While it's not really fair that insurers are criticized for both sluggishness in getting online and for thinking insurance could actually be sold through the Internet, the fact remains that insurance doesn't provide the sensation that makes other online offeringssuch as securities tradingattractive. "There's no instant gratification in buying insurance," says Jamie Bisker, a consultant for TowerGroup (Needham, MA).
But this is not to say that insurance companies' investments in e-commerce have been in vain. From 2003 to 2005, TowerGroup estimates that personal P&C premium from online sales will climb from 4.5 to 11 percentas compared with a 1 percent figure estimated in a Conning & Company study released earlier this year. And with the entrance of 80 million techno-savvy members of Generation Y, online sales will become even more commonplace, TowerGroup predicts. But for now, the principal value of that channel lies in an emphasis on retention rather than sales, Bisker argues in "E-Service: A Strong Second Lead For E-Insurance," a recent TowerGroup study.
Matching other financial services institutions' abilities to distribute their products online is an important goal for insurers, but integrating e-services into a carrier's electronic business model is likely to serve companies better, both for retention and sales, the study says. Bisker defines e-services as any online "mechanism that facilitates the customers getting something done for them by the company."
Since over 60 percent of insurance buyers use the Internet to research companies and their products, prominently displayed e-services are likely to stimulate sales among convenience-minded customers, according to Bisker. Supporting TowerGroup's contention that there is a strong existing market for online servicing of insurance, Bisker cites a recent study by Lincoln, MA-based Internet market analysis firm Gomez, which found that 53 percent of consumers would like to service their policies online, while 38 percent would also like to make premium payment over the Internet.
Having surveyed one's own customers to determine expectations, a carrier's e-commerce preparedness will determine which services should be implemented. For companies testing the e-business waters, it's likely to be safer to stick to small, informative services such as address changes and some billing functions, Bisker says. Those companies ready to dive in "need to make sure they've got claims servicing right up front," he adds.
The challenge that insurers face in delivering e-services is one of achieving effective message brokering, according to Bisker. "It's not realistic to assume that companies can turn their 30-year-old, back-end systems around as quickly as they can add a new front end," he says. But in order to coordinate workflow of data among relevant processes and applications and achieve a requisite integration of core systems with the customer-facing applications, Bisker says, IT organizations have to ask themselves, "'At what point are we going to stop using the bubble-gum-and-baling-wire approach?' and really look at adjusting these old core systems so that they can have the flexibility to both take and give a new feed when it's required." What companies will need, Bisker says, is "something like MQ Series or Tuxedo to broker the transaction between the back end and the new front end."
Synchronization will be a critical component of a company's deployment of e-services, Bisker says. "This means that the agency office information must be the same information that's available online, the same that's available to the CSR."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio