TowerGroup Eyes Insurer Tech Challenges

Insurers need to carefully consider new technology implementations this year and next despite the budget-cutting pressures brought on by the recession, one leading researcher contends.

Karen Pauli, director of research in the insurance practice at TowerGroup, based in Needham, Mass., recently authored a report on “Transformational Technology and Organizational Change: Insurance Carriers' Chicken-or-Egg Question,” in which she addresses tech priorities for carriers.

We recently caught up with Ms. Pauli to find out what insurers can do today to cultivate a technology vision to remain profitable tomorrow.

Q: Why even consider implementing technologies during an economic downturn?

Ms. Pauli: There are no easy ways for insurers to grow revenue substantially right now. Implementing now is perhaps the only way carriers are going to get expenses out of an organization and manage their bottom-line results.

Many companies have been lowering expenses through staff reduction. Now the vast majority of carriers are at a point that if they reduce staff more, then it will become damaging to the overall business.

So carriers need to find other ways to improve business processes. If you don't introduce technology to remove unnecessary human involvement and fill in deficiencies, then you will exacerbate the problem.

Also, consumers now expect more out of carriers, including 24/7 access to services. Emerging technology is the only means by which to provide that service.

Q: Should organizational change be addressed prior to adopting technologies?

Ms. Pauli: Absolutely, as this will foster the acceptance of technology. If you do not prepare an organization appropriately, then you will invariably face resistance.

Any technology, regardless of its relative merits, can fail because of a lack of buy-in. If you involve the entire company in the preplanning stages, then you are likely to find better implementation roots and more robust ways to employ the technology.

Don't overlook the fact that no one knows how a company works quite like midlevel workers. Involving the company in a thorough process review will lead to more informed decisions. Managers will sometimes base purchasing decisions on price or what a competitor is using. Don't fall into this trap.

Insurance companies are very siloed in how they do things. For example, midsize commercial lines may do some things differently than small-business commercial lines, but there are multitudes of processes and actions that are identical. Address those issues beforehand so there is maximum value coming from the dollars spent on technology.

A good case in point is electronic signature, which is product-agnostic. The same software can be used by legal, by claims and in new-business production, but people want to be primary decision-makers.

To be successful, an organization must bring all decision-makers together and empower everyone to make meaningful contributions.

Q: Specifically, what technologies will allow carriers to address critical business issues?

Ms. Pauli: Predictive analytics are interesting in that they have huge applicability across an organization to improve virtually every operational area.

They are being used to reduce a business' exposure to fraud as well as for vendor management, subrogation and salvage decision-making, and litigation management. We've also found them to be imperative in new business acquisition, marketing and call center environments.

Also, I think that business process management tools are crucial in promoting operational efficiency, which is essential in helping carriers to achieve financial stability.

No carrier can move forward, from a results standpoint, if they do not finitely evaluate and manage individual business processes. Success starts at the bottom and rolls up. BPM tools allow a carrier to objectively measure progress and adjust practices and procedures accordingly.

Knowledge management is kind of a green field area. It covers many different types of technologies: document management, [instant messaging], blogs, wikis and telepresence, just to mention a few. It's all about putting together a suite of technology to harvest knowledge and then access that information for collaboration.

Companies need to gather knowledge and have a rolling access so the organization is always learning. I don't know anyone at this point who has said we're going full blast with this. We do know that carriers nevertheless understand the value of telepresence and video conferencing but are just not quite pulling all the rest of the components together just yet.

Q: What proactive approach should carriers employ now to pave the way for success?

Ms. Pauli: Carriers need to start thinking at a higher level about technology and not just use it at immediate pain points. They should have a cohesive executive vision that should involve planning three-to-five years in advance in terms of how to use technology to create a competitive edge. It just can't be about pain-point management.

There's a bit of a switch-around for carriers to be driven by consumer expectation and distributor expectations. Formerly, the plan was more contingent on what a carrier needed for its own internal purposes. Companies today need to think about what customers expect long-term and how to attract and maintain the best distributors to help them succeed and address those needs.

Christina Bramlet is Senior Editor at Claims magazine, a member of Summit Business Media's P&C Magazine Group, which includes National Underwriter. Check out Claims' Web site at www.Claimsmag.com.