InformationWeek
Defining The Business Value Of Technology
|
Sept. 11, 2000 |
 |
Premium Put On Web Initiatives
A conservative industry finally begins to adopt Internet and E-commerce initiatives
|
| More on insurance: |
|
|
 Send Us Your Feedback |
nsurance companies are a conservative bunch, so it's little wonder that they've lagged behind other financial industries in adopting Internet and E-commerce initiatives into their core business strategies. As late as 1998, 45% of major life, property, and casualty insurers responding to a Forrester Research study said they didn't see the Internet as a bona fide sales channel. That attitude goes a long way toward explaining why the insurance industry reported only $1.9 billion in online premiums last year, with $1.6 billion of those sales influenced by online insurance materials and just $300 million sold without a human touch.But things are changing fast, and most industry observers agree that insurers that fail to capitalize on Web efficiencies are going to be heavily pressured by savvy competitors who can squeeze more profits from the Internet value chain. Management and technology consulting firm Booz-Allen & Hamilton says the Internet could cut costs within the insurance industry by more than 60%, with most of the savings gleaned from distribution and customer-service efforts.
Yet in a recent study of 120 insurance company Web sites, the firm found that while half offered marketing materials online and 22% included basic customer-support information, just 1% offered interactive customer service or online sales, and only 7% provided online policy quotes.
Those companies that aren't moving forward on these fronts will fail to capture a piece of what Forrester Research reports will be an $11.1 billion market by 2003, with $7 billion in sales being Net-influenced and $4.1 billion actually sold through the Internet.
Progressive Casualty Insurance Co. has already taken steps to make sure it's at the forefront of the online insurance movement. The Mayfield Village, Ohio, company says that it became the first vehicle insurer to sell auto insurance in real time over the Internet in 1997; today, customers can buy direct online, over the phone, or through one of the $6.12 billion company's 30,000-plus independent agents.
This summer, Progressive.com was named the top insurance-carrier Web site on the Summer 2000 Insurance Carrier Scorecard by Gomez Advisors, an E-commerce rating authority. Around the same time, the insurer also launched ForAgentsOnly.com on its Web site. ForAgentsOnly.com gives Progressive's agents access to customer polices and the ability to complete endorsements (add-ons or changes to insurance policies) online.
This, says Progressive CIO Raymond Voelker, will save a huge amount of phone time for agents trying to coordinate policy changes with customers and Progressive. Agents will have instant access to all customer information, such as billing schedules, driving records, and account history, as well as the ability to view policy documents sent to clients. "It's all about making the experience as easy as possible with the right use of technology," Voelker says.
Marsh & McLennan Companies Inc., a $9.16 billion business and risk-insurance brokerage, also doesn't want to be bringing up the rear as the industry moves to embrace E-business. In 1998, the company launched InMind, an information and interactive client-services system, to let businesses access data on insurance policies and brokerage services over the Web. Since then, Marsh & McLennan has worked feverishly to update the system. "We've extended InMind to include employee benefit services (such as human resources self-service), and other self-service elements that reduce paperwork and time," managing director Gary Lasko says.
In May, Marsh & McLennan said its clients would be able to access insurance certificates and memoranda of insurance through InMind. Businesses typically need certificates of insurance to prove they're properly insured before they can conduct certain types of projects, and getting these normally takes days. Worse, clients who don't have the foresight to request a memorandum regarding the certificate of insurance before a project begins may not be legally able to begin contracted work on time. "What used to take days is now fundamentally instantaneous," Lasko says.
But Progressive and Marsh & McLennan seem to be in the minority in their industry. Part of the reason 1999 may not have seen a flurry of E-commerce initiatives come to complete fruition is the insurance companies' desire to avoid alienating their agent and broker sales channels. But the massive effort required to meet Y2K-compliance deadlines and other internal systems initiatives played a part, too--and many insurers say these efforts have helped them be better positioned to move forward with E-commerce plans.
As Progressive continues to ramp up its customer-and agent-facing Web capabilities, it's reaping the rewards of a long-term initiative it started two years ago to make internal applications modular. Instead of having to deliver product updates, rate information, and the like to three different databases--serving its Internet, toll-free direct, and agent channels--application components can be deployed anywhere within the company. To do this, Progressive has re-engineered many applications from the ground up in C++.
"If we use current components, we can get rollouts done in as little as three days, which typically would have taken 12 weeks," CIO Voelker says. Using component architecture has helped Progressive roll out new software functionality more efficiently. Once data is collected to produce an insurance rate, for example, the same component engines are used to deliver a rate to the customer using the Web site, an agent using desktop software, or the call-center application.
"By using the component, which is really a rules-based driven system, the software pops out a piece of code, and that piece of code works with the applications on all of our channels," Voelker says. "Instead of re-engineering everything, we just do a verification test to ensure it works with the user interface such as call-center script screen, the Internet, or the agent's desktop application."
Aetna US Healthcare, a subsidiary of Aetna Inc., a $26.45 billion provider of health-care and insurance products in Hartford, Conn., has leveraged the massive investment it made to ensure its systems were Y2K-compliant to slash IT costs through increased hardware and software standardization throughout its infrastructure. "Y2K gave us the ability to achieve improvements around our total cost of ownership," says Chris Daley, business operations manager for information management.
The goal, Daley says, was for its 35,000 desktop users and IT staff to be running either the most recent version of a software product or the penultimate version--a goal that's taken Aetna two years to reach. This is an unusual state for many companies, as most IT organizations are so heavily pressured to get more cutting-edge projects completed that they fail to make time for the basics. "The cobbler's kids don't always have the best shoes," Daley says.
For example, Aetna had been maintaining several versions of Computer Associates' Integrated Data Management System, a relational database-management system that runs on minicomputers and mainframes. Forcing IT workers to manage the nuances of several versions was costly and also threatened Aetna's ability to deploy new initiatives seamlessly. "Several of those versions were no longer maintained by CA, so we were running a risk keeping that kind of software on board," Daley says.
By freeing IT workers from such painstaking tasks, Aetna can focus on more profitable efforts. For instance, this year EZLink, its benefits-administration system, is being rolled out nationally. EZLink is a fully integrated online benefits and human-resource administration product for managing benefits eligibility, enrollment, billing, reporting, and employee communications. Its aim is to provide speed, efficiency, and accuracy to the time-and paper-intensive process of administering employee benefits for employers and brokers.
It's undeniable that a substantial Web presence will be required for all players in the insurance industry to move forward. Whether or not individuals or companies actually close a deal online, Web activity is becoming increasingly vital to an insurer's bottom line.
One of the nation's top five producers of life insurance policies, annuities, and mutual funds, the $20.21 billion New York Life Insurance Co., agrees that's the case. Last year, it launched its Virtual Service Center as a way to let customers request policy cash, loan, and dividend quotes, and submit requests to change premium payment schedules or pay premiums by loans or dividends. Today, the service center lets policy owners receive policy value quotes, premium information, and service forms securely online. "The plan is to also deliver financial transactions in the early future," says Gregory Tyson, a senior VP at New York Life. "The service center is pretty nascent, but as we learn more, we'll open up our entire portfolio online to our customers."
At Progressive, all customers can get their questions answered, get a quote, and start coverage online. "Because of the price and complexities of insurance, a little more than half of our customers choose to contact our call center while they're on our Web site," Voelker says. The call center database and online customer prospect activity are linked so that when customers call, they don't have to go over everything again from scratch with the call-center agent. That shaves time off costly call-center calls. Plus, says Voelker, "the way the dynamics of the business works, we do a lot of quotes on the Internet, but a higher percentage of the quotes given over the phone are converted to sales."
The company benefits even when people who come to the Progressive site to get a price quote leave without making a purchase. "On the Internet, it's really not a cost to have somebody come to the site and not buy," Voelker says. "It's certainly nowhere near the cost of the same thing happening with a live operator."
Despite the innovations this year in the insurance industry, much more needs to be accomplished. Voelker says his dream is to realize the true Internet-only insurance policy. "If you buy a policy today, you're still going to get a paper policy in the mail," he says "It's rare, if it's happening at all, for a completely paperless process."
When is that going to happen? "When all of our teenagers get into power," Voelker says, laughing but not joking. "They'll change everything. They're going to be more digitally comfortable than we are. There's no doubt about it."
Illustration by Jeffrey Fisher
Photo of Voelker by Roger Mastroianni
Back to This Week's Issue
Send Us Your Feedback
Top of the Page
Featured Microsite
