Tillinghast – Towers Perrin survey reveals insurers undeterred by burst of technology bubble
NEW YORK, N.Y., OCTOBER 16, 2001 – Prior to last month’s
tragic events, a Tillinghast – Towers Perrin survey revealed that insurers now believe
technology will drive significant industry change. In fact, despite an already reeling new
economy and technology investments that have delivered mixed results, many insurers
believe that over the next three years technology-driven change will be revolutionary.
Insurers’ response to last month’s tragedy may put much of this new technology to the test
earlier than anyone believed.
The survey was the first in a series of industry
“pulse” surveys conducted by Tillinghast – Towers Perrin, the worldwide
management and actuarial consulting firm. Insurers composed the overwhelming majority of
respondents in this first survey, which draws from the 248 North American financial
services companies participating in the Tillinghast e-Track program.
“Ninety-one percent of respondents now believe
dramatic change is on the horizon,” said Jenny Emery, Tillinghast’s global e-business
leader. “A third called the change revolutionary. These are not the self-serving
predictions of consultants or tech sector gurus. These are historically pragmatic
insurance company executives, who do not embrace change lightly.”
Fidelity and Schwab Emerge as Industry Models
Citing financial services stalwarts like Fidelity and
Schwab as their models, respondents created a picture of how their industry has changed
over the past three years. Most believe that new technologies have heightened the
strategic importance of “owning” the customer relationship (75%), creating
profitable business partnerships (76%), and bringing innovative products to market (65%).
As if to confirm that belief, the 20% of companies that
view themselves as ahead of the rest of the industry in implementing new technologies
tended to report considerably more progress in related areas than other respondents – as
well as more optimism about the changes yet to come.
As opposed to those who view themselves as slow to adapt,
those who perceive themselves as leaders already report that they’ve made significant
progress in using new technology to enhance and support existing distribution channels
(64% vs. 18%), improve new business processing (55% vs. 23%) and enhance customer service (55% vs. 36%).
Owning the Customer Relationship
The focus on both customer service and distribution channel
support demonstrates that insurers have begun to put the customer – both intermediary and
end-consumer – front and center. In Tillinghast – Towers Perrin’s work identifying best
practices in distribution for the financial services industry, this intense customer focus
has emerged as a consistent theme.
“It is heartening to know industry leaders have moved
beyond the Web as a distribution channel, alone. They seem to be concentrating on using
the Internet to work more effectively with their agents and brokers, perhaps by tapping
customer information and using it to make these business partners more successful,” said Emery.
Whence Product Innovation?
The belief in the increasing importance of bringing
innovative products to market must be reconciled with the finding that less than 20% of
the respondents made improving underwriting, pricing, and products their first investment
priority. Rather, distribution was clearly priority one for many insurers. Strikingly,
those that describe themselves as industry leaders’ and those who hold senior management
titles’ tend to make underwriting, pricing, and products a higher investment priority over
the next three years than their industry counterparts.
“A distinguishing feature of those who see themselves
as leaders is that they recognize underwriting as an area where insurers can and must
differentiate themselves,” said Jeanne Hollister, FCAS and e-business initiative
manager for Tillinghast. “On the other hand, the majority may have assigned it a
lower priority because they are not yet sure how new sources of data may fundamentally
change insurance products. Or, perhaps they want others – like Progressive and its ‘pay as
you drive’ pilot – to lead the way. As we continue the survey series, we hope to explore
this issue in greater detail.”
Insurers Must Decide Whether to Lead or Follow
In general, because there was widespread agreement that the
biggest changes are on the horizon, the survey indicates that now may be an opportune time
for a few insurance companies’ or other non-traditional competitors such as broader
financial services companies’ to step up as next generation leaders. Last month’s tragedy
and the ensuing losses may actually increase the need for industry leadership.
“Historically, the insurance industry has neither
embraced nor been rewarded for boldness,” said Emery. “This probably explains
why only 20% believe they are ahead of the rest of the industry and why so many are
willing to wait to see results from peer companies before moving ahead. It remains to be
seen if being a ‘fast follower’ is still the right strategy in insurance.”
Other Key Findings
The number of companies that conduct more than 10% of their sales via new technologies
is expected to quadruple in three years. This contrasts with previous reports that indicated most
insurers did not expect the Internet to be a significant sales channel.
Companies (70%) expect to continue to increase or
significantly increase their investments in new technology over the next three years.
A majority of companies believe technology has led to some
or significant progress over the past three years, especially in using new technologies to
improve customer service (85%), improve new business processing (82%), and enhance and
support existing distribution channels (87%). Nevertheless, six in ten do not believe that
the adoption of new technologies has led to a significant reduction in costs in the industry.
The main barrier to implementing new technologies is that
“other business priorities take precedence.” The main enablers are “clear
customer demand” and “good business results, which allow for investment.”
Few companies saw the decline of the new economy or the availability of proven
technologies as significant barriers.
About the Tillinghast e-Track Survey
The survey draws respondents from among the 248 companies
in North America that participate in Tillinghast’s e-Track program. Just under half of the
companies participated in this first survey. Life insurers (44%) and property and casualty
insurers (35%) dominated the respondents, though health insurers accounted for 15% as
well. Senior management/planning executives made up 32% of respondents, finance executives
30%, and IT/e-business executives 19%. Companies were mostly global or national in scope.
For more on the survey, please contact Rachel Bingham at 860-843-7030.
About the Towers Perrin e-Track Survey
Tillinghast’s parent company, Towers Perrin, is also
conducting an e-Track series that will regularly poll a panel of participants on the role
technology plays in revolutionizing the relationship between companies and their
employees. Results of the first survey are now available by contacting Ayesha Talwar at 212-699-2741.
About Tillinghast – Towers Perrin
Tillinghast – Towers Perrin provides management and
actuarial consulting to financial services companies worldwide. Our clients include banks,
insurance companies, health plans, investment managers and securities firms. Our
consultants help clients improve business performance through quantitative analysis,
insight and execution. Tillinghast – Towers Perrin’s e-consulting experts help industry
clients employ digital technologies for competitive advantage, and offer industry
expertise to e-solution providers focused on the insurance industry. Tillinghast – Towers
Perrin is part of Towers Perrin, one of the world’s largest independent consulting firms,
with nearly 9,000 employees and 78 offices in 74 cities worldwide. Additional information
is available at www.tillinghast.com.