TOWERGROUP FINDS FOR INSURERS, “E-SERVICE” MAY BE MORE CRITICAL THAN “E-SALES

E-Service Critical to Customer Retention, Yet Many Insurers Still Lack Technology
Infrastructure to Effectively Service Customers Online

NEEDHAM, MA, June 27, 2001 – With online
consumer insurance sales still in the single digits, TowerGroup has found that many
insurers are missing the more immediate opportunity of “e-service.” New research
from TowerGroup’s Insurance practice indicates that companies making investments in
the technology and human capital needed to better service customers online have the chance
to reap significant short- and long-term rewards—including increased mind-share,
richer customer data, higher retention rates and ultimately, greater profits.

Highlights of the research include the following:

• TowerGroup estimates that currently 60 to 70% of online
  consumers now use the Internet to research insurance companies and products. This number
  will only increase as the almost 80 million members of Generation Y – America’s
  most technologically savvy generational demographic – continue to enter the workforce
  and become consumers of insurance products.

• TowerGroup expects the personal line property and casualty
  (P&C) premium resulting from online sales to grow significantly by 2005, approaching 3
  to 4.5%. This is up from current industry estimates of only 1% of premium resulting from
  online sales for 2000.

• The rush to sell insurance on the Web has overshadowed many
  companies’ ability to provide superior service to policyholders already online.
  Although it is important for insurers to focus on improving their ability to distribute
  products online, TowerGroup believes a second initiative may serve them better in both the
  short- and long-term—the integration of “e-service” into their information
  processing and customer relationship management systems and strategies.

• TowerGroup defines “e-service” as the use of
  technology to facilitate the process of servicing insurance products, both for consumers
  and insurance professionals. For consumers, this might include such activities as changing
  an address, adding a new vehicle to an existing policy or taking advantage of online
  payment mechanisms. “E-service” also refers to the coordination of workflow and
  data between service providers and their various stakeholders.

“As consumers become more comfortable with online
financial services, Web-based sales will emerge as a significant portion of total
insurance premiums. In the short-term, insurers need to demonstrate superior online
service capabilities which in turn will produce satisfied customers and higher retention
rates,” said research author Jaime Bisker, a senior analyst in TowerGroup’s
Insurance research and advisory service. “The challenge for insurers is to make
certain that their e-service activities are more than just marketing offers. They must be
backed by an enterprise-wide commitment, and by effective coordination between customer
relationship management strategies and information technology infrastructures.”

Bisker added that time is running out for companies still
relying heavily on legacy systems. “Many insurers have yet to invest in the
infrastructure changes necessary not only to take advantage of ‘e-sales’
opportunities, but to effectively service consumers online. Firms that continue to rely on
‘quick fixes’ to integrate core systems with customer-facing applications, such
as those utilized on the Web, will face greater challenges in extracting value from new
distribution channels as their customer base becomes increasingly savvy.”

The research report, titled “E-Service: A Strong Second Lead for E-Insurance,
” is available to qualified members of the press for review.

About TowerGroup: TowerGroup is the leading provider
of information technology research, advisory and consulting services specializing in
topics critical to the global financial services industry. TowerGroup conducts research
addressing banking, securities, investments, and insurance information technology,
products, vendors, markets, investment trends and issues. Headquartered near Boston,
Massachusetts, and with offices serving Europe, TowerGroup serves a global client base,
which includes some of the world’s largest financial services, technology and
consulting firms. For additional information, visit TowerGroup online at
www.towergroup.com.

Contacts: