Q&A: New York Life’s Insurance IT Head Talks About the Company’s Technological Future

Sue Paternoster talks to Insurance Innovation Reporter about the 170-year-old life mutual life insurance company’s response to changing customer and distributor expectations in an era of technology disruption.

(New York Life’s Iconic headquarters building near Madison Square Park in Manhattan. Photo courtesy of New York Life.)

It’s hard not to be conscious of a certain contrast when talking about the latest technological innovations with a company pushing two centuries. And yet, technology, while it brings new efficiencies and new ways that people communicate with each other, its power resides in its ability to support timeless human relationships. In that regard, technological innovations can only enhance a relationship of trust with customers, such as New York Life prides itself upon, believes Sue Paternoster, the company’s senior vice president and head of Technology and Service for the Insurance Group. Paternoster is responsible for supporting the domestic life insurance and long-term care business, as well as in-force policy services and manages a staff of about 1600 associates in 10 locations around the U.S. Paternoster recently spoke with Insurance Innovation Reporter  about the opportunities and challenges faced by a 170-year old, mutual company in the early 21st century.

Sue Paternoster, Senior Vice President, New York Life.

Sue Paternoster, Senior Vice President, New York Life.

Insurance Innovation Reporter : How would you describe your strategic brief at New York Life? How do you understand your mission as technology head, particularly at a time of technological change?

Sue Paternoster: First, I’d say that I’m truly proud to work for one of the highest-rated insurance companies with a history of bringing integrity and financial strength to bear in it’s mission to provide financial solutions to Americans at large.  The future is important to use for the same reason as it always has been: we are tasked with making sure that we are able to fulfill the obligations we set and guarantees we make 40 or 50 years from now.

It’s significant that we are a mutual company and this gives us a host of advantages, including  putting our policyholders first, and being able to focus on the long term. We also have an incredibly strong career agency model, with 12,000 agents across the country, and make a significant investment in recruiting and educating our agents.

All of these things have implications for how we think about technology and the world around us. With the consumerization of technology, the outside world is causing us to pick up the pace with regard to how we interact with customers and agents, including determining how mobile, social and electronic commerce in general integrate with our processes. Expectations are very different today than they were 10 years ago.

There are challenges with how to think about technology for insurance, as opposed to banking, with its more transactional nature. But finding ways to offer choice-based models of interaction is something we’re putting a great deal of thought into. Our leadership team has made technology a critical component of our strategic road map; it’s become central in how we think about things, and an area where we will be making significant investments in the next few years.

IIR: Does that translate more broadly into a concept of integration of systems and transparency of data?

SP: Yes, with shifting expectations, we are thinking how to make things simpler, faster and more seamless for all our constituents. New application processing is a great example of where technology can gave a material impact.  We still have pretty high NIGO [applications not in good order] rates in this industry. The notion of simpler, faster and more transparent processing is becoming table stakes, and we’re actively working on initiatives to bring this to bear.

IIR: How is your organization working to support a better agent and customer experience?

SP: We’ve been very focused on the agent and customer experience over the last few years and by way of example have made a substantial investment in a new sales illustration system, NYLIS. Our current system has served us well, but we want to offer new capabilities to agents, like more advanced solves and better integration of sales concepts as well offering them on mobile devices. We put the first products live on the new system in Oct. 2013 and are continuing  to roll out Term, W/L and other products this year.

Another area where we have spent a great deal of time is in the consumer correspondence space. Last year we purchased  a solution where we’ve sought to take the right approach from a compliance point of view, along with brand awareness and call-to-action, from the customer perspective.  It’s a greater challenge given changing customer expectations. You need to take an approach that will be more effective at making sure policies don’t lapse, taking advantage of riders and conversions, etc. The content is the same, but the language and positioning is very user friendly. The “before and after” is striking, and we’ve gotten some very positive feedback on it.

(Related: New Growth: How is Technology Making it Easier to Sell Life Insurance?)

IIR: You say “purchased” in reference to the correspondence system. Can we take that as an affirmation of a buy-versus-build philosophy? Do you take the position that as an insurer, building commodity-type functionality is not your core competency? And is that a newer approach at New York Life?

SP: Yes, it’s a sea change, but in all fairness, there weren’t many commercial offerings available back when we last needed a correspondence system, for example. But yes, we recognize we’re not a software company, but a solutions integrator.

IIR: What’s your approach to the new business process?

SP: We’re in the midst of a multiyear game plan aimed at taking us from intensive manual processing to a streamlined digital experience. We have about 120 general offices, and we have staff to provide new business support to agents connected to those offices. Today the application process is paper-based and all new applications must be keyed-in. You can do the math on what that means for processing 400,000 applications annually. We’ve been very focused on moving the needle on that from a workflow point of view. We’re working with an outside vendor to provide an e-application for life that allows for reflexive questioning. Today our application is over 25 pages long, and you have to look through the whole thing, even if a question is not relevant, and of course you have to make sure the agent is licensed in the state. These may seem like simple things, but in a paper-based world, it can cause applications to have to be rerouted to agents.

IIR: The NIGO problem you referred to earlier.

SP: Yes, it’s been an industry problem for decades. It’s bad enough to have to reroute once, but it’s not unusual to have two or even three trips back to the agent, which creates huge inefficiency and introduces possibilities for losing the sale.

IIR: In addition to e-apps, are you looking at e-signature and automated underwriting?

SP: Yes, e-signature will be a core piece of our eApp solution. We’ve been also  looking at how we can make the underwriting process more efficient, and we have introduced a number of enhancements aimed at ordering and receiving underwriting information as electronically as possible in order to make it easy for underwriters to scan and coordinate without having to deal with so much paper.

We’re also looking at CRM capabilities in the agent context to provide the right set of tools for both leads and customer activity. That includes things that weren’t on the agenda five years ago – such as social listening, which can alert agents about a customer’s life events. We’re looking for various ways to provide greater data integration for agents both to support capabilities and cut down on rekeying.

IIR: Tell us a bit about New York Life’s broader modernization imperatives.

SP: Like most established companies there are a number of legacy systems in our portfolio and it’s increasingly hard to find the expertise to maintain them. That said, many legacy platforms are workhorses that get the job done. We have to be thoughtful about the right strategy to deal with that.

We’ve spent a great deal of time on application architecture and are looking to leverage more of a service-oriented architecture to transport data between systems. That will enable us to offload from some systems, which will in turn give us some flexibility down the road. We’ve done a lot of to make sure that we’re reusing business rules to the extent possible, as opposed to duplicating them in more systems. That has led to performance improvements in the last couple of years we’ve been working on that.

IIR: We hear a lot about the potential of technology to disrupt the insurance business. How do your initiatives represent a response to that, and what kind of company is New York Life becoming?

SP: We have a phenomenal record of stability and growth that is underpinned by the mutuality model. That means we’re here for our policyholders. We stay very focused on our mission and are not easily distracted. However, we know that we can’t have our heads in the sand. Agent and customer demand is evolving rapidly, and over the next three to five years, we will be investing in infrastructure, our application portfolio, policy administration, analytics, and cloud computing. I don’t know if we’ll see disruption in a start-up kind of sense, but we’ll see technologies and techniques that weren’t as viable five or 10 years ago play a more prominent role in the overall portfolio. For example, five years ago we may not have been as comfortable with cloud computing. Of course there are concerns about privacy and security, but the technology has reached a level of maturity such that the NSA is putting intelligence information in the cloud. Life insurance companies will probably not be on the bleeding edge of innovation, but we’re more likely to look at some emerging capabilities today that have reached a certain level of maturity.

IIR: What’s your view on how Big Data could help to reshape life insurance underwriting?

SP: There’s been much discussion about the ability to use new kinds of data for underwriting. Many believe that using predictive and behavioral models could change how we think about mortality and underwriting. The commercial application of those capabilities is still being worked out, but that’s an area where we could be more like early adopters

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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