Digital distribution

Similar to many insurance providers, Omaha, Neb.-based Jefferson Pilot Benefit Partners knows that field sales representatives were assigned their title for a reason. The emphasis on "field" provides them license to network away from the home office as often as possible.The problem: The home office is where the heavy lifting is performed from a data processing standpoint. When field reps conduct business outside the office, they often devote an equal amount of time-or more-at headquarters to ensure data they collected in the field was properly captured and processed.

In the beginning, Corporate America created a concept known as full-service, and it was good. The epitome of full-service is gasoline marketing, where a service station attendant rolled out the red carpet to customers, who could expect to have their tank filled, windshield cleaned, oil and tires checked and the transaction processed-all without unbuckling their seat belts.

It's always been assumed that an insurance agency can find a way to provide adequate service to its existing customer policyholders while at the same time optimize its new-business opportunities.But most realize that it rarely works that way. Internal operational inefficiencies, marked by a paper-intensive communications process and antiquated data-exchange platforms, often undermines an agency's agility in generating new business.

Success in designing Web self-service capabilities does not subscribe to a "build it they will come" philosophy. The business sponsoring the Web site must first conduct diligent research to determine the specific blueprint of what Web features will be regularly accessed.BlueCross BlueShield of South Carolina was one of the first health providers in the nation to offer its members, doctors, hospitals and other health care professionals a large array of self-service transactional capabilities with real-time access to mission-critical information.

Chris Mower didn't want to spend a lot of time-or money-building a Web portal for independent agents. But those restrictions didn't prevent him and Royal & Sun Alliance's Professional & Financial Risks Division from developing a comprehensive offering that is designed to develop new revenue streams, improve productivity by eliminating manual processes and help small-business clients understand management liability exposures."The business model, which we validated with customer feedback, was to create a way to distribute products through new channels without creating channel conflict," says Mower, manager of e-business solutions for Royal & Sun Alliance's ProFin division based in St. Louis. "It was about re-inventing existing processes and taking advantage of new technologies."

In today's highly competitive environment, financial services are largely a commodity, with institutions distinguished as much by service and price as by products and product features.Web self-service can significantly improve service quality. By automating much routine service, Web self-service enables users to quickly and easily resolve most of their service needs around-the-clock More importantly, because users aren't placed in a call queue for an available agent, Web self-service is often more responsive than contact centers.

Carriers and agents have invested a significant amount of capital toward electronic interface initiatives that enable the two parties to improve their data-exchange efficiencies and overall operational competencies.But as they carry this out, consumers have been neglected, to the extent that many "lack faith in the quality of online customer service," says Madelyn Flannagan, vice president of education and research for Alexandria, Va.-based Independent Insurance Agents of America (IIAA).

In the late 1990s and into 2000, several carriers and third-party providers began to recognize online calculator tools as invaluable in helping consumers perform needs analysis for life insurance."We have come to believe that few consumers have the patience or the understanding to spend a lot of time filling in forms to get the information they need," says Terry Burt, president of Canton, Mich.-based Interlinx LLC. Interlinx operates a Web site, www.budgetlife.com, that provides dynamic marketing and pricing data on a stable of life insurance products from more than 150 carriers.

Layton Christensen's best-selling book, "The Innovator's Dilemma," discusses how business leaders at large companies have usually underestimated the long-term impact of disruptive technologies. This trait certainly applies to insurance and the Internet.Insurers' unsuccessful efforts of using the Internet as a lead-referral channel in the late 1990s have soured senior executives' current perception of the Internet. However, recent successes by companies, such as John Hancock's strategy to sell term life insurance online and innovations by some property/casualty carriers in claims processing, is beginning to turn the tide. By 2005, maturing Web services technologies and data intermediaries will become key business drivers for carriers.

When Philip Swift responded to a classified ad for Fireman's Fund Insurance Co., little did he know how that decision would change his life.Swift, living at the time in Liverpool, England, accepted the offer to work for the Novato, Calif.-based carrier, but in the back of his mind he believed his stay in the United States would be short.

More than nine months after it was created, Wilmington, Del.-based Fusura Inc., a Web-based personal lines insurance agency formed by global insurance giants AIG, Kemper and Prudential, is finally preparing to go live.As it prepares to launch-expected to be no later than March 31-the consortium capitalizing the venture can't be accused of rolling out the program too hastily. Since its celebrated formation was revealed, Fusura has witnessed its share of tweaks and modifications-from putting a permanent executive team in place to choosing its technology platform.

Millions of potential buyers are using the Web to shop for insurance.That's why carriers are reassessing how to use the Internet to build their brand.

Until recently, insurance companies have developed many Web sites for various products and business units, with little attention paid to consistency in branding, according to Kimberly Harris, senior research analyst at Gartner Financial Services, a unit of Gartner Inc., a Stamford, Conn.-based research and consulting firm."But insurers are beginning to realize they need to focus on an enterprise brand and roll that down to the different channels," she says.

Imagine how difficult it must be for an independent agent to locate a carrier that covers beekeepers or acupuncturists. Or, from a carrier's perspective, finding agents who will sell employee dishonesty or bailee coverages.MarketScout, a Dallas-based venture that was launched in June 2000, is using the Internet to help retail insurance agents get quotes and bind polices for more than 700 classes of business, primarily specialty insurance. Since it's inception, the company has registered more than 13,000 agents who have free access to information and quotes provided by 67 carriers, including such heavyweights as American International Group Inc. (AIG), Travelers Insurance The St. Paul Cos., Safeco, Cigna and Fireman's Fund.

As world of insurance grows more complex due to competition from within the industry and from banks and other financial services providers, Allied Insurance has a simple business strategy: attract and retain quality independent agents."Agents are our primary focus. Everything we do is aimed at how we can help the independent agent do business better," says Nate Beyene, IT officer for e-commerce at the Des Moines, Iowa-based carrier. "If our automation is not good, our agents can go next door."

Insurers can't understand the benefits of wireless technologies unless they experiment with it, as Progressive Insurance has done for the past year. At the same time, the lack of industry standards, coupled with current limits on how much data can be transmitted and received by mobile devices, limits the types of services that wireless devices can support."This is a technology that consumers are dying to use, except for claims and servicing," says Jamie Bisker, a senior insurance analyst with TowerGroup, Needham, Mass., and author of the recent report "Wireless Realities In Insurance."

The insurance industry received repeated criticism for failing to develop e-business capabilities quickly enough during the dot-com frenzy. Now, it appears that insurance companies are catching up with competitors in other sectors of the financial services industry.That's a conclusion of a recent survey of 150 North American financial services organizations conducted by Chicago-based research and consulting firm Andersen (formerly Arthur Andersen).

Insurers such as Seattle-based Safeco Corp. and The Hartford Financial Services Group, Hartford, Conn., are providing Web-based tools for agents to target key prospects (see pg. 28). Many insurers are also using the Internet for target marketing by building portals for specific affinity groups.For example, The Prudential Company of America launched www.prufn.com for the affluent community; Farmers Insurance Group launched teachers.farmers.com; and Metropolitan Life Insurance Co. has a Web site for parents of children with special needs.

Over the past four years, independent surveys that measure and project online insurance trends have delivered what's become a recurring diagnosis: When it comes to the functionality of their Web sites, carriers remain a step behind banks and brokerages.And while two new reports conclude that carriers have made strides in narrowing the Internet gap, the reports also highlight the industry's continued e-business shortcomings.

Life and health insurers to date have been slow to sell policies online. But within the next four years, carriers will sell $12.8 billion in life and health products on the Internet-up from $1.1 billion last year.That's the conclusion of a forecast released by IDC, a Framingham, Mass.-based technology research firm. The growth in online life and health insurance sales will be spurred by several factors, according to IDC.