The technological, political and economic events
that have occurred over the past several years have forced the transformation
of financial services to the point where the traditional models, performance
measurements and information systems are undergoing a total metamorphosis.
Faster, cheaper, better – value-added services
are the name of the game. They can only be delivered by utilizing the
capabilities of the Internet. Insurance companies that can offer Internet-based
platforms, and can offer programs, products and services with underwriting
decisions being made through questionnaires and access to informational
databases, providing 24/7, real-time, consumer-driven transactions, will increase
their volume as profit margins shrink and insurance becomes a commodity in the
e-business environment of the future.
Several insurers are moving in this direction,
but only for specific lines of coverage, e.g., life, health, and auto, and only
for small to mid-sized accounts. There has also been development in workers compensation.
The National Council on Compensation Insurance (NCCI) is aggressively working to deliver
a variety of Internet-based products and services.
The Internet will transform the way insurers
communicate with agents as well as their insureds. Using the Internet, insurers will
enable their agents to automate many paper-intensive processes and obtain access to
a variety of underwriting, loss control and claims information. Modifications
to agency automation systems will greatly reduce transaction costs from
administrative expenses associated with data-collection, paper shuffling and
re-keying of policy application information. Technology will be the enabler and
a streamlined infrastructure will be critical.
ACORD, the insurance industry's nonprofit
standards developer, and a resource for information about object technology,
EDI, XML and electronic commerce in the United States and abroad, is presently
combining industry requirements and Internet standards to benefit insurance
agents and carriers. This will remove one of the problems in the development of
an effective e-commerce solution.
Insurers are also struggling with the problem of
how to enable agents and insureds to use the Internet to access information
stored in legacy, mainframe-based information systems. Insurers that have already
invested millions in capital on mainframes and other technologies are looking for ways
to leverage these investments, rather than starting from ground zero. Legacy system
integration is required in order to accomplish this.
To address these concerns, software developers
have created a new class of software, referred to as “middleware”, that is used
to integrate these disparate systems and allow access to policy information on
any platform, and process and distribute this information to customer service,
sales reps and policyholders.
Some insurers will build data warehouses and use
data mining tools to pull together information about policyholders from these
disparate information systems. Policy and claim information will be mined using online
databases and statistical tools, leading to more accurate risk assessments, better pricing,
and focused marketing. Price differentiation will no longer be the key driver and
customer service and delivery will be the competitive advantage to improve customer retention
while significantly reducing operating costs.
In addition, customer relationship management
(CRM) software, web-based applications and web portals will give insureds
better access to policy information, expanding the opportunities for
self-service. The construction industry will be one of many industries that
will benefit from these technological advancements in how insurance is procured.
The emphasis on the implementation of e-commerce
distribution channels to sell insurance products will eventually change over the next three or
four years to a business model where these channels are effectively adapted to deliver
a wide range of financial services. This will incorporate the fall-out from the passing of the
Gramm-Leach-Bliley Act of 1999. The next few years will be exciting times in the insurance industry.
