ANALYSIS: WEB SERVICES ARE COMING, READY OR NOT

As insurance companies continue to refine their Internet offerings, Web services will become a key technology to leverage tools that already have been built internally, as well as to access technologies in use by business partners. And with many insurers already working on Web services-based projects, experts estimate that wide-scale adoption will occur in a few years across all lines of the insurance business.

For starters, almost all business processes that are supported by technology (which includes almost everything in the insurance industry) can become a Web service, relates Karlyn T. Carnahan, global industry manager, insurance solutions, Sun Microsystems (Menlo Park, CA). "When you consider the meaning of services as it relates to hardware and software, nearly every business process, product or service is supported by a technology application (or service), such as risk management, CRM, wealth management, database management, claims processing, or accounting," Carnahan says. "In the last decade, we've seen a dramatic shift in the placement and cost of software applications, or services, from the desktop to the server, where users access the application via the network, intranet or Web browser."

And while the usage of Web services will not be limited to one area of an insurance company, or to a particular type of carrier, customer service-focused operations will most likely be most impacted, according to Alvito Vaz, director, agent Internet systems, Progressive Insurance (Cleveland). "Customer service is the single biggest area of opportunity for Web services," he says. "The superior service it can provide will help agents and companies retain existing customers. And keeping current customers costs less than trying to acquire new ones.

"Agents probably already know that billing inquiries make up a significant percentage of calls from their customers," Vaz adds. "Being able to process these calls quickly, or even allowing the customer to perform routine inquiries on their own online, will not only lower agency expenses, but help satisfy consumers' ever-increasing demand for fast, accurate service."

Sun's Carnahan adds that better agency services—offered mainly through Internet portals utilizing Web services—will result in higher policy sales, "By providing agents and brokers direct access to core carrier systems, not only are policies more likely to be written (due to a faster cycle), but policies are also written less expensively, as work is done in the channel and not in the enterprise itself." Carnahan adds that, not surprisingly, more than 33 percent of top carriers already offer agency/broker portals—a figure Celent Communications (New York) expects to double within the next two years among the top 200 carriers in both life/health and P&C sectors.

According to Fred Pantaleano, systems officer, Nationwide Insurance (Columbus, OH), carriers that are already developing technology with XML and industry standards will be best positioned for Web services. "It would seem as if the carriers furthest along in the ACORD standardization process would be best positioned to take advantage of external Web services, and internally, Web services technologies can be applied equally in any carrier type," he says.

William N. Pieroni, general manager, IBM Global Insurance Industry (Armonk, NY), says that Web services will eventually be used throughout the entire insurance industry. "Lines of business sold are not the key factor in determining who is best positioned to leverage Web services," Pieroni says.

And while all lines will use Web services, it will be used in different areas. In P&C, claims and underwriting will initially be the most important areas, Pieroni says. In health, "review of claims and provider management will initially be the most important areas for health writers, given the tactical and strategic importance of the activities."

In the life insurance market, "alliances and new product development activities initially hold the most promise for life carriers as they seek new relationships and products and services to enhance customer value propositions," Pieroni adds.

Finally, Josh Lee, global technical strategist, insurance, at Redmond, WA-based Microsoft, agrees that claims will be a primary focus for carriers. "All areas in insurance will be able to take advantage of Web services," Lee says. "Books could be written about the ways that each of these areas can leverage—and are already starting to leverage—Web services to speed transaction-processing time, integrate multiple systems, or enhance productivity or profits. I would guess that the most visible uses for Web services come from those areas in which the most pain is felt, likely in the claims arena. The money savings from integrating Web services and associated technology in claims is staggering."

For more on Web services in the insurance industry, see the entire article from Insurance & Technology Magazine's September issue on our Web site at: www.insurancetech.com/story/featured/IST20020714S0001.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio