Debate Goes On Over Using The Internet For Distribution

In the immediate future, she adds, insurance IT development efforts will focus on “back end stuff that wont be seen. Thats where you get the real benefits to the bottom line.”

Meanwhile, a survey by New York-based Tillinghast-Towers Perrin predicts “the expansion of the use of the World Wide Web as a distribution channel and to make current distribution channels more effective,” says Jenny Emery, Tillinghasts global e-business leader.

The Tillinghast survey, based on 120 responses from financial services company executives, found 91% of respondents believe that over the next three years, technology will drive “dramatic” changes, not the least of which is increased Web utilization.

According to the Tillinghast survey, “the number of companies that conduct more than 10% of their sales via new technologies is expected to quadruple in three years.” This is in contrast to what the researcher says are “previous reports that indicated most insurers did not expect the Internet to be a significant sales channel.”

Tillinghast noted that “distribution was clearly priority one for many insurers.”

Emery says one way in which the Web will expand is via establishment of broker portals, Internet sites where brokers and agents can get access to information for faster quoting. Larger insurance companies, she notes, will probably develop proprietary portals, while smaller companies may gravitate toward forming consortiums for the same purposes.

One barrier to development of such portals, however, is that “customers arent ready for it,” says Emery. She believes that will change, however, as younger generationsraised on computers and the Internetgrow up and begin doing more transactions online.

Demonstrating that customer relationship management (CRM) has had a significant impact on the industry, the Tillinghast survey also found that most respondents (75%) believe new technologies have heightened the strategic importance of “owning” the customer relationship.

The surveys reported sample is drawn from some 248 North American financial services companies participating in the Tillinghast e-Track program. Among those participating in this study 44% were life insurers, 35% were p-c insurers and 15% were health insurers, the researcher said. Senior management and planning executives made up 32% of respondents, finance executives 30% and IT/e-business executives 19%.

While the survey found that 70% of companies expect to increase or significantly increase their investments in new technology over the next three years, it also found that 60% do not believe the adoption of new technologies has led to a significant reduction in costs.

According to Emery, the insurance industry hasnt been successful in achieving cost reduction, because it has not “put the right kind of business case together.” In many cases, she notes, companies merely put a new technology layer on top of old business processes. “Until you re-engineer the business process, you [wont] get the kind of ROI that youre looking for,” she explains.

Historically, she adds, “the insurance industry has neither embraced nor been rewarded for boldness [in adopting technology].” This may explain “why so many are willing to wait and see results from peer companies before moving ahead.

“It remains to be seen,” Emery notes, “if being a fast follower is still the right strategy in insurance.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 3, 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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