The Internet will continue to be a major focus of insurers' technology spending plans, according to the findings of a new global survey of insurance industry leaders.The survey, conducted by The Economist Intelligence Unit and PricewaterhouseCoopers, reveals that spending on technologies supporting e-business initiatives will increase 89% over the next three years. More than 150 leading insurance providers including carriers, agents/brokers, reinsurers, banks, broker-dealers and dotcoms, participated in the study.

"What surprised us most from the findings is the extent to which the insurance industry is committed to funding and finding ways to use the Internet to better serve its customers," says Charles Brinkley, partner at New York-based PricewaterhouseCoopers.

Indeed, 80% of survey respondents cite "deepening customer relationships" as the driving force behind their e-commerce commitment. Respondents also listed cost savings realized by streamlining internal processes and the development of new revenue sources and distribution channels as other important factors.

Tough challenges ahead

Nevertheless, the study concludes that the insurance industry still faces formidable e-commerce challenges in the near future.

For example, nearly 50% of the survey respondents say their existing business processes and in-house technological skills and infrastructure are inadequate to realize maximum cost savings and efficiencies from the Internet. As a result, the survey projects that more carriers will outsource e-business capabilities including Web-site construction and operation and back-office support.

Toby Alfred, Internet site manager for Progressive Insurance, Mayfield Village, Ohio, agrees that even larger companies may need the services of outside vendors.

"It does depend on how your systems are built, how accessible your data is, and how good the people you work with are," she says. "We do most things with our in-house staff, but if it doesn't make sense for us, we outsource whatever is required."

The study also concludes that increased investment in e-business technology will enable insurance companies to quote and bind more complex and diverse products and services online, as well as provide more advanced customer services.

In addition, nearly 40% of carriers say that offering banking as well as wealth management products and services online will be a critical strategy over the next three years.

Although only 7% of agents and brokers and 17% of carriers have Web-enabled back-end policy application processes today, the study predicts that 93% of agents/brokers and 71% of carriers will have that capability in three years.

And, nearly 40% of respondents say that the Internet will create opportunities for agents and brokers to focus on the activities that policyholders value most, including informed advice and personalized services.

"For us, e-commerce is certainly customer-driven," says Mike Trevino, spokesperson for Northbrook, Ill.-based Allstate Insurance Co. "We're not attempting to drive customers from one distribution channel to another. We want to give customers more flexibility, options and choices about the most convenient way to do business with our company."

Tina D. Tapas is a freelance writer based in Prospect Heights, Ill.

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