Analyst Believes the Worst Might Be Over for Insurers

"What we see in the results of our second quarter study is the consensus seems to be the worst is over," said Craig Weber, senior vice president with Celent.

Weber was one of three industry analysts taking part in the Web program "State of the Market: Where We Are, Where We're Going." Joining him were Matt Josefowicz, director of the insurance practice at Novarica, and Maurice DiMeo, a partner with Ernst & Young.

There is a good deal of evidence emerging the recession may be behind insurers, Weber pointed out, and some of the market performance issues are definitely turning in the right direction.

"How fast we get back, if ever, to the kinds of performance we saw three or four years ago is not exactly clear, but I think we have basically turned the corner," he said.

"In terms of how that affects technology and other types of project work with insurers, we believe things are definitely moving again. People are looking for [technology] solutions."

When asked by panel moderator Sharon Schwartzman, editor in chief of Tech Decisions magazine, about what insurers need to be concerned with in terms of customer-facing technology such as social networking, Josefowicz issued a warning to insurers.

"There's a little bit of a danger of insurers approaching Web 2.0 the way they approached Web 1.0," he said. "There was an incredible amount of hype [around Web 1.0], and companies wasted money on things that were not strategic. A number of other companies hid their heads in the sand."

As the Internet took center stage, particularly in the relationship between distributors and carriers, the companies that hid their heads in the sand missed out on the value being created by the Web, according to Josefowicz.

"We think companies should pay attention to the impact of social networking and think about it in relation to their own online marketing strategy," he said. "It's a very important component of that strategy. But I don't think they should budget a quarter of their IT budget on social networking."

The focus on regulatory compliance has increased of late, and DiMeo feels some smaller insurers may not be prepared for what they are facing in the future. "A lot of smaller insurers are not ready, especially given there hasn't been the strongest oversight [in the past] from a regulatory perspective," he said.

"Smaller insurers haven't had to deal with all the compliance issues, but now they are going to have to," said DiMeo. "The Office of National Insurance--the White House's plan to have the Treasury Department regulate insurance--is the wild card."

For larger insurers, the issue around compliance involves complexity, added DiMeo.

"[Insurers] are complex organizations, and the geography comes into play," he said. "The ability to regulate that is challenging. It comes back to issues such as data integrity. If you lack data integrity, it is hard to build systems to manage risks."

To listen to the entire archived discussion, go to www.tech-decisions.com and click on Web Seminars.