Despite the economic slow down and the many challenges faced by the insurance industry, carriers increased their total IT budgets in 2002 by an average of 7%. On average, 35% of this spending is devoted to new projects and strategic initiatives, according to a study by Celent Communications, Boston.Many insurance companies cannot afford to not update their existing systems. In a mature and highly competitive marketplace like the U.S. insurance industry, operational efficiency and flexibility is key to profitability. To achieve these goals, insurance companies must take advantage of new technological capabilities in every step of the insurance business process or risk falling behind their competitors.
Timing Is Everything
Unfortunately, many carriers have been using the same technology for 20 years or more, missing out on the more recent advances in communications, workflow management, and profitable use of data.
Few carriers are in a position to improve all their processes at once. But by doing a careful analysis of their own businesses and learning where their greatest inefficiencies and unnecessary costs are, insurers can prioritize their new project spending to improve problem areas first.
Some companies may find their greatest bottleneck is with new product definition. They may be passing up new market opportunities rather than trying to reconfigure creaky old legacy systems to support new products.
In many cases, new policy administration systems can reduce the time-to-market for new products from two to six months to less than one month in many cases. Product-definition tools incorporating graphical user inteface technologies can reduce the IT resources required and put more control in the hands of business users.
Web-based agent extranets enable faster communication with agents and reduce necessity to distribute information on paper or CD-ROM. Web-based forms can enable electronic data gathering and reduce re-keying time. And, electronic links to third-party data providers can reduce underwriting times.
Some insurers may find themselves spending too much time and money issuing policies. Electronic distribution of documents to agents or end-customers cuts printing and mailing time and costs, and simplifies storage.
Carriers may also focus on billing issues. Electronic bill presentment and payment (EBPP) can cut printing and mailing costs and improve payment lag-time.
Better Customer Service
Most insurers are targeting their technology spending on improving service. Customer-centric policy administration systems and CRM contact-center systems can enable better servicing. Agent extranets and online policyholder self-service portals decentralize servicing, making it more responsive and reducing central costs.
Others, especially P&C companies, are focusing on claims, where Web-based claims initiation and new workflow systems help tame an unwieldy process that is the biggest component of customer satisfaction.
With so many options, IT groups can be overwhelmed by the magnitude of the task they face. The good news is: A host of new and established software companies and consultants are focusing on helping carriers solve a specific problem rather than trying to address all their IT issues in a single solution.
A careful assessment of their own business needs and a good understanding of the various new options available to them can help insurance companies get started on improving their most important systems.
Matthew Josefowicz is a senior analyst with Celent Communications, Boston.
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