The Decreasing Increase

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Based on some of our recent reading, there seems to be a disparity of opinions as they pertain to the employment market:

  • Exhibit A: According to an article in PropertyCasualty360, “The number of insurance professionals aged 55 years and older … increased 74 percent [between 2006 and 2016].”
  • Exhibit B: According to a study published by Deloitte, “Few millennials are familiar with the insurance industry and only 10 percent are ‘very interested’ in choosing insurance as a career.”
  • Exhibit C: According to a study published by The Jacobson Group, “The mass talent shortage is here, and insurers must take action.”
  • Exhibit D: According to the LinkedIn Talent Blog, “The U.S. will be hit the hardest by the talent shortage, losing $435.69 billion in unrealized economic output—or 1.5% of the whole U.S. economy.”

But those alarmingly bleak perspectives don’t appear to be commonly held, let alone unanimous.

The Plot Thickens

In fact, according to a piece published by the United States Census Bureau in April of last year — “Older People Working Longer, Earning More” — the aging of the workforce and the rise of the millennials might not be so bad after all, particularly for the increasing numbers of  … uh … seasoned folks in said aging workforce.

Here’s a sampling of comparative statistics in monthly wages alone:

  • 17 percent for workers aged 14-24, a $245 increase from $1,431 to $1,676.
  • 20 percent for workers aged 25-34, a $600 increase from $3,049 to $3,649.
  • 32 percent for workers aged 35-44, a $1,254 increase from $3,939 to $5,193.
  • 32 percent for workers aged 45-54, a $1,390 increase from $4,363 to $5,753.
  • 41 percent for workers aged 55-64, a $1,629 increase from $3,928 to $5,557.
  • 80 percent for workers aged 65-99, a $1,816 increase from $2,276 to $4,092.

So, what is there to learn from this seemingly conflicting information? In fact, much.

Cutting to Reality

This much is indisputable: There are demographic shifts taking place in all industries. In the insurance industry (and others), those shifts mean younger people — who are more familiar and comfortable with technology — will enter, and older people — who have the requisite domain knowledge and experience — will exit. But it won’t happen all at once.

Because it won’t happen all at once, there will be knowledge-transfer between those demographic groups. Technology in general and good systems in particular will abet that knowledge transfer, ensuring that the application of technology serves and is informed by the institutionalization of material domain knowledge.

Despite the best efforts of some to convince us there’s a crisis-level shortage of capable insurance-industry personnel on the short-term horizon, it might be much ado about nothing.

As have generations before us, we’ll just do our best to keep up with time and change. Chances are we’ll be just fine.

Be Careful What We Wish For

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We’re tech people. We’ve always thought we’re tech people so insurance people wouldn’t have to be tech people. And we’ve always felt like we were alone in that thinking. But the tide may be starting to turn.

The February edition of Best’s Review ran an article entitled, “Generation Next”, contending that the traditional focus of the insurance industry on technical competence (though not limited to technological competence) may be too narrow to carry it into the future. As Limore Zilberman, a consultant at the executive search firm, Russell Reynolds Associates, put it:

People were hired because of their technical prowess and because of their technical acumen and their technical contribution … [but]  the landscape of leadership is going to change. The expectations of leadership are going to change. Our technical talent is not necessarily well-poised to take on broader leadership capabilities.

That seems about right. To put it another way: With all the bigger fish insurers have to fry, technical talent may be a red herring.

Leaders Lead

In arguing that the insurance industry focus on specialists needs to broaden sufficiently to include generalists in leadership positions, Zilberman elaborates on the characteristics of the people she believes are better suited to fill the leadership roles of the future:

They’re agile, they’re adaptable, they’re quick learners, they’re good problem solvers, they’re forward-looking … Those types of people can be put at the helm to manage the lower ranks of the organization that might carry more of that technical expertise.

At risk of seeming to quibble with terminology, we take issue with Ms. Zilberman’s notion of managing the lower ranks. (We even find lower to be a tad condescending; although, we do take her point.) We take issue because leaders lead. Managers manage. And those two jobs, along with their respective responsibilities, are quite different.

But that difference in perspective on vocabulary notwithstanding, Ms. Zilberman and the article are correct. The insurance industry does need to think more broadly. And it does need to embrace well-rounded, critical-thinking generalists as its leaders.

If continue to favor leaders whose strength are technical (linear) thinking, as opposed to general (conceptual) thinking, we should be careful what we wish for.

Tight Lips Sink Ships

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If you’re familiar with the expression, “Loose lips sink ships,” you understand why too much information (TMI) can be a bad thing. By the same token, too little information (TLI) can be equally bad. Case in point: The insurance industry seems conspicuously tight-lipped when it comes to information about implementations. As a result, there’s precious little data on failed or failing implementations, to say nothing of blown budgets, blown dates, and undue expectations as they apply specifically to the insurance industry.

Fortunately, there are two other things from which to derive meaningful and applicable perspectives: (1) A plethora of data on ERP implementations. (2) Extrapolation. Let’s have a look.

The Numbers Are In

Here are just three citations from the volumes of information about EPR implementations available on the Web: First, here just five of the failures listed by ERP Focus in “Ten ERP failure statistics that highlight the importance of getting it right first time round“:

  1. 60% of ERP projects fail.
  2. 57% of ERP systems take longer than expected.
  3. 54% of ERP systems exceed projected budget targets.
  4. 40% of ERP systems experience at-large operational disruption.
  5. 41% of enterprises fail to achieve more than half of the expected benefits.

Second, according to this infographic from Technology Evaluation Centers:

  • Nearly 50% of ERP implementations fail the first time around.
  • On average, 30% of ERP implementations take longer than estimated.
  • Most implementations cost three to four times what was budgeted.
  • About 65% of the time, budgets go over because the system needs modifications to improve usability. But companies realize this only after the implementation has started.

Finally (for now), Management Consulting Now reports ERP implementations:

  • Take longer than expected (61%)
  • Cost more than expected (74%)
  • Fail to deliver more than 50% of the expected benefits (52%)
  • Leave their respective organizations unhappy with the results (59%).

While all of those sources and studies might not agree, we can agree all of their statistics are dismal … and unnecessary.

Why Settle?

These numbers may be dire, but they need not be leading indicators, as we say in the biz. With some initiative, some diligence, some foresight, and a clearly articulated set of shared expectations, these statistics can be greatly improved. Oh, and let’s not forget clear and open communication between the parties involved.

Remember: Tight lips sink ships.

How About Insurance Insurance?

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We saw this question the other day: How much chain could a blockchain block if a blockchain could block chain? It accompanied this cartoon:

We’re not trying to play similar word games with insurance. But we can’t help wondering: How much insurance could an insurance company write if an insurance company had insurance for its insurance company? We don’t mean liability insurance or BOP. We wonder if a sound, solid, fully functional insurance-processing suite constitutes something like insurance for your insurance company.

Think About It

When’s the last time you read an article about the number of insurance companies still working on green screens? Many insurers still do. When’s the last time you heard anyone admit to still using a dial-up modem? Some people still do. When’s the last time you heard anyone in any industry say anything other than their technologies were emerging, disruptive, or innovative? And why do you think that is?

It’s because talk is cheap. It’s also less expensive and more practical than chasing the rainbow and betting the ranch on emerging technologies.

And speaking of practical, is any industry more practical than insurance? Insurance has to be practical by definition. If you’re in the business of reserving the premiums of your policyholders against potential losses, what else could you be?

Yes. Like every other industry, insurance needs to keep its eye on emerging technologies. But its first look has to be at reliable ways in which to process its business, to serve its constituents, to ensure minimally risky ways in which to deliver its products and services. If insurers spent their time and attention pursuing emerging technologies, how much would be left with which to satisfy and retain their policyholders?

Everything you hear about leading insurance companies notwithstanding, for the really smart ones technology will emerge as it can.

Here’s a Real Bottom Line

We’d like to think we’re as idealistic as the next guys. But we might be just a bit more pragmatic. So, whether you’re betting the farm on insurtech, blockchain, or any other dream of the future — whether you’re chasing rhetorical rainbows like digital transformation or you need a fully functional insurance-processing suite right now — we’re here. We’re here now. And we’re ready, right now.

Feel free to think of us as your insurance insurance.

What a Difference a Year Makes

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According to FinTech Global, this may not be the best time to be getting involved in insurtech. As of May, 2017, interest in insurtech was on the wane. Investments in insurtech were down more than 70 percent in the first quarter of 2017 vs. the first quarter of 2016. And here in North America, plumbing was looking like a better bet than insurtech:

The share of InsurTech deals in North America has been progressively decreasing since 2014, falling to only 37.7% in Q1 2017. The first quarter of the year also saw the overall amount invested in North American companies fall below the amount invested in their European peers for the first time, with $72.2m and $89.9m invested, respectively.

Yeah. It’s a terrible time to be in insurtech … unless it’s not.

Oops …

According to FinSMEs (“a fast-growing blog and represents a realiable [sic] and trusted source of information for would-be, young and established entrepreneurs, angel investors, venture capitalists, technologists, analysts, journalists and bloggers”), insurtech is going gangbusters. As of July, 2018, spending is up. Skepticism is down. And technology is about to … well … you might have to read this yourself:

Tech innovation never ceases to impress society and changes are happening at a very fast pace … Insurtech is still new to people, even though the insurance industry is one of the most common and popular financial businesses out there. Technology and insurance merged into one, creating this new concept … the disruptive innovation of Insurtech has numerous benefits that will positively influence the way people are dealing with their insurances … Technology will take over the insurance world by using complex systems for tracking cars, monitoring devices, helping customers to manage their insurance preferences and so on … Insurtech helps with leading businesses.

If you feel a little a little breathless after reading that, don’t worry. It’s not diminished lung capacity. After plowing through that, even a free diver would be looking for a little extra oxygen.

Just When You Thought It Was Safe …

If those conflicting points of view haven’t made the insurtech issue as clear as mud, there’s this, which says, in part:

Is there a bubble forming with all the billions being poured into InsurTech investments, and if so, is it likely to burst anytime soon? That was the question I found myself addressing repeatedly during the recent InsureTech Connect conference in Las Vegas. My response is a qualified “no.”

And this — “Can an InsurTech Startup Compete With Progressive and GEICO?” — which says, in part:

Unwary and inexperienced competitors may grow by unknowingly writing the risks that their competitors didn’t want … It defies all logic to suggest that there is a large segment of customers in a fragmented and highly competitive market that are being greatly overcharged simply because these companies refuse to offer them good rates to avoid cannibalization … In an industry where 96 is considered a best-in-class combined ratio, even a little bit of claims leakage can be quite hurtful.

Following the bouncing ball of insurtech opinions can be tiring, to say nothing of a source of eyestrain. Call us old fashioned, but we think if we keep one eye on keeping our customers happy and the other on the technology that keeps them happy, we’re good. So are our customers.

The Present is a Gift to the Future

Especially since technology is no stranger to the insurance industry, we’re not precisely sure what all the fuss is about. If an insurer calls and asks us if we’ll have insurtech next year, we’ll say we’ve had it since our founding in 2001. We may or may not say we’re more interested in the insurance lifecycle than we are in the insurtech hype-cycle. But if the insurer says it’s ready to write insurance, we’ll definitely say we’re ready to get that done right now.

In the meantime, if you need us, we’ll be over here, singing along with a very catchy tune from Dinah Washington.

What’s Required?

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We once heard it said that most companies replace systems before they’ve used 80 percent of those systems’ capabilities or capacities. We were skeptical at first. But the more we thought about it, and the more we looked at systems, the more true it became. Here’s why:

Most companies decide to replace systems because of recurring functional frustrations: “Our system doesn’t do this.” “If only our system could do that.” And our favorite: “We need a new system to [fill in whatever you want that new system to do here].” In response to any of those statements, the logical questions are: Did you want your system to do this, that, or the other thing (whatever that thing is) when you bought it? Did you tell anybody?

Look Ahead

When Sylvester Stallone was shooting Rambo III in Thailand, cast and crew members were dropping like flies from the heat and dehydration. Stallone said, “By the time you realized you were thirsty, it was too late.” So it is with systems: By the time you realize you need something, it’s likely too late. That’s why foresight is so important in defining and articulating system requirements. Adding a little more nitromethane to the fuel mixture propelling a top-fuel dragster is much easier to do in the staging area than it is on the straightaway at 300-plus miles an hour.

To define and articulate requirements effectively, you have to:

  • Ensure transparency. If you try to define requirements in secret, away from the prying eyes of users, you’re building the system for yourself. Don’t be that limited or limiting.
  • Specify functional needs. The less you describe specifically what you need the system to do, the more you’re likely to fall for technical smoke and mirrors.
  • Avoid popularity contests. If you ask peripheral stakeholders — rather than users — what they want, they’ll tell you. If you don’t deliver those things, they’ll talk badly of you. If you do deliver those things, you’ll blow the timeline and the budget, the system won’t perform the way users needed it to, and they’ll talk badly of you.
  • Avoid pilots or prototypes. Either the vendor’s done it before or not. As the saying goes, almost only counts in horseshoes and hand grenades. If the vendor hasn’t done it before, you probably can’t afford to be a guinea pig.
  • Agree to a list of prioritized deliverables. Those deliverables should be a clear reflection of your requirements.

Act Like the Future is Now

We know it’s not possible to anticipate everything. But the more you anticipate, the more accurately you can define and articulate your requirements. And the more accurately you define and articulate your requirements, the more you’ll get out of your system and the longer it’ll continue to meet your functional expectations.

Rambo wouldn’t be able to beat the bad guys and dragsters wouldn’t win any races if they ran at 20 percent.

Get It Right the First Time

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Given the business we’re in, we like to keep an eye on the trends, attitudes, and inclinations of the companies we might consider prospects in the industry we’re in, that being insurance. Consequently, we took note of a survey of 396 CIOs and technology leaders by the consulting firm, Protiviti. Two things in particular caught our attention:

First, in response to a question about their motivations for replacing core systems:

  • 76 percent cited risk mitigation
  • 12 percent cited revenue generation
  • Just six percent cited cost savings.

Second, when asked their biggest impediments to acting on those replacement needs:

  • 41 percent cited implementation risks
  • 24 percent cited time and disruptions
  • 24 percent cited vendor product deficiencies.

We find that curious. Here’s why:

Maybe Common Sense Isn’t All That Common

In our experience, the two primary motivators for system replacements are (1) improvement and (2) improvement — the first in operations, the second in customer service. When our customers achieve those objectives, their risks go down, their revenues go up, and their savings increase. That made us wonder how the survey instrument might have been worded.

Likewise, our experience indicates that implementation risks, disruptions, and product deficiencies can be increasingly minimized with diligent, empirical scrutiny of the issues that arise; point-in-time conversions from the old system to its replacement; and ongoing customer feedback with the requisite, corresponding development efforts. That made us wonder about the companies with which the 396 CIOs and technology leaders worked to report the impediments they did.

Try This

We think the most common-sensible things to do for any project, let alone a system replacement are:

  1. Determine your objectives
  2. Identify and define your requirements
  3. Perform your due diligence in vendor selection
  4. Talk to customers of your short-listed vendors.

If you don’t do those four things, you’ll be compromising your chances of getting it right the first time.

Mind Your Ps and Queues

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Whenever someone refers to the proverbial Three Ps, they’re typically referring to the prevailing wisdom about the way in which businesses should value their assets. In that context, they’re referring to:

  1. People
  2. Process
  3. Product.

In that context, we agree with those Three Ps. But some others are worthy of consideration. We offer them here for your deliberation.

Are You Ready?

As the saying goes, life is what happens to us while we’re making other plans. True. But that doesn’t negate the necessity of planning. Another notion suggests that plans are made to be changed. That’s true, too. But that doesn’t nullify the importance of planning, either.

It’s been several years now since we got out of the prediction business. Nevertheless, we’re pretty comfortable suggesting that, in the absence of sure things, these Three Ps will help keep you out of all but the most unavoidable jams:

  1. Planning. No plan will get you from A to Z without fail. But a plan that leaves room for life (reality) and contingencies (the unexpected) will be malleable enough to succeed more times than not.
  2. Preparation. As a subset of planning, mapping out your steps and forecasting potential contingencies will position you optimally to respond to whatever transpires.
  3. Progress. If you go about planning and preparation conscientiously and thoroughly, you’ll give yourself the best shot at making progress.

Henry Ford once said, “Thinking is the hardest work there is, which is probably the reason why so few engage in it.” While he may have been a bit condescending, he may have been right. And if he was right about thinking, planning, preparation, and progress come in right behind it.

The Other IQ

Similar to the Three Ps, when most people talk about IQ, they’re referring to the Intelligence Quotient. And just like our own Three Ps, we think there’s another IQ: the Ingenuity Queue.

Samuel Goldwyn is reputed to have said, “The harder I work, the luckier I get.” He knew the fallacy of overnight successes and get-rich-quick schemes. He also knew the value of planning and the need to be imaginative and responsive to change and changing conditions.

And so it is with system replacements and IT projects. No one ever wants to do them. Everyone has to plan for them.

If you mind your Ps and Queues, you’ll be ready when the time comes.

We OWN This

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We’re quite aware of the fact that the insurance industry has considerably more than its share of acronyms. With examples like ASOP, BOP, CRIS, DEC, and others for every letter of the alphabet, we hardly need any more. But we’ve decided to create one, nevertheless: OWN.

We’ll forgive you if the first thing you think of is the Oprah Winfrey Network. We assume Oprah must have some insurance. But our interests are a little closer to home. It also would be completely understandable if you were thinking of the hare-hunting association chaired by Elmer Fudd, the Outlandish Wabbit Network. You’d be wrong there, too. Ours is more mundane and considerably more functional than that. And the only thing we hunt is satisfied customers. That’s why, to us, OWN means Ours Works Now.

Oh, Look! A Shiny Object!

We’re as forward-looking as the next guys. We love artificial intelligence, machine learning, blockchain, wearable telematic devices, and peer-to-peer networks that return insurance to what it used to be, albeit on a smaller scale; that is, the small contributions of the many protecting against the large losses of the few. We love all that stuff that largely exists in imagination, that lives on drawing boards, and that attracts investors like mosquitos to swamps. But we’re not preoccupied by it.

Our customers have real business to conduct right now. They have prospects who need policies. They have underwriters who need to rate, quote, price, and bind those policies. Our customers have policyholders who need service on their claims. Those policyholders are more interested in the technology at auto-body shops and reconstruction firms than they are in the technology in our Suite. And our customers are more interested in the reality of getting business done today than they are in the promise of getting it done tomorrow.

We’ll Be Right Here

We don’t want to be misunderstood: We’ll be here tomorrow. When any specific technology is required, we’ll have it. But we’ll offer it because our customers want it, have a practical need for it, will use it, and will benefit from having it. In the meantime, our customers won’t be preoccupied with operational headaches. And we won’t be preoccupied by the next bright, shiny object or be chasing the next wild, faddish goose at the expense of realism and pragmatism.

OWN. When it comes to technology, a promise in the future might be pretty. But utility in the present is the key.

Why Is That?

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For all the talk about insurtech, we still live in a world of aging systems, outdated architectures, all required to keep pace with the countless processes required to run an insurance business. Why is that?

Much of what’s being touted as insurtech comes from people new to the insurance industry. People who do work in insurance don’t have time to contemplate the future. They have their hands full with the present, having to manage time and cost, profit and loss, expenses and adjustments, investments and returns, retentions and ratios. Those who work in insurance have to worry about keeping their jobs by selling policies and service. Those who don’t have to sell policies and service have to worry about keeping their jobs by trying to sell insurtech to those who do. Why is that?

Déjà vu All Over Again1

Much of what we hear about insurtech has been said before—many times. Some examples:

  • Insurers are too conservative to notice the changing world around them.
  • They can’t comprehend how technology will change the way insurance will be offered, bought, and sold.
  • IT spending is up (or down).
  • The bulk of the money will be spent on policy systems (or claims systems).
  • The number of vendors in the market will expand (or contract).
  • Insurers will replace systems with best-of-breed solutions, point solutions, or end-to-end solutions.2
  • The sky is falling.

And those prognostications are ways delivered with dread and foreboding: Do something — anything — or you’re doomed. Why is that?

I See, said the Blind Man …3

The insurance industry doesn’t have to save itself from anything. It’s doing quite nicely, thank you. It’s just trying to understand its technology options and make a living. And all it gets is stale Chicken Little rhetoric. Why is that?

In part, it’s because insurers, vendors, advisors, analysts, and the trade media have different agendas. They seem to exist in different worlds. The effect is the rough equivalent of an astronomer with cataracts gazing through his telescope on a cloudy night: There may be some discernible light, but the picture is dim and confusing. So, the industry chugs along, keeping company with the notion that its competitive salvation is IT innovationor, as it were, insurtech. Why is that?

Let’s Try Reality

IT spending in the insurance industry may stagnate, but it isn’t going down. And the insurtech proponents may make the most noise but, thanks to large insurers, the industry still spends the bulk of its IT budget on internal development, a luxury mid-sized and small insurers can’t afford.

Faced with such facts, the best thing to do is face them. Insurtech can’t be ignored, it has to be assessed pragmatically. Policyholders can’t be ignored. They still require products and service. And change can’t be ignored. Since it’s inevitable, we just have to find our own ways to live with it.

In the light of day, the most obvious truths may be the hardest to see. Why is that?

___________________________________________________________

1. https://www.today.com/news/its-deja-vu-all-over-again-27-yogi-berras-most-t45781

2. Solutions will always be in search of problems.

3. … as he picked up his axe and saw.