Insurers Recognize the Benefits of a Robust E-business Strategy, but Limitations of
Existing Processes and a Deficit in Technology Infrastructure and Skills Pose Serious Challenges
NEW YORK and LONDON, May 10, 2001 – More than 150 leading insurance players worldwide
– including carriers, agents/brokers, re-insurers, banks, broker-dealers and dotcoms – expect to
increase their spending on e-business technology by 89 percent per company over the next three years,
according to a joint survey conducted in the first quarter of this year and released by PricewaterhouseCoopers
and the Economist Intelligence Unit (EIU). The survey shows that insurance providers see the benefits of
e-business in terms of cost savings and improved customer service, yet they realize that in order to capitalize
on e-business, they must invest in more than technology.
“The insurance industry is facing critical challenges as companies attempt to move
services online,” says Charles Brinkley, partner at PricewaterhouseCoopers. “Insurance providers
recognize that web-enabling their businesses will make it possible for them to deliver a faster, simpler,
more transparent customer experience at a significantly lower cost. The industry, however, remains concerned
about privacy issues and is constrained by its infrastructure. Most insurers feel they still need to make a
significant investment in technology, back-office processes, and skills to deliver successful e-business offerings.”
Analysis of the survey results indicate that the industry encounters difficulty from
the following e-business challenges:
limitations of existing processes
deficiencies in technological infrastructure
the difficulty of selling complex products online
transforming distribution channels
security and privacy concerns
Most notably, insurers believe there is a
deficit of strategic e-business leadership at senior levels as well as in
e-business-skilled staff. According to the survey, two-thirds of respondents indicate
their companies do not have sufficient e-business leadership capabilities, and few
insurance providers believe they currently have sufficient technological skills for e-business in-house.
“Successfully providing insurance
services via the Internet depends on overcoming these obstacles quickly,” says
Brinkley. “Industry leaders recognize the need to provide a distinct customer
experience, and the importance of empowering their agents. Our research reveals that they
will immediately be making major investments towards improving these areas.”
Today, only seven percent of agents and
brokers and 17 percent of insurance carriers have web-enabled the back-end processing of
policy applications. In three years, those numbers are expected to rise to 93 percent and
71 percent respectively. Also in three years, respondents expect e-business to create 19
percent in annual savings on average, compared with an estimated 7 percent today.
Realizing those cost savings is heavily dependent on putting back-office processes online.
“There is no doubt that insurance
industry executives recognize the benefits of investing in e-business, especially if they
are committed to meeting the common goal of improving relationships with customers. The
success of e-insurance relies on companies being able to offer its customers the speed and
ease of the Internet along with customer service that real-life agents and brokers already
offer,” says Kathy Ford of the Economist Intelligence Unit (EIU).
According to the survey results, as insurance
providers begin investing significantly in e-business technology, they will be able to
quote and bind more complex products and services online, as well as offer more advanced
customer services. Today, insurance providers offer few online features beyond online
policy applications. Moving forward, the focus is expected to shift to core functions,
especially claims administration, underwriting/risk pricing and procurement. The survey
also indicates that additional areas of growth are likely to come from expanding the
product offering into other financial products and services online. In three years, nearly
40 percent of carriers say offering banking and wealth management products and services
online will be a very important or critical strategy, compared with about 20 percent today.
Agents and brokers have moved more quickly to
the web than have the carriers they represent, seeing in the Internet the opportunity to
improve their own productivity and efficiency. Nearly 40 percent of respondents –
both carriers and their agents and brokers – agree that the Internet will create an
opportunity for the agents and brokers to focus on those activities most valued by their
policyholders – providing informed advice and personalized service.
Key Survey Findings
Spending on e-business technology
per company will rise on average by 89% over the next three years. This investment
will focus primarily on customer-facing and other high-value initiatives. Insurance
providers will need to invest in process and organisational redesign to maximise the
return on investment.
In three years, respondents
expect e-business to generate 19% in annual savings on average, compared with an estimated
7% today. Deepening customer relationships and cutting costs are top e-business
priorities. Placing back-office processes online will be a key source of cost savings.
Respondents say that online customer relationship management and integrated, multiple
distribution channels are top priorities for enhancing customer relationships.
Few traditional insurance
providers are prepared to realise the full potential of e-business. Nearly 50% of
respondents say existing business processes are a top barrier to leveraging e-business.
They indicate that their processes will need to be re-engineered before they can implement
end-to-end web-enabled services or fully realise cost savings and efficiencies from the Internet.
Insurance providers need a
broad, company-wide e-business strategy, to avoid large investments in independent
business-line initiatives. Our research shows that insurance providers, in many cases,
are taking a piecemeal approach to e-business, rather than implementing a unified strategy
across the organisation. Ultimately, e-business should become an integral component of the
overall business strategy, rather than a separate effort or organisation.
Larger numbers of carriers and
other insurance providers will rely on out-sourcing for e-business capabilities. They
will look to third parties not only for Web site construction and operation, but also for
a broader range of post-sale and back-office support – including claims, underwriting
and actuarial services. Application service providers (ASPs) will be key suppliers of
these core processes.
Alliances will become
increasingly important in the industry. Insurance providers will turn to partnerships
with organisations such as service providers, other insurers, and non-financial
institutions in order to leverage core competencies, achieve economies of scale, and
extend product and service capabilities to existing as well as new customers. Extended and
virtual organization models will become increasingly prevalent. Alliance-management skills
will be critical to success.
Insurance providers will offer more
advanced customer services online. Respondents plan to increase the number and
complexity of online offerings. These will include online claims settlement, real-time
customer service and billing. Web-enabling these activities will be more difficult and
expensive than putting basic functions online, however – companies will need to find
innovative means for funding these investments.
Agents and brokers will continue to
dominate distribution. Rather than being distintermediated, agents and brokers will
embrace Internet technologies and retain much of their current role. Eventually, agents
and brokers may choose to do business only with those carriers that can work with them online.
Carriers will broaden distribution
by developing multiple, customer-centric access points. Selling and servicing through
carriers’ websites and call centres will grow sharply, providing them with direct
access to customers and customer information. Carriers will also rely on a widening
array of distribution channels, especially partner websites, e-marketplaces, affinity
groups and employers.
Distributors – agents,
brokers and financial-services companies – will offer a complete portfolio of
financial services online. A majority of distributors, and some carriers, will use the
Internet to expand their offerings across a broad range of financial services, including
insurance, banking, brokerage and wealth management. To succeed, they will need to ensure
that business processes will support the new offerings.
Working in cooperation with PricewaterhouseCoopers, the Economist Intelligence Unit (EIU)
surveyed senior executives at leading insurance providers worldwide to determine how they
are responding to the challenges of e-business, and what lies ahead. Our research focused
on e-business motivation and challenges, sources of competitive advantage online, product
and service strategies, alliances and outsourcing, distribution and potential channel conflict.
The 153 companies responding to the survey
represent a cross-section of the industry: insurance carriers, independent agents and
brokers, re-insurers, banks, investment-services firms, broad-based financial-services
conglomerates, and insurance dotcoms. We included in our research providers of life and
non-life insurance in the retail and commercial markets of Europe, the Americas, and
Asia-Pacific. Respondents included some of the largest institutions globally as well as
smaller national and regional organizations.
The Management Consulting Services practice of
PricewaterhouseCoopers helps clients maximize their business performance by integrating
strategic change, process improvements and technology solutions. Through a worldwide
network of skills and resources, consultants manage complex projects with global
capabilities and local knowledge, from strategy through implementation.
PricewaterhouseCoopers (www.pwcglobal.com) is the world’s
largest professional services organization. Drawing on the knowledge and skills of more
than 150,000 people in 150 countries, we help our clients solve complex business problems
and measurably enhance their ability to build value, manage risk and improve performance
in an Internet-enabled world.
PricewaterhouseCoopers refers to the member
firms of the worldwide PricewaterhouseCoopers organization.
About the Economist Intelligence Unit (EIU)
The Economist Intelligence Unit is the
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