Boston - Electronic application submissions have grown dramatically since 2004 but still account for less than half of all new life/health business, according to a new report from Celent, a Boston-based financial research and consulting firm.

The report “Top Ten Trends in L/H Insurance E-Business 2007 and Beyond,” offers some insights when compared to a 2004 Celent report on trends in life/health e-business that contained 10 projections for 2007. In this new report, Celent revisits those projections based on updated survey data from more than 20 life/health insurer executives and looks forward to 2010.

“In general, our predications from 2004 have held up,” notes Matthew Josefowicz, coauthor of the report and managing director of Celent’s insurance practice. “If anything, we underestimated the growth in electronic application submissions. More than 60% of respondents in our recent study said that more than a quarter of their apps came in electronically. This number represents more than twice as many as those experiencing this level of volume in 2004.”

According to the report, e-business budgets have become more consistent across the industry, with 70% of budgets between 3% and 10%. This held true for companies regardless of size. The bulk of this spending (48%) is directed toward agent/distributor-facing systems. Although agent/distributor portal investment is down from 56% in 2004, it is not surprising that it is still the largest area of expenditure, says Celent.

“Policyholder portals are also an investment focus for life/health insurers, and if they do not have one already, most insurers have plans to implement one in the future,” notes Jeff Goldberg, senior analyst in Celent’s insurance practice and coauthor of the report. “Policyholder portals will need to provide a higher level of functionality if insurers want them to remain competitive.”

Among the 2007 survey respondents, 32% said that more than a quarter of their policyholders were users of their portals. But this response came from a broad range of companies, and Celent still believes that an estimate of about 25% of policyholders using policyholder portals on average is realistic.

In 2007, 33% of respondents reported that more than half of independent agent new business submissions were electronic and 40% of captive agent new business submissions were electronic, notes the report. More than 60% said that at least a quarter of new business submissions were electronic, regardless of channel.

As projected in 2004, agent portal deployment is essentially ubiquitous, with more than 90% of respondents offering transactional agent portals or planning on offering one within the next year. Agent portal adoption is high as well, with 95% of insurers reporting that at least half of their distributors use their portals, and 53% reporting that more than three-fourths of their distributors do.

Online advertising is still a minor percentage of most insurers’ ad spending, but it is notable that more than half of the sample group reported spending at least 5% of their advertising budget online. Celent expects at least a 50% increase in online marketing spending by 2010.

Looking forward to 2010, Celent sees the following other developments on the horizon:

* More sophisticated interfaces, built on AJAX or the next generation of web technology;

* A steady increase in the percentage of new business submitted online;

* An incremental increase in policyholder portal adoption;

* Ubiquity of online quoting and sales in term life and individual health, and an expansion of needs analysis and product guide tools for all product types;

* At least a 50% increase in online marketing spending, and a greater increase in search engine optimization.

Source: Celent

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