Studies Conflict On Future Of Web Sales
Two recent surveys on insurer technology use have found that while the Web has a bright future in boosting the industry's operational efficiency, the prospects for Internet sales and distribution are not at all clear.
In a recent survey by Greenwich, Conn.-based IVANS, 75 percent of insurance companies polled said they regard their Web sites as sales vehicles for insurance. "We take that to mean everything from new customer acquisition and applications, to referrals, to agents," explained Clare DeNicola, vice president of sales for IVANS.
In contrast, however, 69 percent of companies that said they use independent agents to distribute their products "either disagree or strongly disagree that the Internet is a viable distribution model," noted Ms. DeNicola.
Among a smaller group of respondents that dont use independent agents (about 20 percent of the total sample), more than 50 percent either agree or strongly agree that the Internet is a sales vehicle for selling policies, Ms. DeNicola added.
In addition, while some companies in the IVANS survey said they considered their Web sites to be sales vehicles, "only about 15 percent of respondents are currently using the Internet as a distribution channel for insurance sales," said IVANS.
The IVANS survey questioned 80 information technology executives from both life-health and property-casualty companies, noted Ms. DeNicola. Job titles of those surveyed include chief information officer, chief technology officer, director of information services, vice president of IT and director of IT.
According to Ms. DeNicola, the survey revealed that insurers are finding "practical" uses for the Internet. "They are being neither aggressive nor conservative [in using the Internet], which is good news," she noted. "If youre purely aggressive in adopting technology for technologys sake, it's going to burn out." A more moderate approach, she added, lets insurers "adopt the best technology for that need."
The IVANS survey also found that only 8.1 percent of respondents said they had no plans to replace their legacy systems, while 30.2 percent were rewriting their systems to be Web-based.
The latter group, said Ms. DeNicola, is rewriting its systems on an application-by-application basis to run on smaller networked systems, rather than mainframe computers. "They will eventually dump their mainframes," she predicted, adding that 1.2 percent of respondents have already done so.
An additional 53.5 percent of respondents said they were implementing Web-based front ends for their existing legacy systems running on mainframes.
"Were in a very good place," said Ms. DeNicola of the insurance industrys progress on technology, emphasizing what she calls the industrys "practical approach" and tendency to "evaluate the right things on a [return-on-investment] basis."
She characterized the insurance industrys technology progress as "comparable" to banking and securities brokerage, indicating that "it could even go beyond that. "Were probably still behind in [producing] flashy Internet sites, but were not looking at the Internet to be a sales vehicle," she added.
In the immediate future, she said, insurance IT development efforts will focus on "back-end stuff that wont be seen. Thats where you get the real benefits to the bottom line."
Meanwhile, a survey by New York-based Tillinghast-Towers Perrin found insurers more bullish about online sales, predicting "the expansion of the use of the World Wide Web as a distribution channel and to make current distribution channels more effective," said Jenny Emery, Tillinghasts global e-business leader.
The Tillinghast survey, based on 120 responses from financial services company executives, found that 91 percent of respondents believe that over the next three years, technology will drive "dramatic" changes, not the least of which is increased Web use.
According to the Tillinghast survey, "the number of companies that conduct more than 10 percent of their sales via new technologies is expected to quadruple in three years." This is in contrast to what the researcher said are "previous reports that indicated most insurers did not expect the Internet to be a significant sales channel."
Tillinghast noted that "distribution was clearly priority one for many insurers."
Ms. Emery said one way in which the Web will expand is via establishment of broker portals, which are Internet sites where brokers and agents can get access to information for faster quoting. Larger insurers, she noted, will probably develop proprietary portals, while smaller companies may gravitate toward forming consortiums for the same purposes.
One barrier to development of such portals, however, is that "customers arent ready for it," said Ms. Emery. She believes that will change, however, as younger generations–raised on computers and the Internet–grow up and begin doing more transactions online.
Demonstrating that customer relationship management has had a significant impact on the industry, the Tillinghast survey also found that most respondents (75 percent) believe that new technologies have heightened the strategic importance of "owning" the customer relationship.
The surveys reported sample is drawn from some 248 North American financial services companies participating in the Tillinghast "e-Track" program. Among those participating in this study, 44 percent were life insurers, 35 percent were p-c insurers and 15 percent were health insurers, the researcher said. Senior management and planning executives made up 32 percent of respondents, finance executives 30 percent, and IT/e-business executives 19 percent.
While the survey found that 70 percent of companies expect to increase or significantly increase their investments in new technology over the next three years, it also found that 60 percent do not believe that the adoption of new technologies has led to a significant reduction in costs.
According to Ms. Emery, the insurance industry hasnt been successful in achieving cost reduction, because it has not "put the right kind of business case together." In many cases, she noted, companies merely put a new technology layer on top of old business processes. "Until you re-engineer the business process, you [wont] get the kind of ROI that youre looking for," she explained.
Historically, she added, "the insurance industry has neither embraced nor been rewarded for boldness [in adopting technology]." This may explain "why so many are willing to wait and see results from peer companies before moving ahead," she added.
"It remains to be seen," Ms. Emery noted, "if being a fast follower is still the right strategy in insurance."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 26, 2001. Copyright 2001 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.
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