Call Forward
With promises of cost savings, enhanced functionality and stronger business continuity capabilities, Voice over Internet Protocol (VoIP) and IP telephony burst onto the scene more than five years ago. But fears about call quality and reliability kept the emerging technology mostly waiting in the wings. Now that it has matured, however, insurance carriers are expected to embrace VoIP and IP telephony solutions more widely in the next two years, according to experts.
"Currently, 27 percent of insurance companies in the United States have implemented IP telephony and 23 percent have applied VoIP," reports Lisa Pierce, vice president at Forrester (Cambridge, Mass.), who predicts that "50 percent of the insurance market will deploy this technology before 2010." Insurers are using the technology within branch environments to bring mobility to agents and brokers who move from branch to branch as well as to enhance customer service in the call center, she explains.
"The technology matured significantly in the last five years," relates Julien Courbe, managing director of service technology at BearingPoint (McLean, Va.). No longer bleeding-edge, VoIP and IP telephony -- the routing of voice conversations >> over the Internet and other IP-based networks in which voice data flows over a general-purpose, packet-switched network instead of traditional dedicated circuit-switched voice transmission lines -- also is no longer plagued with the quality issues it exhibited when it first appeared on the scene in 1998. "The major difference between VoIP and IP telephony is that with VoIP, you keep the legacy environment, whereas IP telephony represents the integration of a telephony application within the corporate environment," Courbe explains.
Both approaches offer opportunities for cost savings, as the technology enables both data and voice communications to share the same network, resulting in a simplified infrastructure and, consequently, streamlined network management. Further, it enables firms to avoid traditional phone charges by routing long distance calls over the Internet. But the advanced functionality, and resulting productivity gains, that VoIP enables may be emerging as an even more important business driver for the technology's adoption.
Feature Rich
For example, with the addition of tools that allow calls to be taken from virtually anywhere -- including via e-mail or BlackBerry devices -- and to be transferred automatically to knowledge experts within a call center, IP telephony provides opportunities for enhancing the overall customer experience. "No individual user needs all 400 features in IP telephony, but all of the options allow companies to choose which functionalities fit their enterprise needs," says Tony Kleckner, director and practice leader of financial services for Avaya, a Basking Ridge, N.J.-based VoIP and IP telephony vendor. Other vendors of converged communications solutions include Cisco (San Jose, Calif.), Nortel (Brampton, Ontario) and Vonage (Holmdel, N.J.).
VoIP can be deployed on any IP network, including those lacking a connection to the rest of the Internet, such as local area networks (LANs), using IP private branch exchange (PBX) ports and legacy digital PBX ports. Methods include connecting traditional telephones to VoIP converter boxes, installing IP-based phones that connect directly to the Internet or deploying "softphone" software that allows users to make calls from any personal computer using a headset or microphone.
VoIP grew from 1.2 million business subscribers in 2004 to 4.2 million business users in 2005. In the insurance industry, the seemingly sudden surge in VoIP and IP telephony adoption actually began several years ago, but companies only recently have finalized updates to legacy network technology that were originally initiated to maximize VoIP functionality and ensure network security.
"In the past year, VoIP grew eight fold," relates Kevin Kalinich, a consultant and national managing director of professional risk at Aon (Chicago). "Insurance carriers are looking at the advantages from a business standpoint and focusing in on network risk prior to implementation -- anticipating the vulnerabilities to security and exposure," he explains.
Yet, security has been the major challenge for insurers adopting VoIP. "Voice data is different from regular data, and CIOs have to devise network plans to include voice encryption, authentication and VoIP-specific firewalls," says Kalinich. The danger is that it is relatively easy to eavesdrop on unencrypted VoIP calls using open source solutions such as VoIPong or Vomit. As a result, many companies implement separate encryption and authentication tools to prevent hacking and eavesdropping.
Although most VoIP vendors include security solutions as part of their VoIP packages, "Security is a big issue," confirms Forrester's Pierce. "Most companies don't deal with security issues very well, and there are a lot of risks out there -- viruses, worms and hackers."
Money Talks
Still, most experts agree that with proper planning and network support, the benefits of VoIP outweigh the risks. In general, phone service via VoIP costs less than traditional landline service because users only need to maintain a single network. "With IP telephony, outgoing costs can be reduced by 15 to 20 percent of the recurring expenses of the matching legacy telephony environment," asserts BearingPoint's Courbe.
Cost was the initial reason St. Paul Travelers (St. Paul; $113.2 billion in total assets) adopted VoIP, according to Jamie Libow, telecommunications director for the carrier. "Initially, it was just cost savings that drove us to look at VoIP as a replacement for legacy phones," he explains. "The market was starting to move toward VoIP, and we knew the time would come soon so we needed to get our feet wet."
Libow began running internal pilots on several VoIP vendors' products in 2000. "I was looking for a stable platform with the utmost performance," he says. "In 2000, the system uptime wasn't what we were looking for."
Libow and his team eventually found more-robust products to meet the needs of the business. They decided that by combining Avaya's S8700 Media Center call center solution and Cisco's CallManager for agents and interoffice use, St. Paul Travelers would be able to maximize both stability and cost savings. "We decided to implement both vendors' solutions during a renovation in Hartford, Conn.," explains Libow. "We were able to run both on one [network] wire with IP telephony instead of two, and that proved to be enough of a cost justification."
By implementing VoIP, the company saves 33 percent of what it was spending on traditional telecommunication. But, gradually, St. Paul Travelers realized other benefits of the VoIP system besides cost. Softphones have enabled the mobile workforce to be more accessible while traveling between the carrier's two key locations in Hartford and St. Paul. "All of our agents can now be reached at a single number internally," says Libow. "Next, we will continue to roll out more functionalities for remote agents."
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