An obvious key to success in the insurance business is selling policies, and the more ways an insurer can sell those policies, the better. It’s no secret that the Internet is moving quickly into consumers’ day-to-day activities—enabling clothing purchases online, banking online and, increasingly, insurance policy purchases online. But there are still those consumers who conduct transactions through the traditional routes — the agent or even via phone.
As pressure mounts for insurers to increase business, they are starting to take notice of the challenges behind creating and managing many distribution channels and to ensure they’re all emitting the same service and message.
In order to address the challenges behind having so many distribution channels, insurers are implementing multi-channel integration (MCI) systems, according to a Gartner study conducted with 50 U.S.-based life and P&C insurers in the third quarter of 2007. The report finds that carriers are making headway with their channel integration projects, including developing enterprise strategies and making IT investments in business process management and data management. Investments are expected to increase during the next 24 months among U.S. insurers, as well as insurers in other regions, says Gartner.
Allstate Insurance Co. started down this road in 2000 with its multi-access strategy, which aims to integrate its network of Allstate agents with customer call centers and the Internet. “We have enhanced the channels to make consumer travel between them more fluid,” says Patricia Coffey, VP of distribution, marketing and process solutions at Northbrook, Ill.-based Allstate Insurance Co. “We want to provide a superior customer experience, and being multi-channel is essential.”
Multi-channel strategies, however, may be lacking overall among life and P&C insurers, according to the Gartner study. But it appears that insurers investing in MCI are making the appropriate investments to build the necessary foundation. Rather than focusing solely on one activity, life and P&C insurers are taking a more well-rounded view of MCI in order to share data across channels, ensure all channels use the same core systems, centralize business rules across the channels, share content/documents across the channels and invest in management of cross-channel business processes.
MCI may be more important than ever due to the development of different types of distribution channels, according to Kimberly Harris-Ferrante, research VP at Stamford, Conn.-based Gartner Inc. Insurers are having conversations about creating new distribution channels—affinity groups, Internet, etc.
A BIG INVESTMENT
Integration requires a heavy investment because many of these channels may be new and threatening to existing channels, or some of the channels may be considered more high-tech. “For example, the Internet was more tech savvy than some of the technologies the agencies use,” says Harris-Ferrante. “Instead of trying to take these legacy systems and open them up to do things such as online quoting and customer self-service, they had to completely redo the technology and, at certain times, buy new technology to replicate their processes in older channels just because there were technology limitations. Where we’ve talked about channel strategy in the past couple years, it’s been more around creating channel silos and offering more channel options to customers.”
Progressing past previous strategies, UK-based Prudential plc established a multi-channel distribution capability to meet the changing needs of its customers. Four distribution channels have been created: direct to its customers—customers are served and advised by the Internet and telephone; business-to-business—corporate pension customers can be targeted through workplace cross-selling; affinities—Prudential develops partnerships with banks, retail brands and other distributors; and the intermediary channel, which consists of independent financial advisers and appointed representatives.
The customer, Harris-Ferrante says, is where to begin the MCI venture. “You have to take an honest look at your customers and how they’re interacting with you today based upon what product line you’re in, who your target customers are and what they’re going to be doing in the next few years. Customers are changing, and we shouldn’t continue to rely on the ‘how it’s always been’ concept.”
THE CHANGING CUSTOMER
Allstate’s Coffey says the customer is top-of-mind when the company makes channel decisions. “Allstate is investing in growth opportunities through all distribution channels, including the Direct Channel, which includes the Internet and call center. This is critical for staying close to consumers, continuing to innovate and remaining financially strong. This is all a part of our growth strategy to differentiate the brand by creating and delivering value propositions that appeal to targeted consumer segments how, when and where they want to be served.”
With the slow proliferation of channels or, what Rick Berry, a director with Deloitte Consulting LLP, New York, calls a medium or venue (Internet, call center, etc.), comes more complexity and the potential for channel conflict. He warns that either at a producer level or a consumer level, companies should pay attention to not confusing the producer and consumer.
“For channels to be effective,” Berry says, “they have to be pretty distinct in the nature, the experience or the market to whom they’re trying to sell.”
The problem now lies with the consumer who wants to use more than one channel. “Consumer expectations of having an increased number of options in how they choose to solve their needs is a result of experiences in other aspects of their lives,” Berry says. “I can go to an LL Bean store directly, I can order through the catalog, I can call them up, I can go online; I think consumers get used to that, especially Generations X and Y—certain consumers who are more comfortable in dealing with the Internet and technology as a way in which to transact business.”
Consumers may want to use more than one channel, which could create inconsistency, says Gartner’s Harris-Ferrante. “As we know in our own personal lives as we deal with a bank or even a retailer nowadays, we don’t think about each channel independently. We think about a brand being a certain way that represents itself, and each channel being one facet. But there are some things we, as a consumer, expect—brand consistency, information consistency and common look and feel, but we also expect channel choices, and that could prove difficult for the insurance business,” she says, pointing to Gartner research that shows consumers don’t feel comfortable with the terminology used by insurance companies.
“If you’re going to give some self-directed channel — for example, the Internet — to a customer, it’s very likely they’re going to get halfway through a transaction and get to a point where they’re stumped and want to talk to a live person,” Harris-Ferrante continues. “They expect to pick up where they left off and not have to start that transaction all over again.”
Allstate recognizes the need for Web-enabled activities, and has added new features to its Web site to provide a superior shopping experience, according to Coffey. Allstate’s Online Ballpark Estimating Tool enables consumers to get estimates on auto policies in about two minutes, and an option to find an agent also is displayed on each page. “All of our access points or channels are integrated, and we work to make it seamless for the consumer,” she says. “We use our Web site as a virtual showroom for our products and our other access points, and throughout our site are opportunities for an online consumer to contact an agency or a call center.”
Technology becomes more of a challenge in the back office. Gaining support for MCI and achieving channel integration may be difficult for many insurers, according to Harris-Ferrante. Many insurers will need to consolidate core systems to improve processes across the channels, and others will need to focus on process standardization to improve transactional capabilities.
“The core systems — policy, claim systems — are legacy applications themselves and can’t be opened up,” Harris-Ferrante says. “They’re not Web-enabled; it’s hard to build services on top of them and expose the transactions in the systems to some of the newer, more technology-savvy channels. Ensuring that every channel has the same source systems is not easy to do.”
This is especially the case with companies that have already made big investments without integration in mind. Harris-Ferrante uses content/document management systems as an example. “An insurer may have already bought one system for personal lines and one system for commercial lines,” she says. “Theoretically, the insurer should only have one system, unless there’s a good reason, but because the buying decisions were siloed, now there’s redundancy. Part of integration success is making investment decisions around system consolidation and retirement of systems to try to get down to a better and fewer number of systems to make sure you can simplify those processes.”
Deloitte’s Berry warns not to go too crazy with investments, though. “The different technologies have to work together, but they also have to make economic sense,” he says. “You don’t want a great deal of functionality in every single medium only to find that you don’t have enough of the right kind of business to support the cost of all that functionality.”
THE BUSINESS/TECHNOLOGY RELATIONSHIP
Cost—it’s one of insurers’ biggest concerns and the source of great conflict. Organizational structure, including channel silos and lack of cooperation among channel managers, will impede MCI initiatives, according to Harris-Ferrante. In fact, Gartner research found that life and P&C insurers considered internal organizational culture and politics as the most difficult challenge. There are different people responsible for each distribution channel, and integration raises a perception that each one is stripped of their own sole management power, whereas they’re more of a team.
“They all have to roll up into a customer experience management type of strategy and, possibly, even report to a more senior person who’s responsible for making sure the strategy is executed and that these channels are not independent but more collaborative and cooperative,” Harris-Ferrante says, adding that this will be a big challenge, particularly for the large companies that often rely exclusively on agents and can’t be bothered with new channels that aren’t major revenue producers. “You’ve got to get past that because, if we’re truly customer-centric and have an outside-in approach versus an inside-out approach, we have to start understanding that customers may be going to agents today for the majority of their revenue, but, new channels, such as the Internet, are going to start to be more important.”
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