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Insurers Ponder IT Security as a Competitive Differentiator

Innovative carriers are nurturing a new kind of customer loyalty by establishing themselves as IT security stalwarts.

Selling the Concept

To be fair, most insurance companies have viewed security as a critical factor in protecting their reputations for quite some time. But that notion traditionally has been a defensive tactic -- to prevent bad publicity from a data breach or prevent projects from stalling as a result of insurmountable security concerns. Now, however, a few leading insurers are discovering the positive opportunities provided by exceptional security practices.

"It becomes a selling point," asserts MassMutual's Bonsall. "It's not just damage control -- it's about having a program that we can be proud of that we know is going to serve our customers well."

According to both Insurance Insights' Savic and TowerGroup's Pauli, no insurer has emerged as a leader in this space -- yet. IT security still is in its evolutionary stages, as a differentiator and as a process, Savic points out. "I don't think best practices have quite been established yet for this frontier," she says.

Pauli adds that the industry's competitive focus currently is elsewhere. "Right now, there are so many other things that are swirling around in [insurers'] heads. They're trying to become differentiated on seamless customer experience and speed to market, those types of things," Pauli says. But, "[Security] will bubble up more as carriers really push out their portal development."

When it does bubble up, Pauli adds, she expects that security will be more of a differentiator for the distribution force than for the end consumer. "The average consumer doesn't really understand how much of their data a carrier has," she contends.

On the other hand, leading agencies -- which are growing larger and more important through increased industry consolidation -- understand their value to carriers and choose their business partners carefully, Pauli continues. "They're making a choice about where they place their business, and a lot of things go into that decision," she explains.

Increasingly, information security is part of that decision, Pauli suggests. "Of course, [producers] are going to look for good prices and smart underwriting [from carriers]. But they're looking for a greater array of things, and the security that a carrier can describe to the distribution force will drive the best agents to its doorstep," she notes.

"We hear increasingly from agents in the field who sell life insurance policies" that their customers are concerned about security, adds MassMutual's Bonsall. "Their prospective customers will ask, 'How are you going to prevent these fates that we're reading about in the popular press? How will you protect me from falling into the same trap?'"

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