SCALABLE DELIVERY MODELS TO IMPROVE THE BOTTOM LINE

By Cynthia Saccocia, TowerGroup

Life and annuity insurers have shifted from being the purveyor of traditional insurance policies to being full-service broker/dealers. They offer a suite of investment products that includes annuities, mutual funds, 529 college savings plans, retirement plans, separately managed accounts, and long-term care insurance. In addition, carriers still offer traditional insurance products such as term life, whole life, and variable life. For some large insurers, nearly 60 percent of revenue is derived from investment products as opposed to traditional life insurance products.

Insurers have the potential to dominate the financial services marketplace because of their affiliations with approximately 150,000 financial advisors at independent and insurance broker/dealers nationwide, representing the largest proportion of financial advisors in the marketplace. What is clear to insurers is that advisors like to work with the best systems and the companies that provide them.

Recent surveys suggest that advisors spend 35 percent of their time absorbed by administrative activities and 65 percent of their time by sales activities. Advisors who spend more time on non-client-facing activities spend less time gathering and growing assets. Therefore, enhancements that automate key business processes can improve revenue for both the insurer and its advisors.

Service-oriented platforms work to control the costs associated with document management by improving the efficiency of these processes, bringing value-added services to an insurers distributors. For example, one large insurer was able to make it easier for advisors to work with the company through a Web services platform. Since its launch, the firm reports over 13,000 registered users. In addition, the firm has experienced lower costs as a result of reduced call volume to the call center as well as less mailing and faxing of information to the home office.

Service-oriented platforms are imperative. The next step, however, is to extend these services to an advice-oriented model. In an advice-oriented model, the focus is to control the costs associated with advice delivery by reducing the frequency of access to high-cost delivery channels, such as call centers and face-to-face interactions. The premise is that a fully developed advice delivery model incorporates high-tech and high-touch delivery channels to increase the range of service options offered to attract more customers and retain more advisors. At the same time, insurers realize bottom-line savings by distributing associated costs more efficiently.

Expanding advice delivery channels increases an insurer's reach to investors of all levels of affluence, and ultimately improves client acquisition and retention. An insurer can improve client retention by offering a suite of services that complement the investor's lifestyle and delivery-channel preferences. Some investors are very comfortable using the Internet for account balances and fund transfers but may prefer to consult an advisor for more complex transactions, such as planning for a child's college education. Insurers can shift from a product-centric model to a customer-centric model by establishing a common set of business rules that allow for the service of all products and delivery channels in a single interaction.

Insurers will find it increasingly important to have scalable delivery models to promote the wide array of products they offer. Linking business with technology to achieve efficiencies is critical for insurers to remain competitive in a converging financial services marketplace. Automated solutions that facilitate customer and advisor activity are necessary today for future success. The insurers that succeed in implementing comprehensive delivery models will dominate the marketplace, because they offer the types of advice and services that customers and advisors need, in the format that they prefer, at a price that insurers can afford.

To learn more about what it takes, in terms of both technology and strategy, to create scaleable delivery models, attend the Customer Service Leadership Forum, "Profiting From the Relationship," April 2, 2003, The Roosevelt Hotel, New York City. TowerGroup is a program partner of this one-day event, produced by Insurance & Technology. For more information, visit https://www.insurancetech.com/events/cslf2/

Cynthia Saccocia is Senior Analyst, Insurance Practice, at TowerGroup (Needham, MA). TowerGroup provides a comprehensive range of research and advisory services focused on the financial services industry, bringing some of the world's largest financial services, technology, and consulting firms a deeper understanding of the business and technology issues impacting them. https://www.towergroup.com