Survey also finds September 11 will not hold up implementation of new technology: Tillinghast Survey
New York, N.Y., January 7, 2002 – According to a
just-released Tillinghast-Towers Perrin survey, using traditional business measures
insurers are finding spotty evidence of success for their new technology investments. Yet
even in the aftermath of the September 11 terrorist attacks, they remain optimistic that
the technology will eventually deliver top- and bottom-line business results.
The survey was the second 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
drawn from the 248 North American financial services companies participating in the
Tillinghast e-Track Program. The first survey found an insurance industry confident that
new technology will drive significant industry change.
However, in this second survey insurers admit measuring
only mixed results to date. They are seeking refined measurements that will capture new
success factors, especially in the area of distribution and customer management. This
focus on customers-both distributors and end-users-dovetails with the first survey where
insurers said that new technologies have made owning the customer relationship a key to
success and that distribution and customer management has become their number one
technology investment priority for the next three years.
“Taken together, the two surveys confirm that new
technology has accelerated insurers’ shift in focus from developing their products to
better understanding and responding to customer needs,” said Jenny Emery,
Tillinghast’s global e-business leader.
Shift To Customer Focus Demands Refined Metrics
Over the past three years, insurers have measured the most
improvement for their new technology investments in business processes and operations.
Most dramatically, over 80% of respondents reported that technology has driven improvement
in both employee productivity and turnaround time.
Yet only about half of the respondents have seen evidence
of technology-driven success in net operating results, return on capital invested, and
growth. Fewer have seen evidence of success using other traditional measures like market
share, retention ratio and return to shareholders. And almost half (48%) indicated they
were looking for ways to refine their measures to capture new success factors engendered
by new technology. An additional 15% of respondents believe they need to radically retool
the way they measure success.
“Respondents expressed a lot of faith in traditional
business measurements,” said Emery. “But they are also seeking refinements that
focus on measuring the satisfaction and value of customer segments and the performance of
distribution channels. Perhaps this is because such measures can provide more timely and
actionable information that insurers can rely on as leading indicators of what the more
traditional measures will eventually find.”
The survey also indicates, however, that many insurers have
not begun to implement their refined metrics. “Over a third of companies say that
over the last three years they don’t know about or don’t measure such things as channel
profitability or customer profitability,” said Emery. “But that number shrinks
by more than half when they predict the next three years. Clearly, some companies will
begin embracing new metrics.”
Jaimie Pickles, a senior vice-president at InsWeb and
member of the e-Track Advisory Board, agrees. “New technologies bring together an
extraordinary amount of customer data in one readily accessible place. Many insurers are
beginning to realize this, but only a handful are getting the processes in place to allow
them to use this information to better manage their business. Those who succeed will
undoubtedly gain a substantial competitive advantage.”
Optimism for the Next Three Years
Despite the mixed results to date, respondents expect new
technology to drive measurable improvements across the board over the next three years. An
overwhelming majority of respondents expect to see new-technology-driven improvements in
customer profitability (70%), company profitability (78%), market share (78%), customer
retention (81%), revenue/premium growth (83%), expenses/expense ratios (88%), turnaround
time (90%), and employee productivity (94%). And while a third felt technology would be
irrelevant for improving loss ratios, a majority still felt it would drive improvement
there, heavily influenced by property/casualty insurers.
“P/C insurers were the hardest hit by September 11 and
more than other respondents indicated new technology was helping them manage the impact of
the attacks in their underwriting, pricing, and products. Based on anecdotal evidence, we
believe this is a response to the reinsurance markets hardening, and primary insurers
hoping that improved access to greater volumes of data can help them better understand
increased concentrations of exposure and risk,” said Emery.
Terrorist Attacks Don’t Faze Implementation of New Technologies
Despite being the largest single-event loss in the
industry’s history, most respondents indicated that the September 11 attacks would not
significantly affect how quickly they would implement new technologies. In fact, at least
15% said the attacks would accelerate their implementation in distribution and customer
management, as well as in business processes and operations. In contrast, very few said it
would decelerate their implementation.
In addition, as companies struggle to process claims and
maintain operations affected by the attack, over one quarter of respondents said
technology has played or will play a major role in managing the impact of the attacks on
business processes and operations. Twenty percent said new technology has played or will
play a major role in distribution and customer management. Only 8 percent said it has
played or will play a major role in underwriting, products, and pricing-though 22% of
property/casualty insurers said it has played or will play a major role in those areas.
About the Tillinghast e-Track Survey
The second e-Track survey, which was administered late last
fall, draws respondents from among the 248 companies in North America that participate in
Tillinghast’s e-Track program. Forty-two percent of the companies participated in this
second survey. Life insurers (46%) and property/casualty insurers (31%) dominated the
respondents, though health insurers accounted for 18% as well. Finance executives made up
30% of respondents, senior management/planning executives 28%, and IT/e-business
executives 16%. Companies were mostly global or national in scope. The third e-Track
survey will focus on how insurers organize for and implement e-business and new
technologies. For more on this survey or on the e-Track program, please contact Rachel
Bingham at (860) 843-7030.
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.