WHETHER ON PAPER OR ONLINE, TEN YEARS LATER, THE PERSONAL TOUCH STILL MATTERS
Sometimes a decade doesn't make all that much of a difference. Such, it seems, is the case with using Web-based technology to customize the customer's buying experience. In INN's inaugural issue, an article by Kit Ladwig, "Online Quoting Services; Hype or Happening?" took measure of the state of Web-based insurance quotes and sales. It found much excitement about the potential of Web-enabled quotes and sales, tempered by a good deal of pragmatism about its limits and speed of adoption.
Today, despite a decade of technical advances and consumers' increasing familiarity with the Web, research shows a small percentage of consumers completing insurance sales using only the Web. Indeed, a couple of new research reports serve to buttress Ladwig's contention that the adoption of online services would be glacial.
A July research note from Cambridge, Mass.-based Forrester Research Inc. paints a grim view of the state of online quotes and sales. Titled, "U.S. Auto Insurers' Slow Merge Onto the Information Superhighway," it states that in 2006, online applications accounted for only 5% of total auto insurance applications.
Likewise, a July report from Boston-based Celent LLC, "Online Insurance Sales and Marketing: What's Happening and What's Next," finds Web-based adoption also in the mid-single digits. Worse still, it says online auto numbers are comparatively robust when held up against the health and life insurance segments. The Celent study notes that several auto insurers, including Warren, N.J.-based Chubb Group of Insurance Companies, Webster, Mass.-based Commerce Group Inc. and Columbus, Ohio-based State Auto Insurance, do not offer online quotes.
Tellingly, the research shows that the resistance has not come from the notoriously conservative insurance industry, but rather from their Web-savvy, yet still reticent customers. While many are willing to research insurance online, many are hesitant to consummate the deal online.
Celent is only slightly more sanguine when it comes to the future of insurance sales, expecting that "pure" online sales will double by 2011, but still account for less than 15% of sales. Put another way, in 2011, despite the seismic shifts in Internet technology and cultural acceptance, and serious investments of time and capital by insurers, Celent foresees a vast majority of consumers purchasing insurance in much the same manner they did in 1997, or 1987.
Today, as evident in the Mutual of Omaha story (cover), having the technology and flexibility to personalize proposals for individual prospects seems to be having a winning effect.
IN 1997, EXECUTIVE DECISIONS TAKE ON DIFFERENT APPROACHES
In INN's first issue, a trio of stories of addressed different aspects of how technology enables executive decisions.
One story, chronicled the attempt of ill-fated, Chicago-based broker Near North Insurance Brokerage Inc. to capitalize on its experience with executive decision tools by launching a new business unit, Near North Risk Technologies Inc. The article, by Christine Woolsey, noted how the advent of Internet technology and the increasing power of desktop processors (Santa Clara, Calif.-based Intel Corp. released the Pentium II in May of 1997) dovetailed with a proliferation of executive decision tools and risk management systems. "Many large corporations have installed risk management systems to help ease the administrative strain on risk managers and free them to spend time on more complex tasks," Woolsey wrote. "Risk managers who do not have the advantage of an automated risk management system find the task of managing and tracking multiple insurance programs and changing exposures arduous."
Another article explored how the changing technological landscape was altering the nature of the people charged with making technological decisions. Stephen Tarnoff's "The New Breed of Insurance CIO" examined how the insurance industry was looking to the banking, manufacturing and investment brokerage sectors as breeding grounds for IT talent. "Facing increasing competition within the industry and with financial service companies knocking on their customer's doors, some insurance companies are concluding that older technology, and the people responsible for implementing them, are no longer viable," Tarnoff wrote. "As a result, the traditional CIO who worked his way up the company ranks might find himself going the way of the outdated mainframe applications."
The third article told the tale of one industry executive's decision to push for universal networking. Mark Brohan's "A CEO's Quest for Consensus," detailed the decade-long push by Columbus, Ohio-based State Auto Financial Corp.'s former CEO Robert Bailey to get carriers and agents to adopt Single Entry Multi-Carrier Interface (SEMCI) as the industry standard. Originally envisioned to work with legacy systems, Brohan rather presciently noted the emergence of the Internet would delay, not hasten, widespread SEMCI adoption. "Though many executives like the SEMCI concept, the networking model has been slow catching on for several reasons," he wrote. Indeed, 10 years later, the promise of SEMCI is still over the horizon.
Today, insurance executives are often called upon as soothsayers, and the challenge remains for them to be able to make good decisions that affect the acquisition, allocation and delivery of the right technology mix to support company-wide growth and reduced expenses.
NOT JUST BUSINESS AS USUAL FOR BUSINESS INTELLIGENCE PROVIDER
Long before the term service-oriented architecture was coined, the industry was already looking at ways to marry business intelligence with technology that enables you to use it to do a variety of different tasks. In fact, the emergence of Insurance Networking News in 1997 coincided with the birth of business intelligence provider ChoicePoint Asset Co. as an independent company that would experience its share of ups and downs.
In an article, "ChoicePoint Spreads Its New Wings," Christine Woolsey chronicled the Alpharetta, Ga.-based company's inception as it spun-off from parent Equifax Inc., and sought to become a top provider of risk management and fraud prevention database information to claims investigators and adjusters.
Woolsey enumerated the challenges the new company would face in a soft insurance market. "More than ever, insurance underwriters need data to accurately assess risks, particularly in this era when many carriers are keeping policy prices low to gain market share," Woolsey wrote. "Today's most successful data service providers will be those that can provide accurate, usable information with lightning speed."
Business intelligence, now as then, encompasses an array of data-centric applications and technologies to help companies make better decisions and improve internal operations. For ChoicePoint, the connotation of business intelligence seemed to expand as the company did. Anticipating what kinds of data its insurance customers might want, ChoicePoint started collecting consumer information, such as criminal records, to aid insurers in ferreting out fraudulent claims.
To help it diversify and expand into lucrative new markets, the company committed to a strategy of growth through mergers as acquisitions, Woolsey noted. "The strategy is a direct response to claims payers' and underwriters' desire for one-stop access to diverse types of information," Woolsey wrote. "No longer content to pay for and maintain separate links to various database providers, these users want access to lots of different data through a single networking link."
However, the strategy to be all things to all customers and to grow through acquisitions was not without consequences. In early 2000, the company acquired Ormond Beach, Florida-based Database Technology (DBT) and with it, some unforeseen complications. DBT had previously been awarded a contract to review the Florida voter registration rolls for the 2000 presidential elections. The ensuing election imbroglio, and the pointed questions about the methodology DBT used to compile the list of eligible voters, put ChoicePoint, and its business practices, under intense scrutiny that has yet to fully abate.
FOR BPM, WHAT A DIFFERENCE A DECADE MAKES
The concept of Business Process Management (BPM) was itself relatively young back when INN was new. However, the underlying issue BPM seeks to address, rethinking how technology can boost operating efficiency and strengthen the bottom line, predates it by decades and remains as current as ever.
INN's inaugural issue featured a story about an effort then underway to tame one of the most antiquated, complex and paper-intensive of business processes-selling annuities. Dubbed "An Annuities Clearinghouse Is Fighting to Win Carriers' Support," it recounted the efforts of the New York-based National Securities Clearinghouse Corp. (NSCC) to launch an electronic service to simplify annuities processing.
"Selling annuities today involves heaps of paper documentation, criss-crossing electronic networks, and hours of tedious fact-checking between the insurance carriers selling them and the broker/dealers who represent buyers and investors," the article's author, Joanne Cleaver, wrote at the time.
Cleaver detailed the hurdles-technical (new systems, massive amounts of data) and cultural (reluctance by insurers to abandon a working system for a new one) the NSCC faced getting what, then known as its Annuity Processing Service, off the ground.
"Insurance was the last frontier, the final financial industry segment that hadn't been automated or standardized the way the securities or mutual fund industries had," says John Ziambras, managing director and general manager, insurance services for New York-based Depository Trust & Clearing Corp. (DTCC), which acquired NSCC in 1999.
Today, NSCC is a subsidiary of DTCC and its positions and valuations service automates the sale and processing of fixed and variable annuities and life insurance. All major carriers are all fully or partially utilizing the service, Ziambras notes. In 2006, the service processed 2.7 billion transactions, an 18% increase over the previous year.
The rising volume also means lower prices for users of the service because DTCC employs an at-cost business model. Effective July 1, DTCC reduced fees for users of the service.
Acknowledging the ever-shifting technical landscape and the vital role of standards, NSCC is working to unveil products that utilize XML. The company is also working closely with other organizations working toward standards such as ACORD and NAVA.
"The only way to grow an industry is through standards," Ziambras says. "We embrace open standards and believe in creating a common language so that people can do business effectively."
As for carriers, rethinking the use of standards and adapting to changing technology is keeping BPM at the forefront of 2007 initiatives.
NEW DISCIPLINES HELP SET IT PRIORITIES
The cover story of INN's inaugural issue broached what was then, and is now, one of the most important questions for insurers: where do I put my IT dollars? Now, as then, there is no simple answer.
The article, by Mark Brohan, contended that for some in the insurance industry, IT investments were made in an ad hoc manner. "Insurance companies are notorious for wasting valuable information technology resources on pet projects championed by individual departments of managers," he wrote.
Brohan noted that insurers had long been accustomed to keeping only few outside electronic links, such as those to agents and brokers. However, insurers saw their network requirements and consequently, their need to establish investment priorities, mushroom in the mid-90s. Today, the even wider net of electronic links insurers are required to keep with banks, brokers, state insurance departments, etc. make an ad hoc approach much less feasible.
To illustrate this point, Brohan's story profiled two insurers and their decidedly different approaches to investing in networking resources. The first employed a rigid, military-style planning and evaluation process. The second used a more subjective approach after the CEO became enamored with mobile technology.
While both approaches worked, the former approach appears more prudent today, given the increasing importance and complexity of IT infrastructure.
To help manage the IT investment process, entire new disciplines and tools emerged during the past decade to make the process more accountable and less subjective, if not much simpler. Indeed, both application portfolio management (APM) and project portfolio management (PPM) became integral parts of the IT investment landscape in the past decade.
APM and PPM, which had been considered separate disciplines, are now becoming more integrated. What's more, both disciplines are themselves are being subsumed under heading of IT governance.
The concept of IT governance emerged in recent years in part due to the emergence of new reporting regulations, including the Sarbanes-Oxley Act of 2002. However, other factors, including the spate of mergers and acquisitions and the effects of the globalization, saw companies looking for greater consistency for their discretionary IT projects.
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