Reprinted with permission from “Your Virtual Insurance” newsletter, issue 08-27-01
Published by SellingwithTechnology.com
While many financial institutions have modernized their services to compete in
e-commerce, insurance carriers have yet to fully embrace online initiatives. This has
prevented insurers from effectively competing against new entrants to the market, particularly online ventures.
While the online insurance marketplace represented only about $1.9 billion in premiums
in 1999, this market is expected to grow to $11.1 billion by 2003. In the evolution of
business strategies, an e-commerce plan is no longer an option.
Most insurers work with less than robust and modern applications. Most of their systems
lack open architecture, scalability, e-commerce capabilities and interactive customer databases.
Insurers also lack the infrastructure and connectivity to perform end-to-end claims
processing. The lack of connectivity also results in disjointed communication and
“silos” of information. Underwriting, claims, special investigative units, loss
prevention, unit statistical reporting and other departments each possess a significant
knowledge base of claims information, but communication among these parties is often ineffective.
The solution to both of these dilemmas lies in the availability of intelligent
“middleware.” This software can help to enhance customer claim service in two important ways.
First, it can turbocharge a legacy system with the intelligence to
automate both claims processing and underwriting, using artificial intelligence components
that can interpret information from legacy systems without needing to upgrade older computer systems.
Second, it can provide the Web-enabled platform to connect the entire
continuum of claims processing and underwriting, thereby eliminating redundancies,
limiting errors, sharing information among all parties, and ultimately processing
transactions in real-time.
When intelligent decision management systems are employed to automate routine tasks and
to identify claims that need special handling, claims adjusters can function as knowledge
workers. This way, they can use their specialized knowledge to add value to the claims
process by managing only those claims that truly need human evaluation and management.
Even though the Web and new tech advances can reduce administrative burdens, there is
strong “push-back” within the industry. Agents and brokers, for example, may
perceive e-commerce as a step toward their eventual elimination. Many insurers have been
reluctant to allow customers to circumvent agents for fear of alienating agents who stand
to lose clients and commissions.
Instead of attempting to placate agents by missing their own opportunities to become
more competitive, insurers should educate agents on technology’s advantages and offer
incentives that encourage them to use these systems, such as attractive commission
structures for business placed online. Insurers should also demonstrate to agents how the
Internet can generate new leads and sources of business, reducing the time spent on
administration and allowing them to make more sales.
An insurance company most likely to win in today’s market is one willing to invest in
intelligent, Web-enabled technology for greatly improved productivity and enhanced customer service.
For example, with more than 90 percent of agent-carrier transactions handled by phone,
fax and paper, policy administration is one of the most promising front-end aspects of
Internet insurance. Web-based administration will dramatically cut policy costs while
improving customer service and responsiveness, providing 24-hour access to information.
Even as insurers expand their online activities, most aren’t ready to accommodate
real-time transactions, such as enabling customers to make changes to their policies or to
buy new ones. Eventually, the full scope of front-end services must be offered, including
the ability to rate, quote and bind policies online.
On the back-end of insurance operations, inefficient claims processing is a substantial
administrative problem. Each year $42 billion is spent on operational expenses
(specifically on administration, paperwork and information flow)-a compelling reason for
automated and Web-enabled processing.
No matter how innovative an e-commerce plan, customer satisfaction and referrals are
critical measurements of success. Insurers that go a step farther and incorporate customer
relationship management and customer optimization to achieve cross-selling opportunities
and sophisticated personalized product offerings can become market dominators.
As the Internet and online services grow, traditional insurers will be left behind
unless they rethink their strategies. Although online sales have not yet taken off, it is
still important to establish a long-term strategy.
Online distribution of policies is only the beginning of what must be accomplished. The
servicing of those policies, the largest expense area for insurance operations, must be
modernized to provide customers with a positive branded experience that reduces process
cycle time and expedites claims disposition.
Modern technology can never hope to replace the underwriter or claims adjuster whose
intuition and subjective analysis can’t be duplicated. But this individual decision-making
must be supported with improved work flows, data management systems and automation.
There may be technological, cost and attitude obstacles to overcome, but accurate and
timely availability of data, delivered to the right person at the right time, every time,
combined with Web-enabled e-commerce technology, can deliver significant cost savings,
increased productivity and greater profitability for insurers. Carriers that are
“early adopters” will have a distinct competitive advantage.