Data & Analytics: Are you making progress?

What are CIOs' Major Initiatives for 2020? What are the Key Technologies that are impacting CTOs' 2018 plans? How are cutting-edge technologies being applied as we brave the new world of fintech?

Three technologies that should not be overlooked:

  1. Social Media Intelligence
  2. Big Data Analytics
  3. Smart Robotics

From the CIO perspective…

  • Social Media is a means for creating new information.
  • Big Data is the new method for analysis of information.
  • Smart Robo is the platform of new information transfer & sharing method.

We believe that the possibility of disruption should be addressed in all adoptions.

Social Media Intelligence

For many people, social media intelligence or what others call social media listening, consists purely in screening social media platforms to get data that can complement internal data to make a better business decision.

Actually this definition is too short and does not include all key phases of a proper social media intelligence strategy.

At Celent we define social media intelligence as the strategy consisting in:

  1. Defining strategic objectives that are dependent not only on internal but external data.
  2. Defining a semantic scope or a group of topics, relevant social media platforms, and a geographic and language scope to be considered for the analysis.
  3. Filtering and analyzing social media data regularly (real time, daily, or monthly, but it is generally a continuous process).
  4. Implementing an action plan leveraging findings derived from the data analysis to achieve the strategic objectives initially defined.

Big Data Analytics

Since 2013, the results of ongoing Celent Survey have brought us many suggestions.

This figure shows the recent evolution of the insurance industry, as well as where we think it should be.

In 2013, Celent placed the target between practitioner and innovator. The survey in 2015 demonstrates that insurers have matched this level in the internal measures.

While 2015’s survey positions competitors ahead of last year’s, they have not matched the pace over the last two years. Similarly, survey respondents value customer expectations below their own investments, even though many digital leaders in insurance claim that insurers are compared to digital retailers and other services.

One BIG observation: The greatest shift has been the perceived benefit of data. This finding is consistent with what Celent has heard from the survey; even small data projects have demonstrated value and created a greater appetite for more information.

Smart Robotics

Once upon a time, a screwdriver was required to program a computer. It was used to install a new vacuum tube or remove a faulty one and pass electricity in the correct sequence to signal a zero or a one. Thanks to Moore’s Law, we have progressed exponentially since then.

However, until recently, IT professionals have continued to operate in the same programming paradigm: providing instructions to a computer requires that a human knows the solution to a problem before they began coding.

Advances in techniques such as artificial intelligence, machine learning, deep learning, and cognitive computing are challenging this convention. Using these tools, knowing the answer in advance is no longer required.

Celent views this shift as the next “Big Idea” in computing. We have labeled such a platform “The Aware Machine.” It combines multiple emerging technologies to solve problems once deemed too expensive, too complex, or just unknowable…

The Celent Aware Machine, displayed in the figure, is a conceptual representation of a platform which combines multiple technologies: artificial intelligence, machine learning, cognitive computing, and/or deep learning.

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In this conference, I will focus on Social Media Intelligence, Big Data Analytics, and Smart Robotics, which are three major emerging technologies that are rapidly being adopted in the Financial Services Industry.

By participating in my session, you will understand the trend of modernization in Data & Analytics and how to introduce these three important technologies in various segments of the Insurance Industry.

In this conference, we will also discuss the impact of using AI and how to utilize this technology in Claims Management and Insurance Fraud.

Asia Conference on Claims Management and Insurance Fraud

13-14 Jun 2017, Mandarin Orchard Hotel, Singapore

Theme: "Managing Claims & Combatting Fraud as Strategic Tools for Success in the Era of Disruptive Innovation"

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Recommendation: Related Celent Reports

Social Media Intelligence in Insurance by Nicolas Michellod

Bigger Data: A Look at How Far Insurers Have Moved to Take Advantage of Opportunities by Craig Beattie, Nicolas Michellod

Machine Intelligence in Insurance: Designing the Aware Machine by Craig Beattie, Michael Fitzgerald

 

CELENT MODEL INSURER ASIA 2017: WHAT WE CAN LEARN FROM THE INITIATIVES

This post is an outline of CELENT MODEL INSURER ASIA 2017. Part 4 sums up this year’s entries in terms of 2017 nomination status and offers valuable insights, which we hope will be utilized effectively.

Conclusion

What can other insurers learn from the Model Insurer Asia initiatives?

Key learnings from the Model Insurer Asia case studies include:

  • Digitalization requires insurers to challenge each manual process and each check and balance to see if they are truly required, and if so, how they might be digitized.
  • Predictive analytics combined with infrastructures allowing insurers to exploit massive amount of data coming from various sources will be key investments insurers will pursue going forward.
  • The benefits of modernizing legacy systems are clear, but the process is neither easy nor often successful. Different methods may be used to achieve success, but all include strong oversight and clear direction. The most critical elements to any project’s success are best practices, organizational structures, and corporate culture.

Celent intends that by aggregating examples of best practices and achieved success metrics from across the industry, we can illustrate the degree to which insurers are making effective use of technology today and provide inspiration to insurers contemplating how to improve their own technology strategies.

Readers should take two key messages from the next report bellow. First, no one insurer does everything right. Rather, most insurers do some things right. Second, effective use of technology is more important than pursuing technology for the sake of technology. These are common among Model Insurer Asia 2017 winners.

 

— This event celebrates the success of the Model Insurer Asia winners. In addition, we will preview the Model Insurer Asia Report.

Celent Innovation & Insight Day Asia featuring Model Insurer Asia Awards

 

New release:

CELENT MODEL INSURER ASIA 2017: CASE STUDIES OF EFFECTIVE TECHNOLOGY USE IN INSURANCE

 

Back to the top of this topic – Click here

CELENT MODEL INSURER ASIA 2017: AWARD CATEGORIES AND NOMINATION STATUS, PART 3

This post is an outline of CELENT MODEL INSURER ASIA 2017. Part 3 explains 2017 nomination status, following Part 2. The trends and features of the projects in this year’s entries are summed up on a category by category basis in this part.

Legacy and Ecosystem Transformation

The benefits of modernizing core legacy systems are clear and compelling

  • Gaining a competitive advantage — or achieving competitive parity.
  • Reducing operational and IT costs.
  • Making better underwriting and claims decisions.
  • Seizing analytic advantages when information and processes become completely digital.

However, modernizing core legacy systems is easier to think about than to do. Modernization projects are costly: both in terms of cash out-the-door and in terms of staff resources (full-time or part-time assignments to design and implementation teams, backfilling those vacated positions). Technical complexity is usually high due to substantial amounts of IP (intellectual property) embedded in the rules, product definitions, and processes; as well as long established integration protocols (often point to point) with other internal operating and back-office systems.

This category has also reached its highest number of entries. In Asia, a large number of legacy modernization projects are being implemented. Even though they differ according to the company, what is common among them is use of cloud computing. They apply it to a common system platform throughout the company in order to standardize their system. Three representative projects are introduced below.

2017 Model Insurer Asia Candidate Projects: Legacy and Ecosystem Transformation

COMPANY PROFILE

PROJECT SYNOPSIS

Life insurance

Implemented a new business application to replace six disparate application systems, and to remove scalability and dependency issues.

General insurance

Implemented a new claims system to streamline and improve processes and system infrastructure, increase operational efficiencies, and provide better customer service.

General insurance

Implemented robotic business process automation and launched a chatbot to automate the business process as well as resolve customer queries accurately and efficiently.

 

Operational Excellence

Implementing new projects and technologies delivers demonstrable results. However, insurers also can generate significant financial improvements by improving the way they do business and the way they operate within the organization.

Sometimes operational improvements are generated by modifying the internal processes to be more efficient. Sometimes simply increasing collaboration and relationships between business and IT can result in operational improvements. While there are technology systems (project management tools, asset management tracking applications, etc.) that are helpful in this area, the most critical elements to success are best practices, organizational structures, and corporate culture.

All Model Insurer projects have some element of organizational excellence embedded within them; otherwise they would likely not have succeeded. Winners of the Model Insurer Asia in this category are insurers that have demonstrated excellence in a project specifically targeted at building a lasting foundation for IT management and operational excellence.

Asian insurance companies are trying to achieve a more modernized operational model and enterprise integration through the modernization of legacy systems. For insurance companies to develop and sell new products or services, the ability to make use of modern technology and establish excellent operational models is essential. Three examples that have achieved this are introduced below.

2017 Model Insurer Asia Candidate Projects: Operational Excellence

COMPANY PROFILE

PROJECT SYNOPSIS

Life insurance

Implemented a project tracking and management system incorporating project management best practices to ensure a drastic reduction in the problems faced by end users.

Life insurance

A Smart sales platform which automates end to end sales process from Target Planning – Activity Management – Lead Management – Sales Fulfillment – Performance Dashboard.

 

— This event celebrates the success of the Model Insurer Asia winners. In addition, we will preview the Model Insurer Asia Report.

Celent Innovation & Insight Day Asia featuring Model Insurer Asia Awards

 

To be continued – Click here

CELENT MODEL INSURER ASIA 2017: AWARD CATEGORIES AND NOMINATION STATUS, PART 2

This post is an outline of CELENT MODEL INSURER ASIA 2017. Part 2 explains 2017 nomination status. The trends and features of the projects in this year’s entries are summed up on a category by category basis in this part.

Data Mastery and Analytics

Analytics is a domain that has been given a new birth in the financial services industry recently. The crucial role new sophisticated analytics systems play in today’s insurance comes from different factors that are driving interest:

  • New data sources: data insurance companies can leverage has exponentially grown. Data sources are found not only in internal information systems but also in external sources.
  • The need to improve technical ratios: the insurance industry needs to find new ways to improve profitability, and in mature markets growing the business has become difficult. Therefore insurance companies understand they need to make investments in core business areas including: underwriting, pricing, claims, etc.
  • Emergence of new data analysis techniques: data sciences have made considerable progress over the past decades, and the emergence of new technologies has enabled drastic improvements in data analysis techniques including big data and machine learning.

This category’s entries include the following projects, which are all ambitious and totally worthwhile.

2017 Model Insurer Asia Candidate Projects: Data Mastery and Analytics

COMPANY PROFILE

PROJECT SYNOPSIS

Life, General insurance, Wealth management and Retirement solutions

Leveraged big data analytics to change its retention approach from policy-centric to customer-centric.

General insurance

Created an agriculture insurance system with use of best practices and experience of field data management.

 

Digital and Omnichannel

Digital is a phenomenon affecting every process and operation in insurers as well as the ecosystem of partners and their customers. The increasing abundance of data, the sheer number of gadgets, cameras, and sensors, and the role of advanced analytics is reshaping what is available and reasonable to expect in real time. Insurers want to transform their processes and make them digital to meet the changing expectations of staff, suppliers, and customers. Industries around the globe either leverage digital technologies or find themselves having to respond to digital disruption.

Digital transformation is a vast topic that insurers globally have tried to address for many years. Celent defines digital transformation as the strategy of transferring as many manual tasks as possible into digital activities. This strategy can be achieved in different ways, including:

  • Automating processes.
  • Selling products online.
  • Leveraging mobile devices and mobile technologies in general.
  • Dematerializing documents and communication materials.

Digital requires a different way of thinking about business and forces insurers to challenge each manual process and each check and balance. The insurer must test to see if these are truly required, and if so, how they might be digitized. Many insurers have sought to bring straight-through processing to parts of their claim process, to leverage digital channels to capture information, and to update their customer. It takes a different level of commitment to try to drive that thinking all the way through the process.

This category received the highest number of entries this year. Every insurance company in Asia seems to be trying to aggressively adopt digital technology. Moreover, we found many digital transformation examples, which vary depending on the insurance company’s profile, competition, and customer base. Accordingly, we can say that the projects in this category show the most potential. We sorted the entries into five sub categories and have introduced a representative project from each one in the list below.

2017 Model Insurer Asia Candidate Projects: Digital and Omnichannel

THEME CATEGORY

COMPANY PROFILE

PROJECT SYNOPSIS

Support agent channel

General insurance

Developed a mobile app for agents, enabling them to tap the market without depending on back office staff for quotes and writing policies

Omnichannel

General insurance

Implemented an OEM Integration platform to enable OEMs and insurance aggregators instant policy servicing in their respective applications without any manual intervention by the insurance company.

Multiple channels

Life insurance

Implemented a mobile app to provide end-to-end sales tools that enable instant policy issuance, bundled with good customer experience.

Service

Health insurance

Created a digital office with a self-service portal for customers and an online distribution tablet solution for advisors.

Enterprise-wide

General insurance

Promoted computerization to create the next generation agency business model, without forgetting the humanity of employees, agents and customers.

 

Innovation and Emerging Technology

Innovation continued to gain traction. Changing customer expectations, digital transformation, growth needs in the face of resource scarcity, and environmental concerns are impacting every industry, including financial services. These changes accelerate the growth of the sharing economy and the demand for new customer value.

For example, the rise of sensors and intelligent digital ecosystems blur the boundaries between the digital and physical worlds and generate massive new data sources. Next generation analytics and artificial intelligence are coming on stream to harness that data and provide new services to prospects and clients.

Celent’s research on innovation plans in financial services for 2016 (Innovation Outlook 2016) found that the pressure to discover new sources of value for customers will continue. In 2017, implementing known solutions in these areas to gain parity with competitors will continue to be a priority.

In Innovation and Emerging Technologies, we can see the history of each company’s projects and their future strategy. Innovations are becoming more and more important, particularly from strategic perspective, as is obvious from the projects in this year’s entries. On the other hand, innovations should not be transient events but persistent changes in a set routine, which will lead to improvements in corporate quality. We have introduced two of the projects below that prove how important and effective innovations are for companies to grow.

2017 Model Insurer Asia Candidate Projects: Innovation and Emerging Technology

COMPANY PROFILE

PROJECT SYNOPSIS

Insurer's innovation centre

Created an innovation framework and culture to generate new revenue streams from new business models and digital capabilities based on customer insight.

Digital insurance company that is a joint venture partnership between Insurer and Bank

Implemented an end-to-end insurance software in the cloud deployed by a single software vendor.

 

— This event celebrates the success of the Model Insurer Asia winners. In addition, we will preview the Model Insurer Asia Report.

Celent Innovation & Insight Day Asia featuring Model Insurer Asia Awards

To be continued – Click here

CELENT MODEL INSURER ASIA 2017: AWARD CATEGORIES AND NOMINATION STATUS, PART 1

This series of posts is an outline of CELENT MODEL INSURER ASIA 2017. Part1 explains award categories.

We received a large number of entries for this competition again this year. We carefully examined these, from the end of the year 2016 to the beginning of 2017, in each of five categories.

The vision for Celent’s Model Insurer research is to try to answer an apparently simple question: What would happen if an insurer utilized today’s technology in the most effective way? Now technology is playing a more important role in every insurer’s strategy than ever before.

CELENT MODEL INSURER AWARDS consists of the following five categories, which embody the vision detailed above. In other words, these five themes are essential for any modern insurance company that wants to successfully carry out best practices.

Data Mastery and Analytics

Data has become a key source of competitive advantage for identifying profitable niches, managing risk, and improving service. New external data sources, data derived from devices, and new techniques for interpreting data are pushing the competitive boundaries for insurers at an accelerated rate. This theme recognizes projects such as predictive analytics (claims fraud, underwriting, pricing, climate analysis); prescriptive analytics (triage, sales automation, “next best action”); and virtualization (dashboards and heat maps, catastrophe management, network analysis, geopolitical risk analysis).

Digital and Omnichannel

Digital transformation is moving from person-to-person interaction toward person-to-machine or machine-to-machine. Integrating and coordinating among disparate and siloed delivery channels will be critical to satisfying ever-increasing customer expectations. Using the definition that digital automates complex tasks, allowing them to be mastered, then reproduced and distributed at no cost, this theme recognizes projects such as online customer portals; industrialization of processes; engaging user interfaces; online sales with STP; integration with business partners; leveraging social networks; and the use of mobile technology.

Innovation and Emerging Technology

Celent defines innovation as fundamental changes to products, services, or business models that break existing tradeoffs and provide value to the customer. New hardware, software, and network technologies feed insurance innovation. This theme recognizes projects such as the expansion into previously untapped markets due to technology; the use of technologies not previously used in the insurance industry; or the development of an innovation culture within an IT organization. This category also includes Insurtech initiatives which are rapidly expanding development and application of new technologies and operating models with the aim to fundamentally change current business models, financial models, and/or industry ecosystem.

Legacy and Ecosystem Transformation

Legacy technology can hinder innovation, since insurers must typically offer backward compatibility. Insurers must not only modernize, but also transform their internal systems and how they interact with customers, counterparties, and regulators. This theme recognizes projects related to core system replacement or transformation including policy administration, document management, customer relationship management, new business, illustrations, billing, claims, and rating/underwriting.

Operational Excellence

What does it take to safeguard investments in technology and improve upon IT processes? This theme recognizes projects such as successful reuse of technology for new initiatives; implementation of a non-core system such as illustrations, document automation, electronic applications, best practices in IT governance, IT operational management or IT risk management and security policies.  Achieving operational excellence, requires transforming processes and systems into competitive advantages by making them leaner, faster, more flexible and of higher quality.

 

— This event celebrates the success of the Model Insurer Asia winners. In addition, we will preview the Model Insurer Asia Report.

Celent Innovation & Insight Day Asia featuring Model Insurer Asia Awards

 

To be continued – Click here

2016年後半のカンファレンスを振り返る

カンファレンスは、いつも刺激に溢れています。2016年もアジアの各地で、パネルディスカッションやプレゼンテーションの機会に恵まれました。自らのプレゼンテーションを通じて、過去のリサーチ成果を発信するだけでなく、カンファレンス・チェアやパネル・モデレータの役割は、業界ソートリーダーとのインプロビゼーションであり、将来のリサーチトピックスやインサイトテーマを仕込む、貴重な瞬間です。人が出会い、意見を交換し、議論を深める。そのための準備と当日の緊張感は、アナリストの責務であり、醍醐味でもあります。 本稿では、2016年後半の5つのカンファレンスを振り返ります。銀行、保険、証券、ウェルスマネージメントの各業界の議論に共通したキーワードは、引き続き、フィンテック、デジタル、そしてモダナイゼーションでした。
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Insurance, Digitization and Bubbles(7月1日:東京)

保険業界は変革を迫られています。超低金利、新規事業参入者の増加、激化する価格競争、顧客との関り方の急激な変化が、保険会社の商品/ビジネスモデルを揺さぶっています。モノのインターネットやスマートロボットだけではなく、いまやブロックチェーンも保険業界に大きく影響しつつあります。 こうした新しいテクノロジーは、本当に業界を根底から変えてしまうのでしょうか? 仮に変化があるとするならば、いつ、どんな出来事が、どのような順序で起こるのでしょうか? セレント主催の本イベントでは、世界の保険業界におけるデジタル改革の最新トレンドを紹介し、お招きした日本の保険業界を代表するソートリーダーの皆様と、中長期的な視点での将来像を模索しました。
  • 世界の保険業界におけるデジタルトランスフォーメーションの最新トレンド
  • InsurTechが保険業界の未来、ビジネスモデル、事業運営に与える影響
  • 短期、中長期的な視点での展望、業界の未来図
  • 日本におけるInsurTechの現状と展望
Insurance, Digitization and Bubbles
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Asia Anti-Money Laundering Summit713-14日:シンガポール)

アジアにおいても欧米同様に、規制の継続的な改正、最大手の金融機関における規制違反事例など、AMLの運営管理全般を改善する必要性が高まっています。電子取引の爆発的な普及は新たな課題をもたらしており、金融機関が様々な事象をチェックする際に、もはや規制当局や政府公認のブラックリストだけでは不十分な状況にあります。 AMLはまた、海外業務を展開する大手銀行だけのテーマではなく、全金融機関において同様な備えとその効率化が問われる時代となっています。本イベントは、アジアの保険業界を中心としたコミュニティにおいて、AMLとKYCを真正面から討議する場となりました。 セレントからは当日、以下の既刊レポートを中心に、「ユーティリティモデルの隆盛とAI適用」に関する報告を行いました。 Asia Anti-Money Laundering Summit
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Asia Insurance Technology Awards95-6日:シンガポール)

2016年も引き続き、セレントは、AIR の主催する Asia Insurance Technology Awards (AITAs) の審査員を務めました。アジア各地の保険業界における、イノベーションと現代化に関する先進的な取り組みを表彰するこのイベントは、セレントの主催するアワード:セレントモデルインシュアラー と併せ、当社アジア保険部門の2大イベントとなります。 新たなテクノロジー、ビジネスモデルそして業界構造や組織変革への取り組みが、6つアワードカテゴリーにおいて表彰されました。中でも、Best Newcomerに輝いた Everledger(英国)、Digital Transformationを獲得した PetSure(オーストラリア)の両社は、InsureTech時代を象徴する取り組みと賞賛されました。
  • IT Leadership: Liberty Videocon General Insurance
  • Best Insurer, Technology: New China Life Insurance, Max Life Insurance
  • Digital Transformation: AXA Asia, PetSure (Australia)
  • Big Data and Analytics: AXA Hong Kong
  • Best Newcomer: Everledger
  • Innovation: IDBI Federal Life Insurance, Ping An Property & Casualty Insurance Company of China
Asia Insurance Technology Awards
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5th Asia Insurance CIO Technology Summit95-6日:シンガポール)

AITAと同時開催のアジア保険CIOサミットにおいて、キーノートスピーチ「InsurTech & Digital: A Global Round-Up 」を提供しました。 さて、保険会社の存在価値とは何でしょうか?
  • 安心、安全、健康な人生を支援する
  • 企業活動の全てのリスクを担保する
  • 人生の、企業活動の不安とリスクを軽減する仕組みの提供
様々な表現で語られますが、全てに共通することは、「顧客中心」主義。一方で、これまでの金融機関におけるテクノロジー活用の中心命題が、長らく
  • システム化による、人手から機械への代替による合理化、コスト削減 であったことは事実です。
しかし、テクノロジーの進化とその爆発的な普及は、こうして古典的な命題を激変させました。本キーノートでは、情報とテクノロジーを手にしたデジタルな顧客に対峙する現代の金融機関は、
  • 「デジタルな顧客中心」主義であるべき と提唱しました。
また、デジタル世紀の金融機関が遭遇している、急激な業界構造の変化に対して、
  • 「戦略自由度の担保」とそれを実現する「アーキテクチャ」 も提案しました。
5th Asia Insurance CIO Technology Summit
***

TradeTech Asia 20161019-20日:シンガポール)

キャピタルマーケットとウェルスマネージメント業界の祭典 TradeTech Asiaは、今年もシンガポールで開催されました。セレントは長年、このイベントのカンファレンス・チェアやモデレータを務めてきました。ウェルスマネージメントにおけるロボアドバイザーの台頭、トレーディングデスクにおけるAlgoからAIへのシフトが鮮明だった2016年は、アジアの機関投資家の方々と、以下のパネルに参加しました。
All Star Panel: How can you use machine learning and artificial intelligence for predictive analysis and accurate analytics?
当日は、セレントのAIフレームワーク:人口知能モデルを披露し、資本市場、資産運用ビジネスにおける、AI活用の現状と展望に関して、以下の事柄に言及しました。
  • トレーディングライフサイクルの最適化におけるAIの役割
  • 投資分析の予測能力や正確性を向上させるAIの適用方法
  • リサーチ:投資分析やポートフォリオ分析におけるAI活用
  • AIとコンプライアンス:不正取引の監視におけるAIの活用
  • 購入か利用か、構築か?:AIにおけるフィンテック企業の可能性
TradeTech Asia 2016  

Core System Strategies for the Fintech Age: LEGACY MODERNIZATION IN INSURANCE INDUSTRY, Part 6

Finally, we will speak out the proposal from three perspectives…

  1. Automation to Complex Systems
  2. Core Standard and Local Variation
  3. Review Sourcing Models

Winding down this post series, Celent would like to put forth an approach specifically tailored to helping insurers formulate modernization plans.

This entails determining top-priority business strategy challenges, formulating a solid scope definition sufficiently reflecting a firm’s capabilities, strengths, and appetite for risk, architecture design, and assessing the feasibility of the project.

***

 

LANDSCAPE AND TARGETING

It is important to create a conceptual diagram that will function as a systems map, containing the peculiarities and implied information to give stakeholders a clear overview of the systems.

In addition, using a system landscape, which is an accepted industry approach to convey knowledge (including the constitutive elements of the core systems in the context of business goals and by involved stakeholder), companies can thrust the unique and peculiar elements into relief.

This task will probably be unfamiliar to Japanese insurers who have designed, developed, operated, and maintained their own core systems. In short, it will be difficult to determine

  • What is standardized?
  • What is peculiar?
  • What can be outsourced?
  • What should be internalized?

Identifying modernization targets, along with formulating the project scope definition, will facilitate setting business strategy priorities and will help lead to emphasizing core system priorities based on desired capabilities.

FIG6-1: Landscape and Targeting: Insurer System Landscape

FIG6-1

 

MODERNIZATION THAT AVOIDS RECREATING LEGACY ISSUES

The greatest risk of any legacy modernization project is recreating legacy issues.

Indeed, Celent regards this as more significant than both stable system operation and realizing a business case.

It is of paramount importance that modernization projects do not recreate legacy challenges but rather free firms from them. Celent puts forth the three proposals below to help ensure that insurer modernization initiatives are successful.

1. Automation and Its Application to Complex Systems

The key to attaining a high level of operational efficiency, not only among systems, but also with straight-through processing (STP) of insurance office tasks as well as office and communication processes, lies in applying automated business processes to complex systems tasks (this refers to processes that are excessively concentrated and frequently require exceptions processing).

When it comes to communication among insurer stakeholders (customers, intermediaries and agents, employees, management, and others involved in the market), it is important to look at several things including rethinking stakeholder interaction and communication (reports, contact, and consultation routes that occur in daily operations), making communication possible through a portal, and the possibility of consolidating existing applications such as workflow tools.

The capacity for insurance office activities to be automated (core processes, exceptions processing, eligibility criteria, business rule management, and business process management) is rooted in a common infrastructure and the monitoring tools of this infrastructure. The positions and opinions of many internal staff members, ranging from actuaries, underwriters, and marketing staff to name a few, must be considered when, for example, implementing a monitoring scheme, renewing automated rules and processes, and setting and modifying governance rules. In particular, for changes in rules or processes, the transition must be rapid and be able to respond to increased business volume. In addition, the objective of STP is to minimize exceptions processing. Eligibility criteria need to be used from the initial stages of the process even if conducting appropriate process routing.

FIG6-2: Automation to Complex Systems

FIG6-2

 

2. Establishment of Core Standard and Allowance for Local Variation

The key to realizing agile operations and reducing IT costs is determined by reusability and standardization in lower layers. Of the three layers of presentation, business logic, and data, the first two, must be shared to standardize and make the data layer reusable.

This is difficult as shown by the insurer responses indicating that "data model rigidity" is one of the largest IT challenges. While it may be difficult, if insurers do not address this matter, they are doomed to recreate their legacy issues.

FIG6-3: Core Standard and Local Variation

FIG6-3

 

To avoid being ensnared in this pitfall, Celent recommends referencing the below approach. These are universal issues that are applicable across industries, and Celent hopes to see vendors create tools and strategies that offer better solutions to this problem.

  • Presentation layer:
  • Configuration for unique user interface (even if fixed or common, configure using tool base).
  • Equip with framework for items such as shared user interface, reporting, and audit procedures, security (even if for unique user specifications, configure using tool base). 
  • Business logic layer:
  • Architecture allowing common office processes and unique variations to operate in tandem.
  • Equip with rule library to implement unique variations and common office processes (even if for unique user specifications, configure using tool base). 
  • Data layer:
  • Standard data model and field for adding unique items.
  • Mechanism to allow the use of non-structured data.

FIG6-4: Core Standard and Local Variation (cont.)

FIG6-4

 

3. Review Sourcing Models

Formulating a modernization plan should include a review of sourcing models. This should start with the design phase, involve assessment of the build phase, and sufficiently verify plan feasibility.

Global insurance IT firm offerings are many with options spanning core system build, operation, and maintenance. IT firms have expanded their scope of activities to include areas such as maintenance of existing applications, testing relating to the center of excellence (CoE), and data migration.

FIG6-5: Review Sourcing Models

FIG6-5

 

We should conclude this post series in this page.

KRQ #3: What does an insurer roadmap to modernization look like?

We’ve found the following:

  1. Legacy modernization framework.
  2. Understand your organization’s priority challenges and risk tolerance.
  3. Scope definition.
  4. Ensure that your modernization does not simply reproduce legacy issues.

 

Related releases:

Legacy Modernization in Japan’s Insurance Industry, Part 1: Survey Analysis and Status Update

Legacy Modernization in Japan’s Insurance Industry, Part 2: Prescriptions and Proposals

 

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Core System Strategies for the Fintech Age: LEGACY MODERNIZATION IN INSURANCE INDUSTRY, Part 5

LEGACY MODERNIZATION FRAMEWORK

Since its inception, Celent has helped host countless events to facilitate financial institutions selecting the optimal next-generation core system.

Sometimes as a project management office (PMO), other times as a third party advisor, Celent has long been deeply involved in working with financial institutions on processes to optimize core systems.

Rooted in this wealth of advisory experience spanning countless projects, Celent has formulated and suggests using the theoretical yet practical framework in this table.

In the modernization project, three things you should know before starting a tender are:

1. VISION AND CONCEPT

  • Initial motivation and direction

2. CHALLENGE AWARENESS

  • Management, systems, products and services, business process and its priority

3. EXPECTED CAPABILITIES

  • Quantitatively, qualitatively, need to measure the ability of your organization

FIG5-1: Legacy Modernization Framework

FIG5-1

 

The next three things you should need are Methodology for the best project execution:

4. SELECTION PROCESS AND POLICY

  • Usually, it is the Constitution of the project, the project charter to be a live document, these seven items are described.

5. SCOPE DEFINITION

  • Not only the solution to be implemented (the new system and the new organizational structure), all of the things that the organization is involved up to its realization, without omission, rather than duplicate, each other without contradiction, MECE (Mutually Exclusive and Collectively Exhaustive) is essential.

6. REVIEW PROCESS

  • Especially in its project members, evaluation team, it is necessary to ensure the cross-organizational human resources:from both sides of the solution evaluation and commercial evaluation.

FIG5-2: Legacy Modernization Framework (cont.)

FIG5-2

 

When selecting a next-generation core system, the important thing is not to depend on industry-specific differences or degrees of complexity, but to establish a methodology that is versatile.

In other words, the essence of legacy modernization is a comprehensive framework.

That should highlights top-priority business strategy challenges, includes architecture design, and fully reflects the scope definition in light of a firm’s capabilities and strengths to assess the feasibility of the project, all while making sure that it is a good fit.

The KFS are Scope Definition; Understanding Your Risk Tolerance and Organization’s Priority Challenges.

FIG5-3: Scope Definition

FIG5-3

 

Factors that will be crucial to determine the success of system modernization projects include firmly understanding your organization’s priority challenges and appetite for risk coupled with a good project scope definition.

This involves determining priority areas, what to procure and build, and what to cut — all within the scope of your risk tolerance.

Maximizing the use of limited business resources to respond to increasingly diverse and sophisticated digital users’ needs cannot be achieved by simply letting things take their natural course; rather, this requires intent and taking the initiative.

FIG5-4: Legacy modernization is a strategic move in digital innovation

FIG5-4

 

Related releases:

Legacy Modernization in Japan’s Insurance Industry, Part 1: Survey Analysis and Status Update

Legacy Modernization in Japan’s Insurance Industry, Part 2: Prescriptions and Proposals

To be continued – Click to read more

 

Core System Strategies for the Fintech Age: LEGACY MODERNIZATION IN INSURANCE INDUSTRY, Part 4

This post series examines the current status and future directions of legacy modernization in Japan’s insurance industry.

It is based on a legacy modernization survey Celent conducted in 2015. The survey targeted insurers, financial institutions, and brokers. It was supplemented with additional information gathered in follow-up interviews.

The new two-part report is an extension of this work that narrows the focus to the insurance sector.

The Report Part 1 offers an overview of the state of modernization in the industry.

The Report Part 2 builds on this to offer policy prescriptions and suggestions for industry players.

KRQs: Our Key Research Questions are…

  1. Where are Japan’s insurers in terms of legacy system modernization?
  2. What does legacy system modernization mean to insurers and why do they do it?
  3. What does an insurer roadmap to modernization look like?

In Part1 – 3 of this post series, we’ve discussed the KRQ1 – 2.

From Part 4 of this post series builds on this by seeking to answer questions three.

***

 

What about the DIGITAL FINANCIAL SERVICES?

First, we will address the relationship between digitization, innovation, and legacy modernization.

  • Celent advocates that companies revisit how they frame the legacy modernization challenge and stop thinking about it as a system unit or cost center issue.
  • Interviewees told us that it was not that core system business cases were not viable, but that business cases without ownership were not viable. Determining where costs should be allocated and breaking down the attendant benefits are important, but more important is reaffirming that today, success hinges on modernization of core systems and core system business processes for more than half of digital financial services.
  • Companies talk the talk and undertake digital projects, but these are often limited to the front office — that is to say, the contact point with the customer. At the same time, today’s digital consumer is increasingly comfortable with digital processes.

In Europe and the United States, digital native financial services have undertaken modernization of core business processes to such an extent that they will not consider adoption of a process that cannot be digitized. Here, we want to show a diagram that portrays the eight dimensions of digital financial services. Figure 6 draws attention to the importance of core systems of the middle and back office and operational processes, which collectively occupy more than half of the eight dimensions.

FIG4-1: Digital Financial Services

FIG4-1

 

The level of digitization reflects the modernization level of core systems.

In other words, the digitization of customer behavior spurs a shift in the digital processes of financial services (such as STP, automation, and self-service), which in turn drives the modernization of legacy systems — a difficult challenge that many people would rather ignore.

It shows us the stages of digital adoption. It is premised upon a modern core system in the middle and back offices that seamlessly combines with front-end digital channels.

FIG4-2: Digital Transformation

FIG4-2

 

DIGITAL NATIVE INITIATIVES

In the insurance industry, a novel business model is appearing. Still in its early stages, this approach fuses peer-to-peer (P2P) insurance with the traditional insurance model, creating insurance based on small circles or small communities.

This insurance is based on a small inner circle that is akin to a “circle of friends.” This approach has deftly used social networks to find a foothold and niche that meets the needs of digital natives.

It has undergone two or three iterations, is optimizing cost, and growing a new customer base at an extremely rapid clip.

Here also technology is the key to agility.

FIG4-3: Digital Native Initiatives

FIG4-3

 

DIVERSIFICATION OF TECHNOLOGY SOURCING MODELS

In the insurance industry, IT needs have accelerated to an unprecedented pace in the third sector arena, which includes new service sectors such as medical and nursing care, involving the addition of new sales channels and novel underwriting assessment models using AI, the IoT, and robotics.

The securities industry is also experiencing change and heightened requirements in terms of variability and flexibility for core system and back office operations (such as securing availability, variability, and scalability related to processing, latency, and connectivity to accommodate varying transaction sizes).

SaaS and BPO are no longer the latest and greatest technologies. Instead they are only two of the available sourcing model choices to accommodate the level of involvement that financial institutions and their technology partners desire as well as their resource, cost, and risk parameters.

Like best execution and optimized trade market selection, these choices are subject to pressure from sponsors and shareholders. Selecting technology models that can accommodate varying transaction volume and frequency is becoming the norm, and relationships between financial institutions and technology vendors are changing from a more specialized model to a more utility-based model.

FIG4-4: Technology Sourcing Models

FIG4-4

 

Related releases:

Legacy Modernization in Japan’s Insurance Industry, Part 1: Survey Analysis and Status Update

Legacy Modernization in Japan’s Insurance Industry, Part 2: Prescriptions and Proposals

To be continued – Click to read more

 

The 2017 Model Insurer Asia Nominations Start Now!

Every year, Celent recognizes the effective use of technology through its Model Insurer Asia Awards program. We are pleased to announce that the nomination period for 2017 award is now open.

From September 15, we will be accepting Model Insurer Asia nominations. The window for new entries will close on November 30. We are looking forward to receiving your best IT initiatives. The Model Insurer Asia award program recognizes projects that essentially answer the question:

"What would it look like for an insurance company to do everything right with today’s technology?"

It awards insurance companies which have successfully implemented a technology project in five key categories:
•Data mastery and analytics.
•Digital and omnichannel technology.
•Innovation and emerging technologies.
•Legacy transformation.
•Operational excellence.

Past winners include Max Bupa Health Insurance, Ageas Insurance Company (Asia), AXA Asia, Birla Sun Life Insurance, Tokio Marine & Nichido Fire Insurance, Yingda Taihe Property Insurance, Cathay Century Insurance, and Ping An Direct to name a few.

Does your company have what it takes?

If you believe that your company exhibits best practices in the use of technology, please read the Model Insurer Asia Submission Guidelines, and complete the brief nomination form by November 30, 2016.