Mania Gives Way to Real e-Business

By Douglas W. Grant, CIP, Principal, Insurance Canada

Reprinted with permission from “Alberta Broker,” Dec 2000/Jan 2001

Lou Gerstner, CEO IBM, keynote address, eBusiness Conference and Expo,
New York City, December 12, 2000.

“The last time that I was on this stage was exactly
four years ago today delivering the keynote at Internet World in December of 1996. And I’m
tempted to say it’s been an interesting four years, but why skip back to the primordial
days of the Internet? The events of this year alone have been plenty interesting all by
themselves. Of course, 2000 will be remembered for the dot-com shakeout and with it, the
overturning of the belief in the media and in the boardrooms that if you weren’t
“dot-com” you were “dot-toast.”

. . .And just the other week, The New York Times
was wondering if there really was something called the “New Economy.”

So, lots of twists and turns, fortunes made and lost — the
kind of high business drama that used to play out over years and decades has been
compressed into months and quarters. How exhilarating! What sport!

But I suspect that many of you. . .are asking: ‘Excuse me?
Was this all just fool’s gold?’

Is e-business and the Internet just a digitally re-mastered
version of client/server? Another paperless office? . . .

I think what’s happened with e-business parallels what’s
happened with those other transformational technologies. First, there’s a period of wild
enthusiasm — intoxicating optimism that the new technology is going to rewrite the laws
of competition and economics, going to create whole new wealth, wipe out old industries,
create new ones. Predictably that fever passes — only to be replaced by significant
disillusionment. People open their eyes. They don’t see new industries. They don’t see
radically new business life forms. And they say: ‘Bah, forget it.’ That passes too, and
the world finally gets down to the important work of taking the technology and integrating
it into the structure and fabric of society and business.”

It is year-end 2000. Another year for the P&C Insurance
Industry in Canada. Y2K is behind us. The market is highly competitive. One insurance
focus is on the potential competitive edge to be derived from the new tools the Internet
represents. Some examples of integration from this past year:

On-line quotes: Insurers and brokers offer on-line quotes
to prospects researching their insurance options. ( Web site lists
sites which offer on-line quotes.) No on-line quotes? Then, fast turnaround on quotes
submitted by web-forms available on their Web site.

A recent IAO-AIS and CGI event highlighted insurance and
Internet directions. Traditional offerings from prior claims to MVR’s are all being
delivered via the Internet, for cost saving and ease-of-use reasons. Marketing information
is growing in importance as a business need, as brokers and insurers look to increasingly
segment markets.

Many niche claims services which adopted an Internet
delivery mechanism are adding depth to the backend process, or broadening their scope. PHH
Asset Management offers damaged auto assignment, case status, standard reporting and
analytical tools. Cybersettle’s whole settlement approach is Internet-based. Vital
Innovations Inc. extended one-to-one autoglass processing to multi-party processes for
auto-repair-and-replacement services with e-Rentalnet. They now address the broader claims
field as DWL and Mitchell recently announced wireless capability targeted at claims.

Companies like Zurich and Royal & Sun Alliance have
implemented browser Internet based access by their brokers for a variety of insurance
transactions. Many others are tackling the same approach.

New CSIO commercial standards extend the applicability of
standards. But their common web-based User Interface standards and single logon help
address the threat of CSR inefficiencies caused by company-unique implementations. The
concept of a CSIO-sponsored broker portal will provide yet another layer of function while
improving ease of use.

Lombard recently announced improvements for processing
business insurance. Now policy information can be shared seamlessly between Business
Choice(R), Commercial LINCQ(TM) and The Agency Manager(TM). This not only speeds up
service turnaround time, but also helps to lower the cost of doing business. This applies
to all transactions and all lines of business.

Cowan Insurance moved into production a new system which
links the customer through the broker’s site to multiple back-end company systems.

ING and Royal & Sun Alliance are addressing broker
Web site requirements with the intention of enabling some business function from the
insurance customer through the broker to the company – seamlessly.

These people have found opportunity for competitive advantage. The examples
illustrate the integration work they are undertaking in leveraging the Internet technologies.

Gerstner: “What a wonderful world! And some people
really believed in it. But I think most people now realize that the business world doesn’t
work that way. Too many people failed to remember that the Internet is a technology. It is
a tool. Yes, a very powerful one, but it didn’t change the fundamental behavior of
consumers: such as their desire for choice; like wanting to inspect the product and
possibly return the product.

Despite the fact that a lot of Internet retailers burst
upon the scene proclaiming whole new business models, in reality, their business was built
on a centuries-old value proposition — lower price. The trouble was they didn’t have a
business and economic model that could sustain these lower prices while generating
returns. And when they couldn’t subsidize those models with easy access to capital —
welcome back to earth. So where are we? Today, e-business is just business — real
business. And real business is serious work. After the hype, after the IPO alchemists have
had their 15 minutes, it’s time to understand that we’ve come to the hard part. And the
winners — the people who stick with it and do the work — understand that this next phase
of e-business is going to be all about two things: Integration and Infrastructure. “

The new millennium is really here. The communications tools
of the Internet juxtaposed on the competitive Canadian P&C insurance industry will
drive change. The Canadian Insurance examples above illustrate the transition towards
“Integration and Infrastructure”. Previous communications tools – telephone,
automobile, courier, fax – each triggered change in the value proposition we offer to our
customers. We are not immune from these winds of change. Have you passed your turning point?

Wish you the best this year – and beyond!