Even the highly visible and funded area of customer relationship management, a major focus of insurance companies over the last few years, will not be immune to the after-shocks the September 11th attacks are having on the US economy.
For instance, if insurance carriers were only toying with the idea of cutting IT budgets and reducing operating costs before that second Tuesday in September, they are doing it in earnest now.
"Reevaluating budgets and expenditures has been the general focus of 2001," says Christine Ingold, vice president of global financial services, PeopleSoft (Pleasanton, CA). "After the attacks, companies are even more cautious with technology spending, but they know technology is important. They are just looking for the best places to spend."
In fact, many technology investments, thought to be "done deals," before September 11th, were once again open for discussion at carriers. "We have had a whole bunch of clients go back and re-review their plans," says P. Kevin McKinney, industry manager for insurance at Costa Mesa, CA-based FileNET, a business process management solutions provider. "The insurance industry still does not have a firm grasp on what its losses will be, so it is understandable. Only in the last couple of weeks have we seen companies start to re-look at new projects."
Cost Conscious From the Top
The C-level managers are so focused on costs that many are reviewing all expenditures, says Donna DePasquale, vice president of marketing at Marketswitch (Dulles, VA) a marketing optimization software provider. "Many IT plans are on hold, but the pipeline remains strong," DePasquale says. "We are now seeing high-level executives getting even more involved in the technology decision making process. We have even seen CFOs becoming more directly involved in the purchase of technology."
One new mandate for any ongoing or new technology investment is a fast and substantial return on investment (ROI). "Only projects that are ROI winners will survive," says Steven Etzler, senior manager at New York-based KPMG Consulting. "Those projects that can't withstand the ROI scrutiny will be stopped."
A large part of the scrutiny will fall on vendors. "There is a large focus on ROI," says David Corrigan, product manager for Toronto-based DWL Inc.'s DWL Customer product, an enterprise customer management application. "Carriers are forcing vendors to quantify and prove the ROI before the project gets launched."
And projects had better show ROI in the near term. "Insurance has traditionally had projects that stretch on for 24 months or more before any form of ROI is shown," PeopleSoft's Ingold says. "Insurance companies are looking for shorter-term ROI by taking on smaller projects so immediate success can be demonstrated," Ingold adds.
However, only certain projects are going to get the opportunity to prove their ROI vitality. "Insurance companies are going to focus spending on improving service to the customer," KPMG's Etzler says. "We are going to see a lot of investment in middleware and integration tools that are going to provide the ability to cut costs and improve service by providing one view of the customer." Etzler adds that two integration providers that are well positioned to help carriers are SeeBeyond (Redwood Shores, CA) and WebMethods (Fairfax, VA).
"To provide customer relationship management CRM, making sense of the data across divisions of the company is important," Etzler adds. "The enterprise has to link all of the product groups together."
By finally capturing a single view of the customera goal insurance carriers have been working towards for a number of years with only sporadic success, points out FileNET's McKinneyinsurers should be able to capitalize on the relationship that already exists with each customer.
"As product lines expand and competition tightens, insurance companies are looking for ways to deepen relationships with customers and cost effectively market to them," says MarketSwitch's DePasquale, whose company sells marketing optimization software that allows business analysts at financial services companies to target customers. "But first, they must have a good view of the customer."
In order to grasp who the customer is, insurance companies will continue to consolidate data through the use of data management solutions, such as data marts or data warehouses, according to Tony Villa, Director, Company Products Division, Applied Systems (University Park, IL), an agency management systems provider. "Carriers continue to have systems that are policy-centric," Villa Says. "However, they are pushing the data together to get a centralized view. They have had limited success so far with data warehouses. The next step, once the data is consolidated, is to use analytical tools to determine customer trends and having the ability to cross sell."
Sharon Fair, product manager for customer relationship management industry solutions at PeopleSoft sees carriers continuing to work on creating an enterprise-wide customer information file in 2002. "There are a lot of carriers that have developed or are in the process of developing a single customer information file," Fair says. "However, delivering the file across the entire company and to all of the business partners is very difficult. Making sure the proper systems are tied together, with the proper level of security, are just a few of the challenges. To distribute the information, carriers will most likely use Web-based tools and software."
Web-based technology provides many advantages to a carrier. "Most people know how to use a Web browser," adds Fair. "If you deploy an application through a Web browser, the training costs are significantly reduced because most users are already familiar with the interface."
In fact, Web-based deployment of technology will be one of the major trends for the industry when it comes to customer service in 2002. "We will be seeing many more carriers providing thin-client functionality to producers," says FileNET's McKinney. "A move to e-processing and thin client operations are really going to help carriers reduce expense. By having no code on the client, it makes updating software easy and efficient."
Applied Systems' Villa agrees. "Carriers are really trying to minimize the cost of the transaction, especially in personal lines," he says. "Real time functionality and self service will help carriers achieve their goals."
Says Peoplesoft's Ingold, "The adoption of business-to-business technology on the Internet brings carriers and business partners together easily. Providing employees, agents and policyholders real-time access to services is compelling and will be the biggest change we will see by the end of 2002," Ingold adds.
Customers Want Self Service
Real-time access will also provide capabilities that producers and policyholders, alike, have been clamoringforself service. "As insurance companies' customers have gotten more comfortable using the Web, there is growing pressure to have self-service capabilities also on the Web," says Michael Dufton, president and chief executive officer of Toronto-based SOLCORP, a life insurance software and consulting service provider.
Says Kevin Rosen, director, insurance practice at Piscataway, NJ-based Silverline, a software development and integration services firm, "We are seeing insurance carrier portals aimed at brokers with functionality that gives the brokers the ability to conduct secure transactions over the Web. The types of functionality include the ability to lookup account status, change addresses and check on claims status," Rosen says. "Those types of capabilities reduce cost."
KPMG's Etzler says the self-service functionality does not have to just be on the Web. "VRU self service is also a good offering," he says. "Anytime that there is an improvement in services and it makes it easier for the customer to do business with the carrier, that is a good thing."
The technology powering the B2B connectivity will not be brand-new technology. Rather, it will be the maturation of technology that has existed for a few years. "XML will play a huge role in linking industry participants," says Applied Systems' Villa. "However, there is a struggle with the speed of setting the standards. Like anything else where there are many groups of people with slightly different business models, it can take a while, but that is understandable and probably better in the long run."
Says DWL's Corrigan, "XML is one of the biggest maturing technologies that will impact the industry in 2002," specifically citing ACORD's (Pearl River, NY) XML standards. "If you can write applications to ACORD's standards, it is easier to talk with business partners. Carriers know if they are going to integrate solutions together to communicate, they have to have an XML interface and a XML standard directory."
Other technologies that will be used extensively, cited by Corrigan, include Java and Enterprise Java Beans-based applications so carriers can easily scale functionality to thousands of users.
DISTRIBUTION/CUSTOMER SERVICE: Key Trends & Challenges
-- Insurance companies will continue to consolidate the customer view across the enterprise.
-- Web-enabled applications for easier distribution of information both internally and to business partners.
-- Only projects with strong return on investment (ROI) will see technology spending in 2002.
-- Insurance carriers will "break-up" projects to provide smaller, faster deliverables.
-- Insurance companies will fund technology projects with short-term ROI before longer-term projects.
-- Middleware and integration tools will see extensive use as carriers combine disparate systems.
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio