Tech Keys Open New Doors For Agents
Even in this hardening insurance market, the extended economic downturn and stiff global competition from full-service financial services conglomerates will not permit the insurance industry to operate under its traditional, policy-based model.
Instead, the historically conservative insurance industry must follow suit with other financial service institutions to better meet the needs of its customers through personalization, timely offerings and heightened service, or risk losing them to the competition.
This will be possible through independent insurance producers who, with the use of customer relationship management tools, hold the key to converting single-line policyholders into enriched, multiproduct customer relationships.
Four key trends are reshaping the insurance industry today. They are:
The evolving role of the independent agent.
The independent agent channel is still the most desired by policyholders. It remains the primary distribution channel for insurance carriers. Companies must help agents seize the opportunity to leverage their close ties with policyholders and gain knowledge of their customers needs to strengthen their relationships through timely, effective offerings.
Agents, however, must take on a new face–that of a financial planner-advisor– and help policyholders select the right financial products to achieve their personal goals. They must attain the necessary securities licenses to sell both insurance and securities products to meet policyholders financial needs.
This will require full commitment from insurance carriers in the form of online customer support and new commission structures to support a truly customer-centric model.
Carriers are beginning to extend varying financial planning and wealth management tools to agents to assist them when devising personalized financial and risk plans for their agents client base.
As the number and complexity of products offered by carriers increase, the agents role will expand and grow more complex. In turn, insurance carriers must provide product education and administrative relief to agents, enabling them to dedicate more time to value-added tasks such as identifying new cross-selling opportunities and building customer relationships.
With component-based Web technologies, insurance carriers can automate business processes, such as policy ratings and claims processing, and support customer self-servicing needs. Agents will be free to spend more quality time with policyholders, thereby gaining insight into clients financial needs and helping them achieve their personal goals.
The industry will continue to consolidate in an effort to fend off the onslaught of competition and create a scale that will improve the carriers and the agencys bottom lines.
While an acquisition strategy might build scale, it is not enough under the current market conditions. Insurance providers must institute a strategy that focuses on customer retention and provides new value to policyholders.
A focus on core competencies.
As insurers experience escalating operational costs and declining rates of retention, they are seeking new ways to improve the bottom line.
Carriers are divesting themselves of unprofitable business lines and outsourcing mundane tasks–they are keeping only core strategic processes in-house. They must also evaluate the profitability of their customers across all lines of business to truly understand the value of each business unit.
Insurance providers are beginning to recognize the importance of an enterprise-wide, client-centric strategy that will help them achieve the most value from their customers. They are struggling, however, to attain these goals, because information technology is inhibiting their strategic choices.
The diverse and proprietary nature of their disparate legacy systems (lacking an open architecture that is based on standards) has hindered the insurance industrys ability to become more client-centric.
Redesigning systems from scratch is not a cost-effective strategy under the current competitive conditions and economic climate. Enterprise application integration technologies, however, allow insurance carriers to adapt legacy applications to new business requirements with limited modification to legacy systems, thereby reducing development and maintenance costs.
New component-based Web technologies with embedded EAI capabilities might be the solution for the insurance industry. Web-based technologies allow component architectures to be built incrementally, reducing risk, producing benefits more closely aligned with investment, and reducing the cost of maintaining older mainframe systems by eliminating costly and time-intensive redesign. Over time, it is possible to retire a legacy application as new, reusable components are built to replace the old.
The agents role will continue to evolve from a single business line insurance agent, to a full-service, multiproduct financial services planner-advisor enabling greater value and improvements to the bottom line. Component-based Web technologies will support insurance providers and agents in reaching this goal, one step at a time.
Stephen Ross is an analyst with Meridien Research in Newton, Mass. This article is based on his recent report, “Converting Policyholders into Customers: Insurance Agents Hold the Key.” He can be reached at email@example.com.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 11, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.