As insurers' expectations for e-commerce revenue tumbled over the past couple years, e-business spending has focused on self-service initiatives such as enterprise portals and agent extranets. But most insurers lack the infrastructure and customer understanding to maximize the return on these and other technology investments, such as customer relationship management.Therefore, insurers need to create financial services hubs: technology platforms for delivering services that span multiple systems.
The centerpiece of financial services hubs are improved integration servers from companies such as See Beyond Technology Corp. and webMethods Inc.-servers that access and synchronize relevant data and enable insurers to actively manage the way they deliver simple services such as an address change and, later, complex services such as policy sales.
These improved integration servers reduce insurers' reliance on expensive, point-to-point systems connections that currently obstruct integration efforts. And they make it easier for business people like underwriters-rather than technicians-to control the way systems communicate with each other and deliver services to agents, policyholders, and other constituencies.
Financial services hubs enable insurers to efficiently share and synchronize customer data across multiple systems.
Large insurers on average wrestle with four separate CRM implementations and an even larger number of policy management systems. The result: multiple, conflicting versions of the truth about customers and no way to offer services consistently across channels-whether it be through call centers, Web sites, enterprise portals and agent or service provider extranets. A typical customer might be known by four different versions of the same name.
MetLife is a good example of a company that has made significant progress in creating a consistent view of its customers. MetLife uses a webMethods integration server to access the data and DWL Inc.'s "Customer" to synchronize customer data across its four major business units.
With customer data now synchronized within its individual life business, MetLife can automate simple transactions like address changes-that currently require multiple hand-offs-and generate a quick ROI on its integration spending.
Workflow engines included in the next generation of integration servers-IBM's WebSphere and Microsoft's BizTalk-will drive the next round of efficiency by allowing insurers' smartest business people to define and control the way both people and systems deliver complex services such as claims settlement.
A good early example is Chubb Group of Insurance Co.'s implementation of Microsoft's BizTalk in combination with pre-built claims components from Accenture. A claims profiler analyzes and assigns incoming claims to the correct adjuster while a task manager ensures that adjusters adhere to best practices.
This contrasts with today's unstructured, ad hoc approach to claims settlement-an approach that makes it too difficult for adjusters to prioritize decision-making and results in poor outcomes.
Financial services hubs will achieve their full potential with the maturation of Web services-a set of Internet standards and protocols that make it easier for internal and external systems to communicate with each other via the Web (see Cover Story, page 22).
New Web services standards SOAP (simple object access protocol) and WSDL (Web services description language) are to system- to-system communications what browsers and HTML were to people-to-system communications 10 years ago. They make it possible to connect systems at a much lower cost-even if those systems sit behind different corporate firewalls.
The lack of adequate standards for security and transaction integrity limit today's Web services implementations to simple transactions that occur behind the same corporate firewall. But the continued cooperation of heavyweight vendors such as IBM Corp. and Microsoft Corp. in setting standards will make external Web services a reality within the next few years.
Building A Hub
Web services standards will enable insurance companies such as The Hartford Financial Services Group Inc. to accelerate their efforts in third-party distribution.
Starting in 1995, The Hartford began creating an infrastructure that could allow for single sign-on by an agent, employee, or customer to receive a complete, accurate view of customer data via the Web.
With these efforts mostly completed, The Hartford has positioned itself to not only offer self-servicing capabilities for agents, employees, and customers, but to expand its lead in distributing its products through third parties including banks, brokers, and independent financial planners.
With the maturation of existing standards such as SOAP and WSDL and new standards such as WSFL (Web services flow language), carriers will convert their core systems-underwriting, rating, policy illustration, case management, and commission reporting-into Web services that even small distributors can access at very low cost.
Most companies lack The Hartford's infrastructure, and even with financial services hubs and mature Web services standards, systems integration-particularly for poorly designed legacy systems-will remain expensive. To maximize the ROI on systems and channel integration efforts, insurers should engage in what Forrester Research Inc. calls right channeling-choosing the right channels for the right transactions and interactions.
If firms lack the data to understand actual channel behavior, they should hypothesize and test assumptions. For instance, it may make sense to integrate Web selling efforts with call centers but not with agents because the types of consumers that use direct channels may want to avoid agents.
It also may not make sense to create transactional capabilities for coverage changes via the Web because these transactions occur infrequently and still require additional human hand-offs to re-underwrite.
Beyond using customer behavior to prioritize integration efforts, insurers need to understand the detailed costs of delivering particular services through particular channels.
Carriers should do what Chubb did in the late 1990s-perform a systematic analysis of the practices they use and costs they incur to deliver first for simple services, such as information requests in call centers, and then for complex services, such as claims processing.
Only with the appropriate business understanding of customer behavior and cost metrics can carriers prioritize their self-servicing efforts and maximize ROI. A detailed understanding of consumers' channel behavior and cost metrics provide the roadmap for building financial services hubs and driving the elusive ROI on integration spending that does not exist today.
Todd Eyler is a senior research analyst at Forrester Research Inc., Cambridge, Mass.
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