Insurance Evolution: Achieving Competitive Web-based Product and Service Delivery
Part II: The Operational Opportunities and Challenges of the Business
The Opportunity: Streamlined business processes will allow for improved services and cost reductions in the delivery of products and services.
The Reality: Traditional business processes are difficult to change and will require systems and business transformations.
Expectations by consumers, insurance agencies and business partners constitute the key driving force in the formation of a new delivery process for insurance products and services. The use of the Web to transact business is highly successful and prevalent in many industries. The insurance industry is being pressured to change its existing processes to more efficiently and effectively meet new service and cost expectations. Additionally, there are a number of simultaneous and related business application changes under development -- some already deployed -- which are converging to form a complete, new product and service delivery model that will meet the new demands of the marketplace. They include:
The Web as a "consumer tool" has been embraced by the general public; agents and consumers have gained technical sophistication, resulting in higher expectations of businesses.
Sophisticated expert underwriting systems have been deployed, allowing for automated (hands-off) processing of policies rather than tedious manual reviews.
Accessibility to information "anytime, anywhere" and the ability to use business applications and data warehouses to transact business in a real-time environment has become commonplace.
Technology departments are delivering new business applications that are more stable, operate in real time and allow for seamless processing and delivery of insurance products directly to the agent and consumer.
Insurance business partnerships are well-aligned and supporting the business applications in the new model.
The Challenges
There are two major company challenges at the very center of the product and service delivery transformation that are needed to successfully implement the new model. First, there is a critical need for business process reengineering as relates to the marketing, selection, pricing and servicing of insurance products. This change must be implemented without compromising the quality of business selected or the pricing of the products to individual consumers. Business reengineering requires key business decisions, including:
Establishing and balancing business process controls for automated (hands-off) policy underwriting (selection and pricing).
Redefining company/agency relationships and accountabilities.
- Consumer/client management, including consumer/client communications
- Workflow management
- Document/correspondence management
- Customer service
- Cost/savings sharing, as potential workloads shift to the point of sale
Underwriting processes.
- Well-defined and articulated guidelines/rules and expectations for selection and pricing products and services
- Comprehensive underwriting and agent loss control and audit processes
- New, expanded and shared data warehouse needs
- Underwriting rules management
Agency dashboard and metrics.
Trending reports and exception tracking ("red flagging").
Accessibility and change capabilities to other critical information, such as:
- Claims status and notices
- Billing setup and inquiry
- Agent financials
Underwriting management is challenged with the formal qualification and quantification of underwriting rules and processes that ensures consistent use of consumer information to determine the company's tolerance for "consumer risk acceptability" and appropriate pricing. Less complex lines of business, such as homeowners', personal auto and business owners' policies, and some mono-lines, will be addressed first, with the more complex lines continuing to be managed by the underwriters in a more traditional model.
The second company challenge is in the business use of new technologies. The model requires selecting business applications that process seamlessly from the perspective of the insurance company, the agent's office and third-party business partners, including application service providers. The focus is and will continue to be on real-time processing and access to information anytime/anywhere. Examples of the key functions needed by role or category include:
Agency-centric service functions.
- Simple, intuitive navigation tools allowing for iterative rating, quoting, payment and remittance processing, policy issuance and change processes
- Consumer account/portfolio management and "on demand" reporting
- Agent profit and loss metrics
- Claims management
- Document management
- Scheduling/calendaring
- Privacy/security protection
Consumer-centric service functions.
- Simple, intuitive navigation to product/policy information
- Company/agency communications and locator information
- Claims first notice, adjuster communications, claims status
- Privacy/security protection
Company-centric service functions.
- Automated rules-based "expert underwriting," including automatic real-time links to third-party consumer information providers
- Application portfolios allowing the complete management of policy issuance, changes, cancellation, billing and complete history of transactions
- Document management systems allowing for view of contracts, billings and correspondences, and localized "on demand" printing
- Information access, security and privacy protection
- Access to claims, client, customer accounting, etc.
- "Point in time" trending and exception management reporting capabilities
The new model challenges the existing, traditional processes by which insurance companies execute the business of marketing, risk selection and delivery of products and services to agents and consumers. Agents and consumers are more technically sophisticated; they want and expect more control of real-time services from insurance companies. Lead insurance companies are preparing to respond to these expectations.
Part III will address the technology aspects of the model, including the challenges and opportunities needed to align it with the business.
About the Authors:
Glenn Coulter, CPCU, AIM, has worked in the insurance industry for 24 years and has focused on helping companies maximize their use of technology, both domestically and internationally. His expertise is in the design and management of multiple infrastructures and in the design and development of enterprise application software ([email protected]).
Dan Laffey, CPCU, ARe, has 25 years of experience advising companies on building business applications to gain competitive advantages. He specializes in the development and management of business application portfolios, business process reengineering, company acquisitions, application migrations and business integrations ([email protected]).
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