Insurance companies spent more than $20 billion this year on new technology. But which technologies are the most innovative and will have the greatest impact on carriers' success?The Internet won't replace agents or call centers, nor will it become the preferred method for purchasing insurance. But it certainly is becoming an integral part in carriers' efforts to market, support and sell insurance policies to customers, and to attract new policyholders.
It's not surprising, therefore, that four Internet categories ranked at the top of Insurance Networking's "Best of the Newest" survey, which asked industry experts to rank 18 technologies based on their impact on the industry and their level of innovation. The panel rated Internet security as the top insurance technology, followed by Internet delivery and intranets/extranets. Following closely in fourth place is Java, XML and other Web-programming languages (see chart, page 20).
Evolving 'net strategies
As insurers transform their Web offerings from text-only electronic brochures to interactive Web pages that enable consumers to research, purchase and bind policies, carriers are looking for new ways to boost the functionality of their Web properties.
"This (Internet delivery) is what it's all about," says James Harkness, vice president of e-commerce for TIAA-CREF, New York. "Doing it won't guarantee success, but not doing it will guarantee failure."
Carriers must shape their Internet strategies to satisfy agents, policyholders and shoppers, says Matthew Josefowicz, an analyst with Celent Communications, New York.
"Agents need speedy communications with, and information from, the home office," he says. "Policyholders need easy access to their billing information and a quick way to resolve disputes. And shoppers need estimated quotes and basic policy information in as painless a way as possible. This will lead to huge cost savings in terms of processing time for staff and increases in customer satisfaction."
But others warn that the Internet also poses new challenges for an industry that historically has been slow to embrace change.
"This requires innovative business models that apply to the industry," says Mark Popolano, CIO of American International Group, New York.
Recent research conducted by Chicago-based Andersen concludes that the insurance industry has moved beyond brochureware, to the second and third stages with online transactional capabilities and self-service. Some carrier Web sites now provide claims initiation and tracking, approval of new policy requests, submission of initial premiums and proof-of-coverage cards.
"The next step for insurers is linking insurance to life events such as purchasing a home," says Susan Cournoyer, a senior analyst with Gartner Dataquest, Lowell, Mass. "The Internet can enable this forward-looking linkage and capture demand at the point of generation."
As insurers build Internet links to their back-end systems, their once-closed networks become exposed to the public. Safeguarding policyholders' personal information will be a paramount responsibility for carriers as they expand their e-business strategies.
"Confidentiality and controls will be the cornerstone for e-business solutions," says AIG's Popolano. "The merger of digital certificates, digital signatures and entitlement software with artificial intelligence controls and extensive data warehousing will pave the way for complex transaction-handling on the Web."
The insurance industry for the most part has focused on privacy and the security of their back-office systems.
"Protecting the company's assets and the privacy of our policyholders is the highest priority for Nationwide," says Kelly Cannon, vice president of Nationwide Insurance, Columbus, Ohio.
But denial of service attacks and viruses that directly attack servers, directories and files are making it more important to have a fully dedicated Internet security group, adds TIAA-CREF's Harkness.
As carriers' reliance on the Internet grows, strong security precautions are becoming a "cost of doing business," says Celent's Josefowicz. "However, the costs will be outweighed by the benefits of doing business online."
To support their Internet business initiatives, carriers and other financial services providers are using Java, XML and other Internet languages to boost their back-end legacy systems.
"The emergence of Web languages has the potential to provide tools to revamp business processes that have remained tangled and inefficient for decades," says Gartner Dataquest's Cournoyer. "IT services, such as consulting and systems integration, will be a key part of this transformation."
The most important value of XML, or Extensible Markup Language, is the potential to move data internally between different systems in a single format, explains Celent's Josefowicz.
"Easing the jump to the Web display of data is a specific example of this type of portability," he says. "Critical to this type of portability will be the development and adoption of robust industry standards."
The integration of language and data formats have always been key to good application design and delivery, says AIG's Popolano.
"No single language will dominate any specific company or industry, but the integration into common data formats will allow disparate applications and companies to communicate with each other," Popolano says. "XML and the interpreters will lead the way to common presentation of data."
But some industry experts believe that the current hype over XML may be overblown. "XML is a promising dream that is yet to come true," says Robert James, executive vice president, technology solutions, for Chicago-based CNA Insurance Cos. "XML will change everything, but not for five years, due to the insurance industry's typical inertia."
The ongoing evolution of carriers' e-commerce initiatives is just one component of the industry's acceptance of placing policyholders' interests ahead of new product development. Among the technologies supporting improved customer service are claims systems, call centers, middleware and customer relationship management software.
Insurers are increasing their investments in claims administration tools to provide quicker resolution of policyholders' claims-an area in which carriers believe they can achieve a true competitive advantage in a tightening marketplace.
"Nationwide is deriving real benefits from intranet claims administration tools," Cannon says. "The ease of deployment and fast training capabilities are very impressive."
Claims administration is a function where business process changes can yield high payoffs in efficiency and skilled application of the principles and practices of insurance, Cournoyer adds.
Improving customer service begins with upgrading call center technology. Carriers are investing heavily in technologies that integrate Web site and call center customer support, such as Internet telephony and call center automation.
"Call centers are as much about customer convenience as they are about outbound marketing and cross-selling," says Ryan Conlon, an Internet IT executive with Progressive Insurance Co., Mayfield Village, Ohio. "Immediate gratification is what consumers want and call centers help achieve that need. What consumers don't want is yet another phone call at dinner time."
Systems integration is an ongoing challenge for the industry, but with the help of middleware, enterprise application integration and other tools, carriers are developing databases that are accessible across their enterprise.
"Middleware is a key technology for large carriers, particularly those with disparate infrastructure investments that host legacy applications which support multiple channels," says William Bradway, president and co-founder of Meridien Research Inc., a Newton, Mass.-based research and consulting firm.
Meanwhile, faith in customer relationship management (CRM) software appears to be fading. Insurance executives do understand the need to deepen the financial relationship their companies have with policyholders, but some industry experts are beginning to question their investments in technology supporting their CRM strategies.
"Mark my words, in just a few years there will be quotes that '85% of CRM projects have failed,'" Progressive's Conlon says. "It's evident today that people aren't sure what they want to achieve with CRM."
Time isn't right
A number of technologies included in this year's survey were deemed by respondents as either ahead of their time or of limited value to carriers.
Digital signatures and digital certificates, which received much attention last year when Congress passed the Electronic Signatures in Global and National Commerce Act, ranked 16th out of 18 technologies in the survey.
"This is a case where the technology (digital signatures) is far ahead of the consumer," Josefowicz says. "It will be at least two to five years before digital signatures in their current form are widespread enough to have an impact on online sales."
Others were more harsh in their assessment of digital certificates. "The technology was obsolete before it was ever promulgated," Harkness says. "Leaving aside their unwieldiness for consumers, (digital certifiates) merely transfer to an external 'black box'-the certificate authority-all the problems of establishing and maintaining a rigorous verification/authentication chain that both companies and customers must then trust implicitly."
The panel also rates electronic bill payment and presentment (EBPP) as a technology that, given time, could have a positive impact. "Over time, EBPP has the potential to reduce costs, but convincing customers to use it is a challenge that IT vendors and insurers face," Cournoyer says.
Nationwide Insurance has provided EBPP capabilities on its Web site since mid-year. "We find this service not only is appreciated by tech-savvy customers, but it also gives our customer care centers easy access to the information they need to answer billing questionsl," Cannon says.
One potential IT wild card is outsourcing and application service providers. "Insurers will begin to look more closely at ASPs as way to bring innovative services to their customers, without having to outlay significant capital in a downward economy," says Ian Rubin, director of online research for IDC, Framingham, Mass. "IT departments won't be able to keep up with the innovation that leading carriers will require.
However, Nationwide's Cannon, who gave ASPs a score of four out of 20 possible points, isn't so sure. "After examining our options, we decided that for the present time, it is more advantageous for us to perform these key business functions in-house."
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