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Balancing between High-Tech & High-Touch

Insurers are walking a fine line, trying to reap the economic benefits of offering online self service, without alienating customers or intermediaries.

Agent-Focused Strategy

Services offered online to the Hartford's agents include the ability to quote business, request issue of a policy and make claims, billing and policy inquiries. They can also get commission statements, submit an endorsement for personal lines and view customized direct bill status report. The Hartford's site even gives its agents the ability to send birthday greetings to its personal line policyholders.

As for other kinds of customer segments, one self-service area in great demand on UnumProvident's (Chattanooga, Portland, ME, $40.3 billion in assets) site is its benefits manager services. ""We have several hundred forms online and benefits managers can download them,"" says Anne Hibbard, vice president, customer loyalty, UnumProvident. ""Also, they can sign on and have access to different marketing information."" Benefit manager clients also have access to Internet billing, as well as to an online glossary that defines terms.

For UnumProvident, an underwriter of disability products, offering Web-based services helps streamline operations. ""For employee benefits, there is a lot of different billing that goes to the customer,"" says Bob Best, chief information officer. ""Using the Web to do this takes a lot of complexity out of the business.""

To a great extent, the viability of online service is linked to the type of financial product/activity involved. For instance, if one thinks of the continuum of banking, securities and life insurance, explains eStrategies' Ross, one moves from low-complexity/high-transaction tasks to high-complexity/low-transaction activities. ""The fundamental limits in the interest of someone doing self-service have to do with that continuum,"" he notes. In banking, ""people are highly conditioned through ATM self-service. With insurance self-service a complexity sets in."" That's why most of the insurance self-service functions rolled out so far have been associated with personal lines products, concurs Gartner's Harris.

For example, functions such as first-notice-of-loss reporting and the ability to check policy status, billing information and accounts, as well as transactional history, are the most popular features on the sites of personal lines underwriters, according to Ron Young, general manager, Siebel insurance, San Mateo, CA-based Siebel Systems.

For carriers hoping to encourage customers to serve themselves in high-intensity/ low-frequency types of transactions, such transactions must provide more from a content and presentation perspective. ""If you think about a banking customer who is going online to pay bills, they probably hit that site often. Also, the intensity is low and they are not very distressed,"" says Gartner's Harris. ""If an auto insurance customer wants to do a first notice of loss electronically, the intensity is a lot greater. However, they might not come to the site that often. Because of this, the Web site must be very user-friendly.""

That means, for example, that sites cannot hold very complex graphics that take a long time to download, Harris explains. They also must be easy to navigate, and questions must be put in a user's terminology so they are easily understood. ""These concepts are new to the industry,"" says Harris. ""Most Web sites are built to be very pretty and flashy. A lot of times insurers forget the user dynamic and what they will be experiencing when they get to the site.""

Despite the technical challenges, there are a number of strong business incentives for insurers to move forward with incorporating customer self-service capabilities into their e-commerce initiatives. Perhaps the key benefit is that there is significant potential for savings from servicing online, rather than through a paper-intensive system or call center. Companies implementing functionality such as online enrollment have saved from $.30 to $6 per transaction because they've been able to reduce their call center size, reports Paul Nagy, vice president, Selectica (San Jose, CA), a provider of e-business solutions that enable companies to sell complex products and services. Savings can be as dramatic as almost $40 per transaction for those done on the Web, rather than over the phone, adds Witness Systems' Treaster.

The actual savings per transaction depends on the type of product, emphasizes Doculab's Watson. ""Labor costs for call centers can range from $4 to $30 per call,"" he reports, adding that ""life insurance transactions are a little more expensive"" than are transactions for other products.

Another benefit (which also contributes to cost savings) is greater accuracy, says Selectica's Nagy. Because the actual policyholders are keying in their own information, there are usually fewer errors, so processes—which previously may have been stalled—won't have to be re-started.

E-Contracts and Booklets

UnumProvident saves $8 million a year, according to Best, simply by storing booklets and contracts electronically. ""We used to generate paper booklets and contracts,"" reports Best. ""About 55 to 60 percent of customers take booklets electronically. That allows the employer customer to get them out to different plants, factories and customers.""

However, creating the infrastructure to support online self-service functions often can be a costly investment. ""The challenge with insurance is that a number of transactions are complex and systems are not set up to have the back-end support them yet,"" says Keith Johnson, partner, insurance industry group, Accenture (New York). Interfacing back-end systems with front-end functionality ""is a huge expense that goes back to the adoption question.""

In order to enable efficient online self-service functions, companies typically have to update their legacy systems. ""In many cases, a company will have a first-notice-of-loss application online,"" says Gartner's Harris. ""It will then either have to be transformed into a different format to go into a system, or, worst case, be rekeyed by someone internally. It is very hard for insurance companies, because of the older legacy systems that are running these back-office operations, to allow seamless integration between the Web front ends and the back office.""

UnumProvident's Best agrees that connecting the front-end to the back-end is both difficult and necessary. ""Any knucklehead can put up a small Web service, but then it may not be scalable,"" says Best. ""Doing things in scale gives you a lot of value. By building to scale and connecting to their legacies small companies can get things up and running, but the front-end is the easy part,"" adds Best.

Despite the current limits to online self-service, as the Internet continues to gain acceptance, customers probably will become more open to using it as a conduit for insurance services. ""Seventy-three percent of the US population has Web access, and that is growing all the time,"" says Humana's Goodman. ""When one gets to the point of spending a few hours on the Web every day, and combines shopping online, those habits build on each other. Once you get started on that path, it's harder to give up.""

Also, according to Accenture's Johnson, the collaborative ability of insurers' sites is expected to grow in the future. ""There is a trend toward co-browsing,"" he says. ""That is the ability to do Web chats like Instant Messenger and voice over IP. It looks very promising.""

It's unlikely, however, that the Internet will ever totally replace human interactions in insurance. ""When you have complex products you need a hybrid approach,"" says eStrategies' Ross. ""It can't all be done online. Insurance companies will always provide information and then connect customers to people.""

Humana's Goodman agrees. ""You will never totally replace the human. Certain things are very complicated,"" he says. The hard part ""is finding the balance between high tech and high touch.""


Online Self-Service: What's Available?

In the past year, the portion of insurers offering customer service Web sites has been growing dramatically, according to Stamford, CT-based Gartner, Inc. According to the firm's February 2001 report, ""Insurance Aggregation Sites: Insights From Early Adopters,"" 30 percent of the US-based carriers of life, health and P&C insurance surveyed had customer service Web sites at the end of 2000. More than half (56 percent) of the those surveyed said they expected their companies would have a customer service Web site up and running by the close of 2001, reports Kimberly Harris, senior analyst, financial services.

Of the nearly one-third of responding insurers that operated a customer service Web site a year ago, ""there was a high tendency toward simple non-interactive functions where the user is just given information, and a tendency to have customers move only part-way through a service and then move it offline,"" says Harris.

Fifty-five percent of sites that were up and running by year-end 2000 allowed customers to view policies, while 68 percent of those companies enabled policyholders to make simple changes, such as an address change. Sixty-four percent of the Web sites in place allowed e-mail capability that would go to a call center or agent representative, and 17 percent allowed payments online.

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