Quantifying ROI from Insurance Mobility Initiatives

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1 Cognizant Insights Quantifying ROI from Insurance Mobility Initiatives By conducting a precision gap analysis and applying frameworks that emphasize user needs and behaviors, carriers can deploy mobile applications that deliver healthy monetary returns and competitive advantage. Executive Summary Let s face it; as an industry analyst recently said to a conference audience, Mobility is here for the rest of your career. For sure, mobility has a strong business case in the insurance industry (life and general), where it can help to improve overall productivity, contributing to both increased revenues and reduced costs. Quantifying the ROI of mobile initiatives, while perhaps challenging in many cases, is certainly possible and can help companies avoid the inertia of deploying mobile solutions. This white paper looks at the mobility initiatives insurers should prioritize, as well as how to perform a gap analysis and then build a strategy to bridge those gaps. Furthermore, it explores various frameworks for evaluating the costs and benefits of such endeavors to facilitate decisions on deploying mobility solutions. Based on the authors experiences, insurers can expect to achieve an ROI of between 3% and 10% purely from mobility initiatives. Insurance Mobility Initiatives Insurance companies are surely no strangers to mobility initiatives. In fact, they have been enabling their field sales force with mobile devices since However, the devices and capabilities that are available today have vastly improved, given the technology and connectivity now available. On the heels of such advancements, insurers current mobility enablement initiatives cut across the entire insurance value chain, from sales to claims, benefiting different stakeholder groups and leveraging various platforms and devices. But when compared with other industries, such as banking or retail, insurers have traditionally followed more than led. This is due, at least in part, to a lack of understanding of how mobility can best be used within the business and how it can generate a positive ROI. When looking at what insurers have accomplished with mobility over the past five years, the trends are clear: Mobile technologies are still cutting - edge/ emerging vs. operational for insurance companies. Most initiatives have been very basic in nature, such as a simple mobile site or mobile app (i.e., an insurance calculator). The focus has been on creating a mobile presence vs. leveraging mobility as a viable revenue-generating channel. november 2012

2 The Dilemma: Whether to Mobilize In conversations with numerous insurance CXOs, several questions invariably arise: We hear a lot of buzz around mobility, but is this just another bubble? Why should my company undertake a mobile initiative? What will the true benefits of mobility be? How much investment would a mobile initiative require? How do we accurately quantify the return on such an investment, considering that there aren t many precedents? For sure, these questions are valid, since there is a very real investment required by a mobility initiative. These questions can help answer whether such an investment is being applied toward a fad or a proposition that will be useful to the business, if not even a competitive advantage of sorts. Where Do You Stand? Making the decision to go mobile is an important step. The next step is understanding how to bridge the gap between where you are today and where you need to be, as well as clearly understanding where the market is heading. Our mobility maturity framework (depicted in Figure 1) is useful to any organization at any stage of its mobility journey to take stock of its progress relative to the competition or general market. Mobility Maturity Framework MATURITY/CAPABILITY (PARAMETERS) Laggards Starters Regulars Leaders Roles enabled for mobility Customer functionality availability Agent functionality availability GAPS Products range Claims Ease of use of application functionality GAPS Mobile initiative/brand Mobile 2.0 ready CURRENT STATE TO - BE STATE (OR STAGE OF TOP COMPETITOR) Figure 1 This framework can be modified for different capability parameters that can then be used to assess the existing state of an insurer s mobile maturity. The parameters should be defined based on the specific capabilities being considered for mobile enablement. The framework provides a clear understanding of the following: The current state of an insurer s mobility enablement and a depiction of where the company wishes to be. The to -be state can be based on either where the insurer wants to be or the level reached by another insurer that is considered a leader in mobility adoption. The gaps that need to be bridged to reach the to-be state. Bridging the Gap: Business and Technology Roadmap To bridge the gap, it is imperative to design a roadmap that ensures a seamless deployment of the mobility solutions. The strategy and steps for bridging this gap are depicted in Figure 2. 2

3 Business and Technology Roadmap Focus on the user Create business roadmap by understanding business functionality by user types by mobile technologies Choose the technology approach by combining each user type with its functionality needs Analyze the benefits, costs, ROI Deploy in waves so users have ample time to become familiar with new capabilities, thereby maximizing adoption Figure 2 Focus on the User Carriers, in both the life and general insurance industries, are not paying enough attention to the most obvious question of, Who is the target user? We believe this is the primary question to answer before addressing any other concern. A user-centric approach to mobility aligns possible areas of focus with different user populations. The user-centric approach offers three benefits: 1. It brings focus to the mobile strategy, as the insurer can focus on the key users who will benefit from mobility. 2. It helps identify the key focus areas and pain points for each type of user. 3. By segmenting users and focus areas, use cases for required functionality can be more easily developed. These use cases can then act as inputs for the technical team, which can decide the best technology to adopt. Create the Business Roadmap The business roadmap combines the user types with their functionality requirements. It should also provide a view of how to time deployment for specific user groups, which can be addressed in the form of implementation waves. Figure 3 provides a sample view of functionality by user categor y and the different waves of mobile implementation enabling this functionality. It is imperative for insurers to identify the right set of functionality that they want for each user group, since this will determine the technology approach, effort and costs. A User-Centric Approach FOCUS ON UTILITY, PRODUCTIVITY AND EXPERIENCE Functionality-intensive apps for: Illustration and quotes Sales support Client information Compensation & campaigns Agents Employees Customers FOCUS ON DISCOVERY AND INFORMATION Driving self-service by furnishing: Product information Account information Company and agent information Calculators Figure 3 FOCUS ON EXPERIENCE AND PRODUCTIVITY Sunday night/monday morning experience Seamless integration with back-end systems Lower asset management costs Market intelligence 3

4 Implementation Waves WAVE 1 WAVE 2 WAVE 3 AGENT SERVICES Product information and brochures Information gathering Need analysis and illustrations Quotation Application submission Lead and prospect management AGENT TOOLS CUSTOMER SERVICE INTERNAL USERS Training: news and updates, info snippets Interactive training (including videos) Branding and campaign management Commissions Notifications Customer management: app status, new business reports Customer management: reminders, policy inquiry, claims Self service Product information and brochures (interactive) Agent/office locator Branding, games/educational Financial calculators Quick quote Notifications-reminders Underwriting approval Agent business level Application status Notifications-reminders Business dashboard Figure 4 Choose the Technology Approach Choosing the technology approach can be challenging for senior management, as all the hype in the industry around apps and Web sites makes it is easy to adopt a strategy that might not be sustainable in the fast-changing mobile landscape. Several questions need to be addressed before arriving at the best possible approach: App or Web site: The choice between app or Web site is clearly one of end-user experience vs. cost of maintenance. While HTML5 Web sites are certainly improving, the architecture of a Web site today makes it challenging to replicate the experience of a native app. However, HTML5 Web sites are clearly the easiest to maintain, since the target platform is no longer important. From our experience, it is typical to use different approaches for different users, with the ultimate goal being user satisfaction and, hence, higher adoption rates. Target platform: Many customers first choice of platform is ios (both iphone and ipad). However, Android is a strong contender, considering its increased adoption, its ongoing evolution and the number of device makers supporting it and its growth in developing markets in China and India. Microsoft is also making a strong statement with Windows 7 and 8 devices, which we believe will be a force to consider in Here, the segmentation of users would assist in deciding the target platform. The rule of thumb is that, if it is a consumer-facing app, the strategy adopted should support all current and future platforms. However, if the devices are under the control of the company (i.e., company-issued tablets), then specific platforms can be targeted. From our experience, most insurance companies have adopted the BYOD (bring your own device) approach, especially for agents, which reduces asset management costs but also means that maximum coverage needs to be provided, and the platform should be market-driven vs. company-driven. Target user group: The last decision that needs to be made is the order in which user groups are targeted. Once these decisions are made, the choice of technology approach becomes fairly straightforward. Since mobility has been driven by consumers, who are accustomed to easyto-use interfaces, fast response and stable platforms, it is very important that the technology approach delivers on these expectations while 4

5 optimizing the costs of maintaining the technology infrastructure. To achieve this with currently available technology, economy of scale becomes important. The winner will be the technology that can cover the broadest base (including multiple user groups) while providing relevant priorities. In addition to the traditional strategy of choosing one dominant platform, three other approaches should be considered (see Figure 5). Approach to Mobile Technology Platform PROS CONS Figure 5 OPTION 1 OPTION 2 OPTION 3 Native mobile apps for dominant platform, mobile Web for the rest of the platforms Target dominant platform with native app. - Addresses needs of primary audience with the best user experience. - Leverages HTML5/mobile Web for all other platforms. - Allows broadest reach to support users of nondominant platforms. Higher development and management costs over time. Constant catching up with the market. Worse user experience for HTML5/mobile Web user, including limited offline capabilities. Set up MEAP platform for the region, as a whole Mobile middleware allows one code base to be mantained, while deploying to multiple platforms. Provide adapters/connectors to integrate to back-end EIS. Multiple options for development applications (HTML5/native/hybrid/mobile Web/desktop). Standard provisions for implementation components, including security. Multilanguage and multidevice support (including feature phones). SLAs offer future-proofing benefits. Flexibility for choice of applications and devices for deployment. High licensing and/or maintenance costs (competition putting downward pressure on these costs). Possible vendor lock-in (some MEAP vendors allow easier switching). HTML5 and hybrid apps Lower cost than native and MEAP. Emerging technology with maximum device coverage among smartphones. Hybrid platforms and pure HTML5 offer flexibility for development. Open source avoids vendor lock-in option for integration with native libraries and HTML5 code base. Provides for caching of data using built-in 5Qlite engine. HTML5 tags and device access APIs now allow tapping into hardware functionality, and hybrid allows deployment as native on app stores. Developing technology, early-stage. Not suited for sensitive and secure application development. Experience of a true native app lost; not as fast. Limited device coverage (doesn t extend to feature phones), which could negatively impact some target markets. Understanding Mobility ROI How will the mobile initiative benefit the company? How do we quantify the return on such an investment, considering that there aren t many precedents? Insurers often ask such questions when planning their mobile initiatives. And the answers have not been forthcoming. One mobility pioneer has stated it is not even looking at quantifying ROI at this stage. There are two parts to the mobility ROI process: benefits and costs. Benefits from mobile initiatives: Quantifying benefits from mobile initiatives must start with the business functionality that the insurer has defined in its mobile business roadmap. The basic idea is to quantify the benefits arising from implementing this functionality. For quantifying benefits, a step-wise approach should be utilized for best results (see Figure 6). Step-Wise Approach to ROI from Mobility Initiatives Step 1 Step 2 Step 3 Step 4 Step 5 List Functionality and Benefits List all the functionality that is being planned as part of the roadmap. List benefits that can be gained from implementing the above functionality on mobile (i.e., benefit levers). Identify Quantitative Benefits From this list of benefits, identify quantitative benefits (i.e., reduce data entry effort, increase number of customer visits). At this stage, do not look at the big picture -- focus on the immediate benefits. Identify Contributing Qualitative Benefits For each quantitative benefit, identify the qualitative benefits that contribute to it and arrange into a tree structure. Connect the functionality to the benefits to draw a line of benefit for each type of benefit functionality planned. Big Picture Of Benefits Consolidate the quantitative benefits to see the big picture or the main benefits that will exist for any insurer, (i.e., increase revenue, reduce cost). This is what the insurer is working toward. Benefits Parameterization Key step: every quantitative benefit must have a formula to compute how the benefit is achieved. Each parameter in that quantitative formula should ideally be backed by actual studies conducted by the insurer or be based on some empirical precedent, to ensure credibility. Figure 6 5

6 Benefits Framework Benefits Benefit Levers Functionality Quantitative Benefits Levers Qualitative Benefits Levers Increase Revenue Increase agent productivity Reduce Increase customer visits (improved scheduling and planning) Increase prospect conversion by agents Reduce Increased customer facing time Gain Intelligence from lost deals Information at finger tips to agent Reduced turnaround time Faster quoting capability Faster response to agent queries 1. Lead management 2. Product info and brochures 3. Information gathering 4. Application and submission Agent Services Agent Services Reduce Costs Reduce operations cost Reduce cost of claims Reduce cost of... Reduce cost of... Higher customer satisfaction Keeping the customer engaged Increase customer loyalty Easy access of info to customer FNOL for customer and status Customer Services Reduction in claims expenses by... Faster claims processing and response Easy access of info to customer Enhance efficiency of claims processing 2. Adjustor notification 3. Data of risk and loss details 4. Processing on field data and sending to back office Adjustor Figure 7 The benefits framework in Figure 7 provides a sample view of quantitative analysis that can be performed for an insurer based on the stepwise approach. It can be expanded for additional benefits that align with the insurer s value chain. For any insurer looking to create a business case for mobility, this framework can help maximize the impact of the investment. Costs for mobile initiatives: We have developed a framework to analyze the costs of implementing a mobility solution. Such a framework consists of three primary components: Licensing, development and hardware (see Figure 8). Cost-Analysis Framework Licenses Cap - Ex Op - Ex Cost Development One - time (Cap - Ex) Maintenance (Op - Ex) Hardware On - premise Figure 8 Hosted 6

7 From our observations, the bulk of the costs would be incurred in the first year (license costs, development of key functionality), while ongoing maintenance costs (based on onboarding of additional users and functionality) could be adjusted depending on the company s preference. Licensing and development costs could be significantly high depending on the chosen approach; adopting MEAP (mobile enterprise application platform), for example, requires a per user, per year cost, which could make mobility a hard choice. Hence this component must be carefully considered before making a choice. In order to control this, we encourage companies to consider propositions that convert the high up-front Cap - Ex to a peruser-per-month Op - Ex cost. Most of the key functionality should be implemented and targeted at the user populations most likely to adopt it; this ensures that future adoption rates are guaranteed and that the ROI can be fully realized. In order to manage costs further, companies must consider sourcing development and exploring hosted solutions. From our experience, organizations that experimented with such approaches, especially in the early days of mobile initiatives, reaped significant benefits. The Cost-Benefit Analysis: Key Considerations Analyzing mobility implementations is a challenging exercise but one that can be very useful for senior management to consider. Using the benefits and cost frameworks provided above, insurers can ascertain expected costs and benefits of implementation and then use any of the conventional methods for conducting the cost-benefit analysis. Key considerations during this exercise include: The understanding that many of the benefits might not accrue in the first year of the mobile implementation due to adaptability levels of the channel/customers/employees to mobility. Relevant assumptions will need to be made for staggering the expected benefits, keeping in mind the variables of business growth, market growth and expected benefits for the year (i.e., all agents might not start using mobile functions in the first year). Some benefits might end after the initial period (i.e., even though agents might enter all details for the quotes, quality assurance must still be performed, plus some amount of data entry since not all agents will go mobile). In this case, expected benefits associated with effort reduction for data entry might remain stable after an initial period. Costs usually kick in over a period of time, as more users come on board. Such a phased approach is recommended, since the pace of the roll-out would depend on the maturity of users in the target geography. A simple break-even calculation or net present value method could be used to compute the expected payback period and assess comfort levels for investment. From the authors experience, at least two scenarios, pessimistic and realistic, must be considered in order to arrive at a meaningful analysis. Companies have often relied on pessimistic estimates to phase investments over several years and keep pace with the changing landscape. Conclusion Quantifying mobile ROI for insurers is an essential requirement for justifying mobility investments and benefits. Even though there is little precedent for quantified benefits and ROI, insurers can use what data exists and more importantly their own understanding of their business to realize the simple benefits that can result from doing things differently; in this case, bringing mobility to the enterprise. 7

8 About the Authors Partha Panda is a Principal Consultant with Cognizant s Insurance Business Unit. He has 13 years of experience in insurance and risk management and has held line responsibilities in underwriting, claims, customer services, operations and other aspects of direct insurance operations. Partha has program management and consulting experience, with a focus on providing IT enablement and transformation, working with insurance clients globally, across the value chain. Partha has been published in insurance journals and has been a guest speaker on insurance topics at conferences. He can be reached at Partha.Panda@cognizant.com. Vinod Venkatasubramanian leads Cognizant s Mobility Solution Practice for Asia- Pacific, advising and helping customers with their mobile strategies. Following a six-year stay in the U.S., he gained experience in the Asia-Pacific region through stints in China, Hong Kong and Singapore over the last five years. During this period, he helped numerous clients with multichannel commerce and marketing strategies. Vinod has an engineering degree and an MBA from HKUST-School of Management, a premier business school focusing on Asia. He can be reached at Vinodrv@cognizant.com. About Cognizant Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 145,200 employees as of June 30, 2012, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at for more information. World Headquarters 500 Frank W. Burr Blvd. Teaneck, NJ USA Phone: Fax: Toll Free: inquiry@cognizant.com European Headquarters 1 Kingdom Street Paddington Central London W2 6BD Phone: +44 (0) Fax: +44 (0) infouk@cognizant.com India Operations Headquarters #5/535, Old Mahabalipuram Road Okkiyam Pettai, Thoraipakkam Chennai, India Phone: +91 (0) Fax: +91 (0) inquiryindia@cognizant.com Copyright 2012, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.