Insurers have invested significant amounts of capital on technology based on the belief that those investments will improve their top- and bottom-line performance. However, new research indicates that carriers are experiencing mixed results to date and they're seeking refined metrics to measure how technology is impacting their operations.Those are some of the conclusions of a recent survey of 248 North American financial services firms conducted by Tillinghast-Towers Perrin. The survey is the second in a series of industry studies conducted by the management and actuarial consulting firm intended to learn how new technologies are impacting carriers' performance, and how carriers are measuring the success of IT implementations.
Taken together, the two surveys reveal that while a majority of survey respondents have experienced significant improvements in various business operations from their IT investments, there has been less success measured for distribution and customer management, and company and customer profitability.
"In some cases, carriers are learning that there isn't the expected payoff," says Jenny Emery, a senior vice president with Tillinghast-Towers Perrin and author of the study, "The Measured March Continues: As New Technology Intensifies Customer Focus, Insurers Seek Refined Metrics."
New metrics needed
Another reason why some carriers aren't seeing evidence of return on their IT investments is that they're not using the right performance measurements.
Indeed, many carriers are relying on traditional business metrics, such as net operating results, growth and return to shareholders, as their primary means of measuring the success of their technology investments.
And, more than one-third of survey respondents indicate that in the past three years they have not measured how technology has impacted channel profitability, while 37% indicated that they don't measure, or don't know how to measure, technology's influence on customer profitability.
Nevertheless, they remain optimistic that technology will deliver measurable improvements during the next three years in customer retention (81%), company profitability (78%), market share (78%) and customer profitability (70%).
"There needs to be more short-term 'leading indicators' that help insurance executives understand how technology is influencing their business," Emery explains. "That includes measurements for agency productivity by distribution channel and the true sense of customer value based on multiple products sold."
Sept. 11 Impact
Separately, the study indicated that despite the massive losses that carriers experienced due to the terrorist attacks last September, carriers aren't scaling back their IT budgets-and in some cases, they're accelerating their technology timeclocks.
For example, 16% of carriers surveyed said they will speed up their implementation of technologies supporting distribution and customer management in the aftermath of Sept. 11. In addition, 15% indicate they'll accelerate IT spending on business processes and operations while 11% plan to increase their spending on technology supporting underwriting.
"There has not been very much emphasis on using technology for sophisticated underwriting and risk-exposure analysis, but as carriers begin to see improvement in their top-line revenues, there will be a movement to better manage their risk," Emery says.
