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FEATURES

COVID-19 has forced companies to innovate and implement new practices to comply with stay-at-home mandates. Organizations put several stopgap measures in place to accommodate the shift from face-to-face operations to remote ways of conducting business.

KEN TOFFOLORESEARCH COUNCIL FELLOW

EVOLUTION AT WARP SPEED Bill Gates famously said that we overestimate the changes in the next two years and underestimate the changes in the next ten, but he didn’t say anything about the last two months. For many insurers, the previously unthinkable—fully remote company operations and fully digital sales and service models—has become reality.

Some had a harder adjustment than others, and some were able to take advantage of recent digital investments and thrive. But as they make plans for the After Times, insurers can’t unsee what they’ve seen about the digital future. Insurers of the After Times are going to be a lot more digital and a lot more organizationally agile.

IT strategies for the After Times are starting to come into focus. Early indications show a much greater focus on digital capabilities and continuing core systems investments, at least in some sectors.

Innovation programs, on the other hand, are more likely to be refocused on immediate business impact or deprioritized.

Of course, we’re all living through the greatest test-and-learn opportunity any of us will ever have. If there are two silver linings to this tragic situation, they are that reality is challenging long-held dogma about “what’s possible” and that insurers are learning that their teams are capable of great things when they have a strong sense of urgency and common purpose.

We’re privileged to continue helping more than 100 insurers make better decisions about technology strategy in this ever-changing world.

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HOW CIOS CAN PREPARE FOR COVID-19’S IMPACT ON IT BUDGETSBY CHUCK RUZICKA

While the full financial impact of the COVID-19 pandemic is unknown, it is almost certain

that there will be a negative short-term impact on IT budgets and pressure to cut costs for the entire organization.

In the short to intermediate term, revenue and cash flow shortfalls will occur as cancellations increase due to missed payments; commercial account payrolls are reduced, which will impact workers’ comp premium; bankruptcies limit small commercial growth; and new sales by agents decline due to less frequent interaction with potential clients.

Reduction in loss frequency may help auto insurers, but other lines will see an increase in fraudulent claims. Life companies will see an increase in death claims, which could get offset by ending some annuity income payout streams. However, lower bond yields will exacerbate life company expense issues.

The world was already moving toward full digitization, but recent experiences due to the virus will increase customer expectations for full digital access and accelerate these trends. Traditional cost-cutting approaches may be too shortsighted. Historically, contracting expenses are first to be reduced when there is expense pressure.

This is perceived as an easier cut to make as employees are not impacted. However, with IT relying on outsourcing to deliver new capabilities, this will significantly impact all business transformation projects.

Pilots and any experimentation or R&D are also the first things to be cut. Pilots are meant to generate learning and test new technologies or processes. By continuing to invest, an organization will gain knowledge and be better prepared for rollout as the economy turns around. Failing to conduct pilots will put insurers further behind.

What CIOs Should Do Now

Create a prioritized list of projects to be cancelled or delayed. Instead of waiting for across-the-board mandates for reductions, CIOs should identify lower priority initiatives or troubled projects and stop them rather than weakening every effort or removing a critical resource from a strategic project. This may actually sharpen focus, reduce risk, and improve delivery prospects for highest priority projects.

Proactively discuss plans to reduce expenses in various steps or levels with key executives. Identify the impact of each level of cuts, from short-term to long-term cuts. Suggest the timing of reductions based on project completions, not arbitrary dates.

Invest in key digital capabilities. In the future, these capabilities will be even more important than previously expected. They should be prioritized at an enterprise level. While a CIO may authorize fewer pilots, it is important to continue making these investments to generate learning and be prepared for rapid rollout in the future.

The world was already moving toward full

digitization, but recent experiences due to

the virus will increase customer expectations

for full digital access and accelerate these trends.

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BLOG SPOTLIGHT

Authorize RPA or OCR projects. Such efforts can help improve digital workflows and lower expenses. If modernization slows, these projects will allow organizations to gain efficiency without significant investment. These are quick-hit projects which yield cost savings quickly and improve cycle times.

Slow core systems rollouts if necessary. Rollouts of modern core systems are often expensive and require a lot of resources. By cutting the number of programs, states, or LOBs being delivered simultaneously from, say, four to two does impact final rollout dates, but it may actually yield productivity improvements if the best people are retained and focused.

Consider bringing configuration in-house. Lower cost resources can be trained to do this work if it is repeatable and enabled by core solutions. Current employees can be repurposed, saving corporate knowledge. Some offshore deals are still very cost effective, but COVID-19 could hit those offshore firms. Having some internal capabilities is a great risk mitigation approach.

Lean out IT processes. Inefficiency and waste cannot be tolerated and will subject IT budgets to even more scrutiny. Agile teams and DevOps improvements will yield visible benefits more quickly.

Manage talent effectively. Talent was scarce prior to the arrival of COVID-19. While people will be less likely to look for another position during these stressful times, how employees are treated could significantly impact an organization’s ability to create or attract talent in the future. Engaging employees in professional development discussions and in IT process improvements will help them grow professionally as well as improve productivity and retention in the long run. Managing performance issues will also help improve the morale of better performers.

Experienced CIOs prepare for contingencies. Recent increases in remote workers and in security risks have put some CIOs in a reactionary mode and have taken much of our CIO clients’ time. It is time to look to the future and prepare to address not only the downturn, but the increased need for digital capabilities and product changes in the future.

CIOs should identify lower priority initiatives or troubled projects and stop them rather than... removing a critical resource from a strategic project.

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WHAT COMES NEXT? THE FUTURE OF WFH IN INSURANCE IS BEING DECIDED NOWBY MARTINA CONLON

The senior team at Novarica has spent a great deal of time with our clients and Council members discussing their COVID-19 response and the associated successes and challenges. Overall, we are impressed with insurers’ ability to migrate to work from home so quickly and smoothly. Most clients were able to accomplish this in days, and all were able to complete the transition within two weeks. Given the technology state of many insurers, this was impressive!

Just as the Coronavirus Task Force outlined the phased reopening of the country two weeks ago, many of our clients started planning their return-to-work strategy. Many are looking at their situation more broadly; revisiting their business plans, technology priorities, and operating models; and planning to revisit these periodically during these uncertain times. But return to work is a top priority, and many companies are now working out the details.

Today, Nationwide announced a shift to a hybrid model of work from home and work from the office, and it looks like it will certainly have a lot of company. Our clients are reporting that the trial by fire has developed a new acceptance, and

even appreciation, of work from home. One client mentioned that they are stopping all physical expansion and acquisition of new properties, even though their significant staff expansion is still in play. Others have indicated that they are in no hurry to get anyone back to the office since productivity is up, and why take the risk right now?

Those insurers that are planning to have a portion or all of their employees return to the office are talking about implementing some combination of the following measures:

• Decreasing capacity of the buildings through shift work in the office—employees rotate one week in the office, the next week from home

• Masks, regular temperature tests, sanitizer available in all public spaces

• Restrictions to vendors’ and partners’ on-site presence

• Return to WFH at any time as needed

• Workspace reconfiguration—the cubicle is back!

• No lunchroom seating

• No collaboration space/conference room use, continued online collaboration only

• Limited collaboration space/conference room use with strict guidelines around occupancy and seating

• Continued support for online collaboration with vendors, partners, and distributors

Since digital technology has freed office workers from a dependence on mailrooms, phone systems, and local computer systems, physical collaboration space is the only real value that an office provides. If this is going to be restricted further, is it any better to join a Zoom meeting from your cubicle than from your home?

It is very clear to everyone that we will have a new normal, but we don’t know how long it will take to get there or exactly what it will look like. As an industry, we need to become more agile in approaching our business plans, technology priorities, and operating models in order to deal with the uncertain times ahead.

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NEW REPORTSHere's a summary of recently published reports, including studies of insurers’ technology experiences, capabilities, and plans from our Research Council; business and technology trends; CIO best practices; vendor information in our Novarica Market Navigators; and recent webinars and presentations. All of the research summarized here is available for download by our advisory clients at novarica.com. Research reports can also be purchased individually.

RESEARCH COUNCIL STUDIES

EMERGING TECHNOLOGY IN INSURANCE: AI, BIG DATA, CHATBOTS, IOT, RPA, AND MORE

EXECUTIVE BRIEFS & REPORTS

INSURANCE MARTECH 100: OVERVIEW AND VENDOR INDEX

INSURER CIO FOUNDATIONS: LEADERSHIP, PRACTICES, AND TECHNOLOGY

MARTECH IN INSURANCE

YOUNG AGENT INSIGHTS: MARKETING, SALES, AND SERVICE CAPABILITIES

INSURANCE TECHNOLOGY STRATEGY AND REGULATORY COMPLIANCE, VOL. 3

SNAPSHOT: POLICY ADMIN SUITE PRICING MODELS AND LEVELS

NOVARICA MARKET NAVIGATORS

PROPERTY/CASUALTY POLICY ADMINISTRATION SYSTEMS

NOVARICA WEBINARS

INSURANCE IT STRATEGY AND REGULATORY COMPLIANCE: CCPA, BIOMETRIC AND GENETIC INFORMATION PRIVACY LAWS, AND CHATBOTS

VIRTUAL TOWN HALLS

COVID-19 FOR INSURANCE TECHNOLOGY VENDORS

MANAGING AND DELIVERING AGILE REMOTELY

COVID-19 FOR INDEPENDENT AGENTS

“WFH” 101: SUPPORTING TEAM CULTURE ONLINE AND MANAGING A VIRTUAL WORKFORCE

MANAGING AND DELIVERING AGILE REMOTELY TO INSURERS

MAINTAINING RELATIONSHIPS WITH PARTNERS AND OUTSOURCERS

CYBERSECURITY AND REGULATIONS

PLANNING FOR THE NEW NORMAL

THE THREE LEVERS OF VALUE

DIGITAL STRATEGY

VENDOR CLIENT MONTHLY VIRTUAL TOWN HALL: MAY

CIO CHECKLISTS

CIO CHECKLIST: SOFTWARE LICENSING AUDITS

BUSINESS TECHNOLOGY TRENDS

LARGE COMMERCIAL BROKERS

INDIVIDUAL LIFE INSURANCE

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CIO PROFILE: NIMESH MEHTA, SVP AND CIO, NATIONAL LIFE GROUPNimesh Mehta is SVP and CIO of National Life Group, where he previously served as Head of Life & Annuity Operations, Chief Strategy Officer, and CTO. Prior to joining the firm in 2008, he held leadership positions at Lincoln Financial Group for over 14 years. He holds a BS in computer engineering and an MBA, both from Case Western Reserve University. He spoke with Novarica on March 27, two weeks into the COVID-19 state of emergency.

Novarica Update: Obviously, the last few weeks have been about transitioning the company to work from home. What do you think some of the longer-term effects of the current crisis might be for organizations like yours?

Nimesh Mehta: Right now, everyone has come together to make sure the company can make the immediate adjustment. There’s a lot of adrenaline, and people are doing whatever needs to get done. But the real question is, if this situation continues for a few weeks or months, what does the new normal start to look like? How is productivity going to change, and what’s the long-term impact of remote work on the organization? I believe we will be productive to get work done, but the bigger question is how innovative will we be when we are not together as a team?

Some things become more important than they were before. For example, there will be a new focus on the availability of systems. Before, uptime was important, but now any downtime at all is intolerable. There will a lot more attention on things like release management and change control to make sure everything goes smoothly and everyone is ready.

Fraud detection is going to be even more important, as well as cybersecurity. It’s not only about securing a few campuses now, it’s about securing thousands of home offices.

Digital will also undergo a fundamental change. It’s going to be the only way to do business; it’s not a nice-to-have anymore. “Mostly” digital processes and functions aren’t going to cut it anymore. It becomes the new world where we make choices when we don’t have choices.

Obviously, I think collaboration tools and connectivity are going to play an even bigger role in the future. I also think it’s going to change the model of how insurance is sold. If there’s a long-term shift away from face-to-face, the shift hasn’t happened yet in life annuity.

It’s not just about being digital, it’s a whole new conception of a new business model and process, not just technology.

For example, we’re automating the intake of ACORD forms for new business, streamlining our AP processes, automating various renewal processes, etc.

NU: What leadership lessons or opportunities have you seen as the crisis has unfolded?

NM: The most important thing for me is being a part of a learning organization. In crisis, you learn hierarchies don’t matter, and things get done without bureaucracy. The entrepreneurship of our team is really impressive. As a leader, you can do a lot by just being there, you don’t have to be directive. People will figure it out. A crisis can be a great time to lead from the back and provide a context for people to act.

I think collaboration tools and connectivity

are going to play an even bigger role in the future. I also think it’s going to

change the model of how insurance is sold.

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Connections are critical. If you can’t stay connected to your teams, you can’t lead them. You have to structure and focus on the desire to connect or it will get dropped. Coaching and mentoring remotely is a new skill that many of us haven’t had to develop before. It’s also important to give teams a break. In a crisis, people are working 20-hour days sometimes, and you need to get them to stop. I’m not the best at leading by example on that, but it’s important to recognize. In a work-from-home environment, people don’t have the natural breaks in their day of a commute or lunch when they can decompress a little. We need to have teams take the time to reboot.

NU: How do you think the industry’s appetite for innovation and risk is going to change?

NM: I think companies are going to be increasingly careful about the risk they take. They’re going to focus on the most important things first and make sure they use their capital surgically to get the best bang for their buck. We’ve stopped a bunch of small projects and nice-to-haves—we’re focused on data analytics, some core system digitization, and making it easier to do business with our distributors and policyholders. It’s not just about the expense, it’s about the focus. You have to be focused to execute flawlessly.

That also translates to working with InsureTechs and startup vendors. I’m not sure there will be as much of an appetite for experimentation there. It’s going to be hard for some early-stage companies in the space.

I also worry that individual employees are going to be more risk-averse. Innovation requires a degree of personal risk, and with high unemployment, market fluctuation, and ambiguity about the future, you might not see as much of a willingness of people to get outside their comfort zones.

NU: How have you and your team leveraged Novarica during the early stage of the crisis?

NM: A lot of my teams have been on the virtual town halls and have found them useful. But the most important thing is to get a pulse on where we stand compared to the rest of the industry. Getting the sense of what can we be doing differently and learning from others has been very helpful. I also value the informal connections I make with my peers as part of Novarica’s Research Council.

Fraud detection is going to be even more important, as well as cybersecurity. It’s not only about securing a few campuses now, it’s about securing thousands of home offices.

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Novarica helps more than 100 insurers make better decisions about technology projects and strategy through research, retained advisory services, consulting, and special programs.

We serve clients in life/annuity/retirement, property/casualty, workers’ compensation, and reinsurance. Our clients range from Fortune 100 insurers to small regionals and specialty companies. Although most of our clients prefer we keep their names confidential, a partial client roster includes Amica, AXA XL, GenRe, Grange, Hanover, Penn Mutual, Principal, ProSight, SECURA, SunLife, and more than 100 others.

Our senior team has direct experience as senior IT executives at firms including AIG, Arbella, AXA, Guardian, Liberty Mutual, MetLife, Marsh, Progressive, Prudential, Travelers, and others.

We publish frequent, independent, in-depth research on trends, best practices, and vendors. Our research projects are directed by our senior team and leverage our relationships with the more than 300 insurer CIO members of our Research Council. We conduct more than 2,000 conversations with insurer executives every year.

Our retained advisory services provide enterprise access to our research, unlimited phone and email consultations with our team, facilitated 1-on-1 conversations with other CIOs in our network, an annual trends and best practices workshop, and an annual trends and best practices workshop.

Our consulting services include assessments, strategic blueprints and roadmaps, benchmarking, business process visioning, and vendor evaluation across digital, data/analytics, core systems, operating model, and innovation.

Our special programs include our Silicon Valley Innovation Tour, InsureTech Summits, Executive Leadership Development with Brown University, an online learning course in Foundations of Insurance Technology Strategy, and more.