NEEDHAM, MA, January 6, 2004 — The life and annuity (L&A) market continues to weather troubling financial times, while property and casualty (P&C) is in recovery following one of the worst three year operating periods in history. Yet despite differences in the core issues facing these two sectors, TowerGroup believes the U.S. insurance industry confronts a similar challenge in 2004 in advancing business through customer service, distribution, operational efficiency and technology decisions.
As the industry focuses broadly on growth, cost containment and risk management in 2004, new research from TowerGroup identifies seven strategic initiatives that will help position insurers for success in the new year and beyond:
Distribution Channels: Expanding Market Share: Insurers must maintain a competitive distribution edge with their agents, and in the future will focus development efforts on front-office applications to improve services and increase sales revenue. Ultimately, insurers should prioritize distribution initiatives based on their ability to shift distribution from a cost of doing business to a profitable growth engine.
Customer Service: Building the Single View of the Customer: Insurers’ ultimate goal should be building a single view of the customer regardless of the access medium. To take advantage of present opportunities, insurers must continuing moving in 2004 toward a truly customer-focused advice and service model.
Core Systems: Developing A Legacy System Strategy: For insurers to advance operations and remain competitive with other financial services institutions, they must begin to make tough decisions about their legacy systems – starting with the core question of whether to reengineer, replace or leave legacy systems “as is.”
Data Integration: Leveraging Data as a Corporate Asset: Changes in today’s business environment demand that insurers become more knowledgeable about their customers and distribution partners. A well-orchestrated network of data gathering and information analysis will help steer development and execution of highly-competitive short- and long-term initiatives.
Sourcing Strategy: Evaluating the Options: Outsourcing of financial services IT and business processes is today considered a strategic way of doing business. In 2004, insurers should conduct sourcing assessments that focus on “best fit” solutions to include a hybrid of in-sourcing, outsourcing, off-shoring and “right-shoring,” and should evaluate of the “outsource-ability” of their organizations.
Regulation: Leveraging as a Competitive Weapon: In the coming year, savvy insurers should begin to view compliance with the array of new federal mandates (from USA Patriot Act to Sarbanes-Oxley) not simply as a cost of doing business, but as a way to differentiate from the competition.
Operational Resilience: Recovering from the Great Blackout of 2003: The Great Blackout of 2003 reminded insurers that current business continuity plans are not foolproof, especially when it comes to people and processes. 2004 and subsequent years will see significant emphasis among insurers on building operational resilience.
“To help reach their 2004 objectives relative to growth, cost containment and risk management, insurers will place significant emphasis on leveraging existing technology investments,” said Deborah Smallwood, Insurance practice leader at TowerGroup and author of the research. “IT spending will slightly increase compared to 2003, but those new dollars will be limited and carefully directed. Ultimately, those insurers that effectively integrate business and IT strategies while flawlessly executing these seven strategic initiatives will be best positioned competitively.”
This is the last in a series of six “2004 Perspectives” issued by TowerGroup. In each 2004 Perspective, TowerGroup discusses the critical business and technology issues and trends impacting the financial services sector in the coming year. TowerGroup’s Perspective on Consumer Banking, Financial Services Strategies & IT Investments, Global Payments, Securities & Investments, and Wholesale Banking were issued in the fourth quarter of 2003.
“2004 Insurance Perspectives: The Seven Key Strategic IT Initiatives to Position for Success” is available for review by qualified members of the press. Those interested in obtaining a copy of the research may contact TowerGroup at +1.781.292.5200 or [email protected]
About TowerGroup: TowerGroup — now celebrating its 10th year — is the leading research and consulting firm focused on the global financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world’s largest financial services, technology and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in New York, London, and Kuala Lumpur, TowerGroup serves a global client base. Visit TowerGroup online at www.towergroup.com