Canadian Underwriter

The IT department

August 28, 2017   by Martha Porado

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Implementing the right software can make or break business operations for an insurer. But the best tools are pricey, and are complicated to get rolling. For brokerages, those investments can seem orders of magnitude more expensive from a proportional point of view and mean implementing massive change in processes and procedures.

“The onset of cloud computing has had a significant impact on all industry verticals,” says Doug Schneider, partner, IT advisory, at KPMG. “When you look at some technologies like Amazon Web Services, Microsoft Azure, IBM and its Bluemix platform, Salesforce and others,” it’s clear that cloud-based tech is becoming all-pervasive.

These new tools “have allowed insurance companies to look at areas that are non-strategic to their business, and offload some of the legacy cost,” Schneider says.

“Moving [things like] HR systems, mail communication, messaging systems, service management and marketing systems off legacy-type platforms [gives them] much more modern capabilities. You can develop much faster, deploy much faster, and they’re far more cost-effective,” he says.

IT on offense

To be sure, many insurance companies are making IT investments with brokers in mind.

“In 2014 we announced we had selected Policy Center from Guidewire,” says Kelley J. Irwin, CIO at Economical. “It would replace our internally built policy admin system as part of our ongoing transformation program.

“We’re making this investment because we believe, in the future, a large percentage of the population will continue to want to work with brokers to seek guidance and advice from them,” she says. Broadly speaking, the new tool will eliminate many administrative inefficiencies, allowing brokers the maximum amount of time to foster their ongoing relationships with customers.

of U.S. small and medium-sized businesses experienced a cyberattack between 2015 and 2016

Source: Ponemon Institute, 2016

Similarly, KPMG’s Schneider points to Salesforce, the world’s preeminent customer relationship management (CRM) system, as a tool that can allow insurance companies to replace the entire customer service centre desktop and its communication with customers. “Most of the insurance companies do not have integrated contact centre capability across product lines, so they are very siloed by product,” he says.

“The Salesforce desktop has provided the opportunity for insurance companies to look at how they can start aggregating client data in one spot and allow more servicing across product lines… These platforms, 10 years ago, obviously did not exist with the sophistication they do today.”

Some P&C companies in Canada are jumping on board. In an interview with Canadian Insurance Top Broker last fall, then-CEO of Zurich Canada Patrick Lundy noted the company’s investment in Salesforce technology.

Salesforce also serves as a useful example of the different challenges brokerages have around IT investment compared to insurance companies. For someone like Adam Hare, chief operating officer, Insurance Jack & Petley-Hare, a platform like Salesforce was out of the question. “[It’s a] really high-end tool for lead management, but I still think it’s too expensive for the size of shop we’re running.”

However, other options exist. “Velocify is a tool that we’re using for lead management, which is putting a grip on inbound opportunities that are hitting our business,” Hare says. He paints a picture of the office before this software, noting the strong potential for failure in following up with potential leads without a strategic system in place to handle the timing and implementation of those key communications.

“So-and-so’s friend wants a call, there’d be a post-it note left on a desk reading ‘Sally wants a quote.’ I looked at this and thought, ‘What happens when we call Sally one time and then we get busy and can’t follow up?’”

The CRM debate is indicative of a bigger issue. For a brokerage, the risk of investing in a new system, only to have said system made outdated by a newly released option, is always present.

“We’ve spent a lot of time researching and figuring out whether something is a good business move for us. And it’s not a one-year thing. Anything we would be looking at has to have some longevity,” says Hare.

“It’s kind of a gamble,” he says. “At the end of the day we’re not specialists in that field, so we’ve really tried to team up with and outsource to people who do understand that field.”

Options that are standard for larger companies are only just becoming the norm for smaller players like Hare’s Insurance Jack, where the resources needed to both choose and purchase a new system represent a significant allocation.

“We went with a company out of the gate and we tried it for six months and it didn’t end up working. The flow of it didn’t really work, it didn’t sit right with us.” Eventually he said, “Scrap it, we’re starting again, and then we hooked up with Velocify and we’ve had a great relationship with them.”

“IT investment in our industry is typically targeted at 3.5% of gross written premiums,” says Economical’s Irwin. Over and above that average, “we’re making targeted, strategic investments that involve our direct channel platform for Sonnet, and our broker policy admin system.

“We have 225 employees in IT at Economical and we also partner with strategic vendors, for software as a service, and data centre services. We believe it’s important to have a strong base of knowledge internally in IT,” she says.

IT on defense

Cybersecurity is on everyone’s lips. “This year alone, global ransomware attacks such as the WannaCry and NotPetya viruses have highlighted the need for cybersecurity measures,” says Catherine Smola, president and CEO of the Centre for Study of Insurance Operations (CSIO).

The data insurers possess about their customers is far more sensitive than what other big companies may have. A retailer getting hacked for credit card numbers is a relatively quick fix—customers can cancel the card. The personal data insurers are privy to, if nefariously acquired, creates more confusion and alarm for clients.

“Salesforce is a really high-end tool for lead management, but I still think it’s too expensive for the size of shop we’re running.”

“Especially if you look at the group benefits or employee benefits line of business, [insurers] have access to [lots of] personally identifiable information,” says Schneider.

Such prominently covered attacks like WannaCry “actually allow organizations to demonstrate their ability to respond,” Irwin says.

“There’s always something happening that shows us that we need to continue to invest in this. Our major focus area is the personal and financial information of our customers. If we don’t protect that and we have loss of confidence, then that’s not something that is easily recovered,” she says. “We have an ongoing investment in an information protection program. So it’s not the type of program that you launch and finish.”

“The other thing is issues that have occurred as a result of integration with third parties, so that’s elevating concern over managing those third-party relationships, and making sure that we do the correct due diligence before we’ve partnered with any of these vendors,” Irwin adds.

On the brokerage side, Hare says it was a major shift in company operations to move the handling of IT over to an outsourced third-party. “We realised very quickly when we had everything internally, a lot of things were going wrong and we weren’t the best ones to be handling that.”

Considering that “we have all this client information that we need to make sure isn’t being accessed, we took it very seriously.”

Hare tells an almost quaint story about running and forth to back up data on analogue tape. “I would have to move it into a firebox, and make sure that was locked up, or we’d have to take it with us […] it was a nightmare. And that was only four or five years ago.”

“We made the switch about three years ago and took everything out. Now we have everything housed offsite,” he says.

There is a certain amount of blind trust going on when mid-tier players outsource their IT management. They are at the mercy of a third party who assures the brokerage that their systems are secure.

“We’re definitely not quaking in our boots.,” says Hare. “We feel very confident and safe with where we are, but also knowing that anything is possible.

of small business owners in the U.S. say price is the most important factor when making technology-buying decisions

Source: Salesforce, 2016

“Our phones still get hacked. […] someone will hop on a line and once they do they can make calls to wherever.” Just another example of the vulnerability of legacy tech.

“The high attendance at CSIO’s webinars on cybersecurity suggest our members’ keen interest in protecting their data. Members were particularly interested in our webinar on ransomware, showing an evident concern about this form of cyberthreat, among others,” Smola says. The human element is also an enormous factor in maintaining security. “Cyberattackers use human interaction and/or social skills to obtain information. For example, internal employees may request passcodes or other information from colleagues to help gain access to company systems,” says Smola.

“We’re hosting seminars, inviting experts to come and speak with our employees […] we try to prepare them as much as we can,” says Hare.

“We’re almost lucky that this is becoming so topical in the news, so it is really being talked about within the industry. Any of these insurance companies where they’ve seen these big claims, they want to send reps out to speak to our teams about this stuff,” he says.

“We just went through a whole exercise with [our IT company] around what if a cyberattack were to happen.” Hare explains. “As a smaller organization we’re taking this more seriously than we would have five years ago. Having a disaster plan in place is not just for a flood anymore. What if something were to happen to all of our data? We’ve been proactively looking at that with our leadership team.”

Copyright © 2017 Transcontinental Media G.P. This article first appeared in the August 2017 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.