Equal Attention Needed for Strategic, Tactical Planning

Insurers have to balance strategic initiatives with operational and tactical changes in order to succeed in 2012. That's the "call to action" presented by the research and consulting group Strategy Meets Action (SMA) in the latest in its Insurance Ecosystem Research Series.

"You can't focus on one more than the other," says Deb Smallwood, founder of SMA. "We asked insurers to think more holistically. You can have separate strategies for areas such as social media, mobile technology, or customer communication, but you need to bring them together. Innovation is where insurers need to focus. How do you leverage all your assets and bring in emerging technologies such as cloud so you can take everything to the next level."

Despite cuts in expenses made by insurers in recent years, cost containment remains a significant factor among the key business drivers for growth, according to Smallwood. Cost containment/expense reduction was cited by over half of the respondents (52 percent) to the SMA survey.

"Insurers are trying to simplify the IT environment so overall total cost of ownership is lowered," says Smallwood. "There is still room for expense reduction and cost containment, but I am surprised it was number two on the list. I would have thought business optimization (number three on the list with 44 percent) would be higher. There is still a balance in cutting costs, growing, and customer service."

Business growth through new lines/markets/geographies was fifth on the list at 34 percent.

"Three years ago when the market crashed, we saw a higher number of insurers looking to grow through new lines," says Smallwood. "Companies were looking for alternatives, but since then they've decided to go back to what they do best and keep with their core business."

On the p&c side, carriers are looking at rating and maintenance of rate rules and forms, linking to actuarial, underwriting, and product development as areas where they anticipate increased spending, according to Smallwood.

On the marketing side, carriers are using analytics and business intelligence to capture information on how to grow their business—what markets, what agents, and what products to grow.

"Marketing is really market segmentation," says Smallwood. "It's understanding the market and setting strategy. Spending is really high in front office/middle office and it ties back to growth. It is interesting to watch the same survey over the course of three years continue to reinforce the story and show more emphasis there."

One of the top projects for carriers this year will be agent/broker portals, according to Smallwood.

"They have them for personal lines and they want to add them for commercial lines," she says. "Or they'vedone them for quoting and want to add service elements. We're actually seeing the next generation of portals.  They used to put lipstick on the legacy system to get enough ease of business and now they find the next generation of portals involves elements of sales and service."

Portals need to offer users first notice of loss, billing, commissions, scorecards, and tools for the agents to manage their book of business, according to Smallwood. Portals should allow agents and brokers to show the carrier risk appetite and become centers for sales and service.

"Many insurers are replacing the technology and creating a hub for their portal," says Smallwood. "When you talk to many insurers, portals aren't just the front end to allow someone to key-in information; it becomes the hub. If someone want to pass data through real time or they want a front end to capture data entry by the agent or if you have a comparative rater or an exchange, it can come through the technology hub of the portal and be integrated."

Integration continues to be one of the major expenses for insurers. Smallwood believes whatever vendors can do with partnerships and alignments to introduce plug and play into their environment will be key for their success and for that of their insurance carrier customers.

"We are starting to see synergy between solution providers with pre-integrated components," she says.

This is the third year for SMA to publish its ecosystem report on technology spending, drivers and projects and Smallwood has been fascinated to watch the industry continue to mature and spend a wisely.

"It's not about how insurers can leverage next generation technology," she says. "Many [carriers] are looking at how to leverage cloud computing, big data, social media or mobile. They have to understand how those are going to change our industry and how [the carriers] are going to be in a position to respond."