Insurance accounting is a unique challenge because insurance contracts assume an intangible risk in exchange for a real dollar premium.  In most cases, premiums go directly to an insurer’s general account as a pool of funds to pay future claims.  This is always true for Property and Casualty insurance and Health insurance too.

But things get complicated when life insurance and annuity investment products are used to grow funds for a rainy day or retirement.  Unlike standard insurance premiums, deposits into insurance products like variable annuities and variable life insurance are kept separate from the general funds.  In those separate accounts, policyholders may choose different investment options, take out policy loans and transfer dollars across different funds.  But the success (or failure) of those investments can have a direct impact on the policy’s value as well as the guarantee risk assumed by the insurance company.

So insurers have set up special accounting treatments for general and separate accounts and the risk obligations that they support.  But all of those complicated accounting arrangements will need to be revisited under the new approach accounting standard, IFRS.  That’s the challenge as insurers work to make their accounting ‘wallpaper’ useful to Wall Street investors.  Recently, CEB TowerGroup surveyed insurers on their future technology investments including critical life and annuity policy administration systems.  Each of these systems will need to be adjusted for IFRS.  Perhaps that explains why 44% of insurers will be increasing investments in policy administration.

The goal of convergence to the IFRS in the US is to provide an easy comparison between U.S. and foreign insurers (especially European).  Ideally that would foster cross-border investment and more uniform solvency standards.  But every ideal takes effort to attain, especially by a target date of 2015, although that may move out a bit.

With IFRS as well as solvency modernization for risk management, there’s a great deal of change coming to insurance financial systems going into 2015 and beyond.  Thus these systems must be both agile and accurate.  Recently CEB TowerGroup reviewed actuarial systems with flexibility, auditability and accuracy being key features.  Those are exactly what insurers need to adjust to IFRS.  For more information view the actuarial systems vendor review.

The “time to wastebasket” for impersonal, canned communications can be calculated in seconds. Yet insurers have significant information to provide customers. Some of it is legally mandated, some of it is related to new products and services, and some of it is designed to help customers manage risk.  No insurer wants communications to end up deleted, tossed, or ignored before the message is delivered. Many insurers understand this, but still see customer communications in siloes, and not as a unified, enterprise capability, across all products and channels.

Our recent technology adoption and investment survey for customer communications indicates that 40% of insurers believe that this technology has high to very high value for their organization. An additional 30% indicate it has somewhat high value.  In terms of risk, 33% of respondents believe that integration complexity is a risk driver, which is tied with information security risk, also at 33%.  Actually, the biggest risk is doing nothing at all, relying on standard forms packages, Word documents, and embedded communication templates in core systems. Compare your technology spend and adoption curve to our survey results. 

If your organization has not kept up with customer requirements for modern, unified communications, you may find your customers communicating with your competitors and that is not an outcome you want.

More than 40% of financial Services IT experts affirm their companies spend an annual average between US$100,000 and US$999,999 on derivatives systems, corporate actions, reconciliation applications, and securities processing technologies. In addition, 51% of financial services expect spending on portfolio management systems will increase by 2015.

Visit our adoption and investment landing page to benchmark your company’s spending on Capital Markets Technology Areas. You can also download the entire data set or download one of the 23 reports created for each of the technology areas we cover.

The largest distributed denial-of-service (DDoS) attacks garner a lot of attention. Recently, there has been a great deal of coverage of the March 18 attack on the anti-spam organization Spamhaus, which topped a staggering 300 gigabits per second (gbps).

The size of the attack was significant, but there are two other lessons all organizations should learn from this attack. First is the additional targeting and impact on various internet exchanges’ (IX) service traffic for Spamhaus, which also hit non-related sites served through those exchanges. Second is the collaborative effort between Spamhaus, vendors, Internet operators, and international law enforcement to deal with the attack, analyze the patterns, and swiftly make an arrest.

On a more limited scale, organizations can think of their infrastructure and data delivery as similar to the Spamhaus example. Their infrastructure is a set of shared components that serve many specialized functions and services. If any of the shared components are attacked with the goal of bringing down one service, all the other functions and services can be impacted. To best prepare for this, business continuity and DDoS mitigation strategies should include a clear definition of the transaction types, value, frequency, volumes, source, transit, access, and responsibility for all data-using shared components.  Based on that information, organizations can prioritize protection efforts and segment or isolate data flows.

Additionally, this type of proactive planning helps to establish lines of communication for internal constituencies with responsibility for the security and continuity of information. This communication is essential in order to ensure a proper response to attacks when they hit, and maintain a security profile to deal with any simultaneous attempts to steal data or otherwise attack critical resources.

Finally, a clear internal understanding of what good traffic and traffic patterns look like aids in the creation of steps to identify and mitigate attack traffic. This in turn leads to information that can be shared with Internet service providers and Internet exchanges, or law enforcement. Big attacks make a lot of noise and can create major havoc, but they also produce a lot of forensic information, and have led to multiple arrests internationally.

Title VII of the Dodd-Frank Act (DFA) calls for significant reform of OTC derivatives. In addition to centralized clearing and transaction reporting DFA calls for certain OTC derivatives transactions to be executed on swap execution facilities (SEFs) or designated contract markets (DCMs).  Once these trading-related rules are implemented, the market will move towards a more automated, transparent, and efficient model that puts new demands on the technology that supports OTC derivatives trading.

In the new multi-channel trading model, traders will choose among traditional bilateral execution, SEFs or DCMs, and the use of swap-like futures.  Attend our upcoming webinar exploring the impact of derivatives reform on trading technology to learn about how trading technology will have to adapt to meet the needs of this new multi-channel model.

The majority of wealth executives rank financial planning technology as high or very high value.  Some of the value drivers include process improvement, functionality and ROI, but almost one-third chose competitive advantage as the main driver.  Conversely, only 18% of wealth management executives view this technology as high risk.  This distinguishes financial planning from other high-value front-office technologies, which historically are considered high risk as well. 

By accessing our extensive network of wealth management executives, you will learn that over 50% of respondents have already adopted financial planning technology and have no plans to change it in the next five years.  Thirty-eight percent of surveyed executives indicate that they do intend to adopt or replace financial planning technology by 2017.  Also, discover how much wealth management firms intend to spend on financial planning, as well as other technologies, using our 2013 Financial Services Technology Adoption & Investment survey.

Banks consistently hear about making clients’ lives easier as a foundational pillar in the new era of rapid technology adaptation. One of the most visible and impactful ways to get moving in the right direction is to establish an onboarding process that incorporates BPM and automation.

In our upcoming webinar Automated Onboarding in Commercial Banking, CEB Towergroup will review the results of a survey detailing how commercial banking FIs think about their onboarding practices. We will also discuss the vendor technology solutions that are helping banks achieve faster revenue recognition and potential loyalty gains.

CEB TowerGroup included automated onboarding as a Top Ten Technology Initiative for 2013, and among the reasons is the ability to impact client satisfaction levels through improving overall experience, starting where it counts.  Join this insightful webinar and find out how to make your institution an easier place for clients to do business.

Nearly 500 executives from the most influential Financial Services Institutions and technology providers gathered for the 2013 CEB TowerGroup Financial Services Technology Conference in Boston.  Across the three day event, attendees were given actionable insights and data to inform strategic planning, budgeting, and provider selection.

Keynote sessions incorporated depth beyond the scope of financial services to create a holistic view of the evolving environment executives face today.  Highlights included: 

• William Bratton’s keynote exploring the parallels of financial services institutions and police forces -”too many folks who aren’t talking to one another.” He touched on how siloed internal departments are missing the impact of collaborative analytics.
• Mark Jamison’s keynote quantifying the societal impact of the digital channel revolution; “There are more people writing iOS apps than there are working in the US farming industry.”

Breakout sessions centered on equipping attendees to face the most important business drivers of technology investment in the insurance space.  Highlights included: 

• Research Director Sam Stuckal’s insights into how more targeted use of CRM tools can increase sales force productivity and challenge complacency in the Life & Annuity marketplace.
• Research Director Karen Pauli’s review of the big technology bets common to both the Property & Casualty and Life & Annuity space, including business management and operational analytics capabilities.

Conference highlights have been prominently featured in a number of industry media sources. Examples include: 

• Insurance Networking News’s Justin Stephani noted that while technology investment is crucial to maintaining cost-efficiency in the claims process, insurers must also focus on maintaining a quality customer experience during that moment of truth.
• Gil Press, writing for Forbes, cited Bratton’s keynote as further evidence that siloed management – of the kind we have seen prevail in insurance and other financial services sectors - detracts from the numerous benefits technology has to offer in our ability to gather and understand data.

Please contact us  to request downloads of the presentation materials.

Nearly 500 executives from the most influential Financial Services Institutions and technology providers gathered for the 2013 CEB TowerGroup Financial Services Technology Conference in Boston.  Across the three day event, attendees were given actionable insights and data to inform strategic planning, budgeting, and provider selection.

Keynote sessions incorporated depth beyond the scope of financial services to create a holistic view of the evolving environment executives face today.  Highlights included: 

• William Bratton’s keynote exploring the parallels of financial services institutions and police forces -”too many folks who aren’t talking to one another.” He touched on how siloed internal departments are missing the impact of collaborative analytics.
• Mark Jamison’s keynote quantifying the societal impact of the digital channel revolution; “There are more people writing iOS apps than there are working in the US farming industry.”

Breakout sessions centered on equipping attendees to face the rapid rate of change in the financial services industry.  Highlights included: 

• CEB TowerGroup analyst Andy Schmidt moderating a panel of experts discussing the imminent creation of comprehensive anti-money laundering strategies in a global economy. Panelists noted that correspondent [banks] are the Achilles’ heel of large institutions when it comes to AML.
• CEB TowerGroup outlining the “Enterprise of the Future”; Institutions should take a cue from their customers and focus innovation on Social, Mobile, Analytic and Cloud.

Conference highlights have been prominently featured in a number of industry media sources. Examples include: 

• Bank Systems & Technology’s Bryan Yurcan noted that as the industry looks to focus on data-driven strategy institutions have to walk the fine line between providing relevant offers while not to “freak them out” with the use of personal data.
• This year our attendees not only talked the talk but also walked the walk, while the industry focuses on social innovation our attendees joined in on the conversation online. American Banker’s Sean Sposito summarized the Top Tweets at #CEBTG13.

Please contact us  to request downloads of the presentation materials.

Another cyber-attack tarnished bank card systems, affecting US$45 million in 40,500 fraudulent ATM transactions. As we noted to The Washington Post, the industry challenge is that as we make it easier for customers to transact, we open up new entry points for fraudsters to attack the system.  In this particular case, it appears that magnetic stripe data on unactivated prepaid gift cards were recoded with stolen MasterCard data issued by banks in the UAE and Oman.  The card blanks are readily available at the gift card malls you find in many retail locations.  The attacks happened in countries already deploying EMV smart cards, such as Canada and the United Kingdom, and countries that use the simple magnetic stripe, such as the United States.

As our recent Card Fraud Vendor Analysis indicates, 90% of card issuers view their infrastructure as less than effective, even though US fraud rates are at an historic low of 5 basis points.  We highlighted this point in last month’s CEB TowerGroup Webinar and explained how leading companies such as ACI, Actimize, FICO, and SAS are adding protection layers to their product offerings.  Latest developments surround better access to data through tightly controlled cloud access, integrating biometrics, developing stronger tools to manage customer disputes as early warning indicators, integrating social networking tools and adding better data visualization tools offer new protection layers.

Various regulations and card operating rules, such as Reg E in the United States, ensure consumers do not directly bear the brunt of the losses, through industry fees and pricing pass through the expense.  Issuers and investors view fraud as an operating expense.  We see fraud as more than a necessary evil.  Card payments account for one third of all consumer financial transactions in the world; prevention must be a top objective to protect the integrity and reputation of a $12 trillion industry.  Financial institutions must focus on three strategies to protect the integrity of their infrastructure:

1.      Protect the enterprise, not just individual cards: Most card businesses operate in business silos; customer management systems rarely link activity between a customer’s debit and credit relationships, but strong fraud control requires a full understanding of customer activity.

2.      Tighten controls on all card products: Debit card control features, such as Debit Class Indicator (DCI), which controls daily withdrawal limits rarely exists on prepaid card platforms, even though the feature is a low impact way to control debit card losses at ATMs.  Similarly, strong predictive analytics for credit accounts have not migrated to the fledgling prepaid business.  Fraud requires a holistic view that integrates best practices through the ecosystem.

3.      Adapt the infrastructure to meet risk exposures: Risks associated with low-visibility products, such as prepaid, card not present transactions generated at mobile and internet access points, and social engineering attacks bring new challenges to the financial services framework that evolved from high-speed, merchant facing transactions.  Risk management technologies must adapt to vulnerabilities coming from organized attacks, thieves undeterred by political borders and data in use, at rest and in motion.

This will not be the last data breach for the card business but it is another wake-up call.  Consumers must check their accounts regularly for activity, ATMs and point-of-sale transaction points must be fortified to protect against counterfeit, and card issuers and payment networks have the responsibility to go beyond the current requirements of PCI compliance.   With emerging payment trends on mobile, card-not-present transactions and alternative transaction offerings by non-regulated players, the industry cannot just be satisfied with their double digit growth; it must perceive every transaction as a new vulnerability that can diminish confidence and reliability.