at its own justifiably conservative pace. And if there’s anything the insurance industry has in abundance, it’s data, particularly experience data. So, as the insurance industry continues to adopt and assimilate machine learning and AI, it will become better able to predict loss potential. And those predictions will become increasingly accurate as more and more experience data informs the AI.

Looking Ahead

As that predictive capability continues to grow, insurers will be more able to plausibly have conversations like this:

Policyholder: I know I’m at risk. But I don’t want to pay for adequate coverage because I haven’t needed it yet.

Insurer: Yes. We understand the premium for fully adequate coverage seems high. But what will it cost if you don’t have that protection?

If insurers can keep policyholders from grinding their psychic gears now, they can keep them from grinding their teeth later.

Maybe then underappreciation of loss occurrence can become sincere appreciation for insurance.

Too Costly Overruns

For reasons we can’t even recall, we were doing some research in The Complete and Total History of Abbreviations and Acronyms in the Whole Entire English Language (TCATHOAAAITWEEL) when we came across TCO. We certainly knew TCO stands for Total Cost of Ownership. But we didn’t know that hadn’t always been so.

According to the TCATHOAAAITWEEL, TCO had initially stood for Too Costly Overruns. One day, while working in the language lab at Bletchley Park, Sir Randolph Smedley-Whyte was trying to figure out how to build the Enigma Machine British Intelligence needed to break German codes during World War II. Given the shoestring budget on which the agency operated, Sir Smedley-Whyte was afraid his superiors would be wary of too costly overruns (TCO).

One fateful day, he was joined in the lab by a counterpart from the Russian NKGB, Sergei Agafonov. During an all-consuming deliberation in which he’d lost all sense of self-awareness, Sir Smedley-Whyte blurted out, “The Prime Minister will never approve the building of this machine. He’ll say it’s impossible because of too costly overruns.

On hearing that, Sergei said, “You have to put a more positive spin on it, Dude. Too costly overruns has way too many negative connotations. You’d be better off if you changed TCO to total cost of ownership. Then you’d convince Churchill if he doesn’t build it right the first time, his too costly overruns will go through the roof.”

Sir Smedley-Whyte looked at Sergei in utter astonishment. “That’s bloody brilliant! I’d never have thought of it. But I had no idea you spoke English.”

Sergei replied, “Я должен сломать тебя, and the rest is history.

Get it Right the First Time

When you’re looking for a core insurance-processing suite, you don’t need Sir Randolph Smedley-Whyte or Sergei Agafonov to prevent too costly overruns (TCO) and to ensure a much lower total cost of ownership (TCO). You only have to know a little bit of history and make sure your due diligence includes the track records of the vendors you consider working with.

In addition to ensuring your satisfaction, you’ll be sure to prevent one TCO and to benefit from another TCO.

The choice, as always, is yours.

The Finys Mailbag

It’s been a while since we opened the mailbag. But given the volume of cards and letters we get, we’re definitely overdue. So, here’s a selection of our recent fan mail:

Dear Finys,

A vendor recently told me I could have a complete policy administration suite implemented in 20 minutes. Is that true?


In a Hurry

Dear Hurry,

We do believe that’s possible. But not on this planet. Should such a thing become available, we suggest you review The Good, Fast and Cheap Rule before making any commitments:

Everybody wants everything good, fast and cheap. But you can only have it two ways:

  • Good and fast, but it won’t be cheap
  • Good and cheap, but it won’t be fast
  • Fast and cheap, but it won’t be good.

Good luck.


Then there was this:

Dear Finys,

My company’s spent $20 million over the past three years for a policy administration system. So far, the only line we’re able to write on the system is igloo coverage in Lapland. Should we consider switching vendors and cut our losses?



Dear Confused,

We’re sorry to answer your question with questions, but we have two:

  1. How much money do you have?
  2. How much time do you have?

If you read our reply to Hurry, you know we can’t implement a new system in 20 minutes. But we can definitely help.

Best wishes.


And finally:

Dear Finys,

We’re an insurance company that’s been in business since 1820. The policy administration system we use is Old Steamy, shown in the photo to the right. It still works pretty good; although, it gets harder and harder to find people to maintain it. Is it too soon to consider replacing it?



Dear Wheezy,

We hate to be the bearer of bad news. But we checked the market. The only vendor that promised to provide replacement parts for Old Steamy also promises to implement a new policy administration suite in 20 minutes.

Call us skeptical.



Until next time, please keep the cards and letters coming. And please let us know how we can help.

Thank you.

Insurance Trends for 2023

Now that we’re almost through the seventh month of 2022, we decided to get a jump on the upcoming year and publish a list of the trends we hope to see in 2023.

Since we wrote about no-code/low-code platforms in February of this year, we were inspired to fire preemptively by something we found in Capgemini’s Top Trends in Property/Casualty Insurance: 2022. It was this:

P&C insurers are increasingly adopting no-code/low-code platforms to compress application development cycles, improve efficiency, and go to market faster … No-code and low-code platforms with built-in, ready-to-use software development components enable insurers to create and deliver new apps faster than traditional methods.

Since we’d rather be early to the dance than late, here are the Top Five Trends we hope to see in 2023:

  1. Technology consultants, analysts, and trade publications will no longer write about existing technologies as if they’re new or emerging.
  2. Technology consultants, analysts, and trade publications will know what vendors in the industry actually offer, rather than trying to make it seem as if they’re ahead of some curve.
  3. Technology consultants, analysts, and trade publications won’t be quite so quick to fall in love with whatever they think the next big thing (TNBT) might be.
  4. Technology consultants, analysts, and trade publications won’t write about digital transformation as if digital transformation hasn’t been underway since we all survived Y2K.
  5. Technology consultants, analysts, and trade publications will actually define insurtech, rather than applying the term to everything from Ziggy and Gomer in their garage with a coding handbook to startup MGAs and insurers.

Who’s On First?

At the time at which there was still a proliferation of print publications in the insurance industry, we used to bet people that if they ripped the covers off the trade magazines, ignored all other indications of publishing dates, and tried to guess when those magazines were published, they wouldn’t be able to do it. Given the fact that the magazines were all writing about the same things ad infinitum, we never lost a penny.

The most radical digital transformation in the insurance industry is that technology consultants, analysts, and trade publications now publish virtually what the magazines used to publish in print.

We hope they get better at balancing their affinities for TNBT with pragmatic looks at what exists in the present.


Because we like to keep ourselves abreast of what’s going on in the insurance industry, we happed across a post from Comperemedia purporting to identify three emerging trends. They are:

  1. Ecosystems Expanding
  2. Brands as a Life Coach
  3. Beyond the Screen as We Know It.

We don’t know what any of those things are supposed to mean. So, we looked up Comperemedia. According to its parent company, Mintel, Comperemedia is:

The complete and expert source of product-level data and insight in direct marketing. We monitor acquisition strategies, pricing, targeted offers and product introductions from our rolling and lifecycle panels in five channels for the US and Canada.

As if pedestrians don’t have enough to worry about already, now we have to be wary of rolling panels. But that’s not what confused us the most.

Say What?

What really caused us to scratch our heads was this, under trend #1 above:

In the face of ongoing pandemic concerns like inflation, exponential increases in product offerings and choices, and limited out-of-home experiences, consumers will demand control via stability, simplified choices, and fresh entertainment experiences.

We could understand how and why inflation might be a pandemic concern. We got the fact that exponential increases in product offerings might cause curiosity, if not concern. We share people’s concerns about limited out-of-home experiences. And we’re right there with the desire for stability and simplified choices. Give us simple coverage choices from a stable company, and we’re good to go.

But we have to admit to being stymied by fresh entertainment experiences. At first we thought it might be a typo. It’s easy enough to imagine typographical errors of one, two, or maybe even 10 characters. But 30? That felt like a stretch. Even when we had to type The quick brown fox jumps over the lazy dog in our high school typing class, blindfolded, we didn’t make that many typos. Then we thought maybe the folks at Comperemedia believed consumers wanted to be entertained by the insurance they buy. We enjoy all of the insurance protection we’ve purchased in our lives. But we can’t recall having been entertained by any of it.

The Fine Print?

We may or may not call the folks at Comperemedia to find out what they’re on about. But in the meantime, we’re going to play closer attention to the fine print in our insurance policies.

We can’t stand the thought that we may be missing something.

Don’t Yank My Value Chain

In perusing Insurance Business America, we came across the insurtech weekly news roundup. In the roundup, we came across this:

The coronavirus pandemic has underscored the need for insurers to modernize but fewer than 25% of the 200 largest global insurers have truly digitized their value chain.

It might be more helpful to the remaining 76 percent or more of the largest global insurers if value chain — or digitized value chain — were defined. Then the largest global insurers would have a better chance of knowing what they were supposed to have been doing.

Our main office is in Michigan. During Michigan winters, value chains are what we put on our tires when it snows. But according to Investopedia:

  • A value chain is a step-by-step business model for transforming a product or service from idea to reality.
  • Value chains help increase a business’s efficiency so the business can deliver the most value for the least possible cost.
  • The end goal of a value chain is to create a competitive advantage for a company by increasing productivity while keeping costs reasonable.
  • The value-chain theory analyzes a firm’s five primary activities and four support activities.

Investopedia goes on to explain the five primary activities and the four support activities. But we still think value chain sounds a little stuffy. And four bullet points and nine enumerated items still feels a bit too complicated to communicate something that could be said more clearly and succinctly.

Plain English

Call us crazy. But wouldn’t it be easier to define value chain like this? Value chain connotes the activities needed to create a product or service and bring it to market. And if we did that, wouldn’t it be easier to grasp the concept of digitizing our value chains if we said this? Digital value chain connotes the activities needed to create a product or service and bring it to market using computers and the internet.

If we simplified the language we use to explain things and if we used less jargon, it would be easier to facilitate collaborative synergies and to enable the various parties along the digital value chain to transition end-to-end functionalities as a way of architecting turn-key functionalities for all of our end-user constituencies and to exploit innovative metrics to revolutionize extensible distribution channels.

See what we mean? 😉

Ripped From the Headlines

Sorry. We couldn’t resist making the title of this post as sensational as possible. But we did find a headline that intrigued us. It was this, from Insurance Business America: “Wisconsin Supreme Court rules against insurance coverage for COVID losses:”

The Wisconsin Supreme Court ruled on Wednesday, June 1, that businesses are not entitled to insurance coverage for losses resulting from the COVID-19 pandemic and related public safety restrictions … “One may think of the business-income provision as indirect loss-of-use coverage, but that does not change the fact that a prerequisite for that provision is still a direct physical loss or damage.”

And then we found the Supreme Courts of and Massachusetts and Iowa handed down similar rulings. Here’s the intriguing part: Loss-of-income insurance can cover revenues lost due to property losses. Disability insurance can cover wages lost by individuals due to illness or injury. COVID-19 clearly didn’t result in property damage. And few if any disability writers could have foreseen a global pandemic.

But the bigger question to us, it seems, is what happens when wages are lost due to governmental decisions to shut down entire segments of an economy? Wow. Talk about unforeseen circumstances.

Uncharted Territory

We’ve now been contending with COVID for about 28 months. That may seem like a long time. But the insurance industry works in mysterious ways. Developing insurance coverages at all requires huddling with actuaries, writing new products, testing them, rating them, underwriting them, pricing them, getting them approved by State DOIs, marketing them, selling them, and more. Compound all that with the vagaries of a global pandemic (or any other unforeseen disaster) and we’re working without experience, to say nothing of maps, compasses, and guide dogs.

Yes, these court decisions against COVID losses seem harsh and heartless, at least as they pertain to the interests of policyholders. But they’re learning experiences. We now know at least some of what we didn’t know before the pandemic. We can apply that knowledge in anticipation of future eventualities and to write contingencies into protections and limits against future uncertainties.

The most consistent thing ripped from the headlines these days is uncertainty.

We’re all doing our best to live with it.

Cyber Liability

The May edition of NU Claims contains an article entitled, “Cybersecurity compliance is about to get even trickier”. It contains this fact:

A January study by KPMG found that senior risk executives in the Americas reported record losses from fraud, compliance breaches and cyberattacks over the last year and expect threats to grow in 2022.

Granted, cybersecurity and cyber liability insurance are relatively new fields. But two of the reasons for the record losses are (1) insurers have been writing cyber liability coverage without fully understanding the extent or the complexity of the risks, and (2) their policyholders don’t understand the extent or the complexity of their vulnerability.

As with everything else, with cyber liability, we’re learning as we go. But there are things insurers and their policyholders can do to protect both parties.

Safety First

Before writing coverage, insurers can work with their prospective policyholders to make sure their environments have been evaluated and some manner of protection has been put in place. Those evaluative and protective measures should include but need not be limited to:

  • Gap Analysis: Make sure environments and infrastructures are evaluated to determine levels of preparedness and to determine the ability to recover from potential cyberattacks or data breaches. If weaknesses are discovered, perform a …
  • Vulnerability Assessment: Find the weak points and identify compliance gaps in the IT infrastructure. Evaluate points of remote access. Assess authorization levels for access to networks and systems. Analyze perimeter and internal defenses and system configurations. Categorize the risks and prioritize remediation efforts.
  • Penetration Testing: Make deliberate attempts to hack environments to evaluate networks, software, security controls, and defenses.
  • Monitoring: Make sure you have the tools in place to monitor and secure the IT infrastructure.

To help their prospective policyholders, insurers can also suggest their prospects make sure their cybersecurity vendors have one or more cybersecurity certifications. The website of the National Initiative for Cybersecurity Careers and Studies is a good place to start identifying the appropriate certifications.

Forewarned is Forearmed

No system or environment is hack-proof. That’s why there’s cyber liability insurance. But all systems and environment can be protected from the most common kinds of attacks. And insurers can help their prospects and policyholders mitigate their risks of fraud, compliance breaches, and cyberattacks.

The fact is we’re all in this fight together.

Brave New World

On October 22, 2015, MIT Technology Review published a piece called, “Why Self-Driving Cars Must Be Programmed to Kill”.

It’s hard to imagine the degree of academic detachment required to reduce a philosophical quandary to the level of computer programming and to anthropomorphize said computer and the programs it runs to the extent that a life-and-death scenario could be blithely characterized as:

an impossible ethical dilemma of algorithmic morality.

But that’s exactly what happened because:

Jean-Francois Bonnefon at the Toulouse School of Economics in France and a couple of pals … say that even though there is no right or wrong answer to these questions, public opinion will play a strong role in how, or even whether, self-driving cars become widely accepted.

And professor Bonnefon and his fellow academics concluded:

People are in favor of cars that sacrifice the occupant to save other lives—as long they don’t have to drive one themselves.

After reading that article, we found ourselves walking, biking, and taking public transportation for fear of coming up on the short end to some algorithmic morality controlling a self-driving killing machine. But we eventually got over ourselves.

Fast Forward

Since then, of course, self-driving cars have become all the rage, with some predicable results. Nevertheless, the May/June edition of NU Claims features an article entitled, “Autonomous Vehicles: Predictions vs. Truth”. The article said this, in part:

Autonomous technology doesn’t just apply to private passenger vehicles. With the shortage of truck drivers, having autonomous technology would allow goods to be moved across the country on a 24-hour basis. The autonomous trucks could keep moving without the need to stop for drivers to rest … the size of the vehicle and the logistics of turning and navigating in traffic bring a different element to the task at hand.

When we read that, we couldn’t help thinking of the 1971 Steve Spielberg film, Duel. In a latter-day version, of course, the truck wouldn’t be driven by a dude with terminal road rage. Rather, it would be directed an algorithmic morality programmed to kill. We’ve come a long way, baby.

After reading the article, we couldn’t decide who we’d least like to be: The guy who comes up on the short end of a car programmed to kill. The actuaries who have to work with algorithmic morality to calculate risk probabilities. Or the underwriters who have to throw darts at the wall to determine risk levels until there’s enough claims history to rate and price coverages with any reasonable degree of plausibility, to say nothing of profitability.

This is the kind of thing that give the phrase, brave new world, entirely new meaning.