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Insurers Can Learn A Lot From Banks About Doing Business Online

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Washington, D.C.

When it comes to real-time technologies for financial services, the insurance industry can learn a lot from the banking industryand it had better do so soon or face significant problems in the online marketplace, says an expert.

According to David Becker, chairman and CEO of First Internet Bank of Indiana (, based in Indianapolis, online real-time transactions are coming, and carriers who are slow to implement Web-based communications systems for agents and customers “will quickly find themselves at a competitive disadvantage.”

Speaking during the LOMA Emerging Technology Conference here last month, Becker said that, “probably 80% of financial institutions have some kind of Web presence today, but less than 25% of them are transaction-oriented.” Instead, he noted, they offer “static” data that is not updated in real time.

“I call them electronic newsletters at best,” he said of these non-transactional sites.

One factor that has made moving transactions to the Web very attractive to the banking industry is huge cost savings, said Becker. He cited figures showing a per-transaction cost of $1.07 at a bank branch, $0.54 by phone, $0.27 at an ATM, $0.02 using PC-based banking with a CD, and $0.01 via the Web. While the CD option is very low-cost, “its not dynamic enough to keep people engaged,” he said.

According to Becker, First Internet Bank of Indiana, launched in 1998, has gone from “ground zero to $250 million in assets” by building a brand and image. The key to the banks success, however, has been customer service. Part of that service, he pointed out, is giving customers a single account number to simplify communication, no matter how the customer accesses the banks system.

The back end of the banks system features a Central Information File (CIF) system with real-time transaction-processing capabilities, he explained. “The key is to create good interaction with the customer. To avoid a host of customer service issues [the system] has to be integrated at all access points.”

The front-end experience for the customer includes online banking and wireless banking engines with seamless integration to the CIF, said Becker. Theres also a telephone banking system, along with ATM, credit card and debit card processing with real-time authorizations.

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One advantage of this paradigm, he noted, is that disparate legacy systemsa well-known problem in insurance companies as wellcan be integrated under the CIF. “Its all thereone inquiry, one point of entry,” added Becker. “Its huge and its designed around the customer.”

According to Becker, “Insurance companies are where banks were in 1997. Quotes are ubiquitous, [but] policy management isnt.”

Becker said 29% of property-casualty carriers and 43% of life-health carriers currently provide some kind of policyholder access. The goal, however, is to “design services and tools around your customer, not around your organization.”

Just as online banking did not eliminate branch traffic for banks, it will not have a disruptive effect on insurance sales, Becker said. He also pointed out that 38% of the “top 100 p-c carriers and 54% of the top 100 l-h carriers have already implemented some type of Web-based agent extranet.” Some carriers, he added, report increased efficiencies as great as 90% on communication with agents.

Regarding Web-based transactions, Becker said: “Its coming and you need to get engaged as the banks are getting engaged. Most of my [banking] peers have some kind of Web presence. Theyre still not at the forefront, but they are moving. Youll be at a competitive disadvantage without it.”

Becker also cautioned, however, that online services need to be integrated. “If its not integrated into the core database, dont put it out therefrom the call center to the Web to mobile claims management.”

In addition, it is important to give customers and potential customers a reason to come back to the companys Web site, said Becker. “Thats done by having good quality information.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 1, 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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