Insurers Need Better Technology, Customer Service: Tower

Insurers to be successful in the future must ramp up their technology and get a better focus on their customers, according to a research consulting firm.

The findings by the TowerGroup based in Needham Mass were among those in a series of reports on challenges for change in the financial services sector in 2007.

Many of the changes, according to TowerGroup, are based on what iss occurring in the global environment.

The firm argues in the reports that financial services institutions will have to become more adaptable and reinvent themselves to stay competitive as new markets and new players emerge and develop.

"The global financial services industry is changing in response to tectonic shifts in marketplace and business dynamics," said Guillermo Kopp, vice president of TowerGroup Cross-Industry research. "Traditional markets are saturated with product and service options.

The maturation of established customer segments is limiting traditional market opportunity. Both customer satisfaction and loyalty are being eroded by competition from traditional and nontraditional sources and industries."

For insurers, the landscape is somewhat different from others in financial services. Karen Pauli, a senior analyst in the insurance practice at TowerGroup, said that insurers operate in a different world due to the differences in regulation, distribution and other aspects of their business.

Insurers and others will have to adapt to a broader spectrum of consumers demanding a wider array of products, TowerGroup finds, and those that are more flexible in how they operate will be better positioned to be successful.

Technologically, Ms. Pauli noted, the insurance industry has traditionally take a conservative approach, but TowerGroup sees technology as playing a major role in what it sees as the big issues for companies in 2007.

The main issues for the insurance industry "circulate around customer intimacy," Ms. Pauli said, adding that "carriers are recognizing that they have to make the customer feel as though they are the only customer in the world."

Essentially, she said, insurers haven't been taking what she called a "holistic" view of customers, instead seeing them more as simply the person they are selling products to.

In additional, Ms. Pauli said that working towards a service-oriented technological architecture will continue to be an issue for carriers in 2007.

Another continuing concern, she added, are efforts towards increased business and IT alignment within insurance companies, which Ms. Pauli said is being seen at the upper management levels, but "hasn't worked its way down" throughout most companies.