The world of commerce and insurance more specifically is shifting relentlessly from a paradigm based on tangible assets to one based on intangible assets. Increasingly more insurance companies will succeed with fewer people with deeper industry or functional knowledge and with significantly less dependence on physical artifacts, such as paper.This is not an Internet-era crazed screed about insurance agents disappearing. Rather, my point is that insurance companies themselves must change the way they do business if they are to attract and retain the policyholders and producers necessary to profitably stay in business.

Several technology forces accelerate this shift to intangible assets. It's going to happen. What is uncertain is how many insurers will change at all or fast enough to survive the shift. By 2015 one-half of the life insurers and one-third of the P&C insurers currently in business will be gone.

They will have been either swallowed up by winning insurers or other financial services firms, or will be placed into history books, surviving only as case study discussion material. The winners will be the insurers who quickly move up the learning curve of using information to compete. The winning technology firms will be those that support insurers at all points along the curve.


There are four major changes insurers must make to shift from tangible to intangible assets.

The first is to promote process commoditization. Business functionalities will become commodities. Insurers are creating this situation right now when they use industry standards such as ACORD or as they increasingly use more Web services.

Yes, the triggers for using these capabilities are interoperability, friction-free transactions and even a short-term competitive edge. Longer term, however, the picture is clear: Insurance functionality from first notice of loss to billing to underwriting standard applications to adjudicating "clean claims" will become commodities available to any insurer at a price.

Insurers who try to ignore the use of standards or Web services will find themselves with too high a cost structure. Standards, Web services and even service-oriented architecture (SOA): Can't live without them, can't compete the same way once every insurer uses them.

The second change insurers must make is to achieve initiative agility. Agility is there for the taking. Business rules that are used to speed process flow-by eliminating or at least decreasing human interaction-will enable insurers to be quicker than their competitors. Insurers now experimenting with embedded analytics in operational processes-what we call "intelligent process automation"-will also find themselves nimbler and able to quickly pass their competitors.

The third change is to pursue strategic sourcing. Politically sensitive or not, insurers who do not use some combination of IT outsourcing and business process outsourcing (BPO) will find themselves unable to shift to the new insurance market. Insurers that do the hard work of determining what they are truly good at and outsource the rest will have a significantly lower cost structure than their competitors. Those who believe they shouldn't consider BPO are consigning themselves to wasting resources on maintaining business applications that they don't have the competencies to support or maintain. The high-pitched sound heard by insurers stuck in the "not-invented-here" quicksand is the sound of their competitors whooshing past them.

Lastly, insurers must remain aware: The world is moving very quickly and insurers making the shift to leverage internal and external information will know what events are occurring that will impact them right now.

Dashboards with real-time data input from both internal processes and external news feeds will heighten corporate awareness. Modeling will become even more critical in this new information-intensive market. Successful insurers will model their large loss possibilities, such as natural catastrophes or their density of risk, to get a better handle on their exposures within a given geography.


They'll also model how geographies and prospect bases are changing and alter their pricing and target campaigns accordingly. Winning insurers will have feedback loops that track the viability of their models in real-time or near real-time, as well as systems that make adjustments as needed.

People aren't going away. Well, not the highly skilled people. It's just that information-the intangible assets of the insurance industry-will be taking on a significantly greater role. Insurers who stick with the physical artifacts will become historical artifacts themselves.

Barry Rabkin is senior research analyst, insurance, at Financial Insights, an IDC company. His e-mail address is

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