the challenges of getting to the future market facts, spring 2002)

8/9/2019 The Challenges of Getting to the Future Market Facts, Spring 2002)

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Looking to the future, there is little doubt technology

will continue to drive efficiencies through all the key

insurance distribution channels. However, in getting

to the point where the full benefit of these effi-

ciencies can be realized, carriers face a host of chal-

lenges. To gain an understanding of the specific chal-

lenges that will be encountered, LIMRA and Deloitte

Consulting conducted The Future of Technology Survey ,

a qualitative email survey with technology personnel,

in February 2002. This survey was part of a larger

paper jointly undertaken by LIMRA and Deloitte,

entitled Technology and Insurance Distribu tion — A

Look to the Future.

What were the challenges identified by the in-

surers in getting to the future? A content analysis

of the survey results suggests six top challenges in-

surers expect to deal with as they move to the fu-

ture. In order of frequency of citation, these chal-

lenges are:

• Financial issues

• Consumer issues

• Organizational issues

• Technology advances

• Producer issues

• Pace of change

The following discussion of these challenges, along

with supporting verbatim statements, addresses

each of these issues independently. However, it is

important to note they are interrelated: Challenges

in one area impact many other areas. As the above

quote indicates, cost is usually part of the challenge

T H E C H A L L E N G E S O F G e t t i n gF u t u r e

t

o

t

h

e

by MARY M. ART

Associate Scientist, Technology in Marketing

and Distribution Research, LIMRA

International

“Cost. A comprehensive vision and the will to implement it. Human resources (both

quantity and quality) to implement the plans. Cost. The challenge of constantly

changing technology and trying to weigh improvements against the delays they

can engender. Cost. Cultural resistance. Inertia. Education of front-line troops and

support troops. Cost. Sorting out the “best” technological solutions from the myriad

offered. Making different technologies work with each other. Cost.”

— LIMRA/DELOITTE F UTURE OF TECHNOLOGY SURVEY


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in each step of the process. An organization also needs the

will to respond to change, and the time and commitment of

all segments: company management, company staff, the field

force, and the marketplace. And no vision of the future of the

insurance marketplace will be achieved without the appro-

priate technology to support it.

F INANCIAL ISSUES Given overriding concerns with the

state of the economy and the substantial cost to develop

and maintain technology, it is little surprise that the most fre-

quently cited challenges deal with financial issues. These fi-

nancial challenges focus on three main themes. The first deals

with the magnitude of the finances required. Quite simply,

computer operations are expensive and technology advances

will require major investments. Each major investment will

require a debate within the company itself: Is this the right

technology to take the company into the future, or should the

company wait to see how competitors react, perhaps letting others take the gamble? If they choose to wait, what will they

sacrifice if they then need to play catch-up? Will the bene-

fits ultimately outweigh the costs, helping the company achieve

an edge in the marketplace?

“Technology platforms a re expensive and changing rapidly. These

are big financial and resource investments for companies to make.”

“Moving many of the operational processes to meet real-time

requirements will be extremely expensive and difficult due to the

variety of mainframe systems most companies are using.”

A second financial theme focuses on the need to keep ex-

penses under control. Applying these technological changes and

keeping up with technological advances can be among the

most expensive undertakings insurance companies will face.

Yet, they may invest with only a nebulous feel of their return

on investment (ROI).

“Control expenses while building infrastructure.”

“Allowing for choice of interaction without adding to overall ex-

pense structure.”

Finally, there are financial challenges dealing with ROI. These

challenges involve issues around the need to achieve ROI and

the difficulties in measuring return. Given the scale of these in-

vestments, and the traditional perception of the conservative na-

ture of the insurance industry, the question is raised whether

any company, regardless of size, will feel comfortable investing

in technology without a certain and measurable ROI.

“New technologies like these cost time and money to implement.

Therefore, we need to make sure there is a good ROI for any solu-

tions that we implement.”

“Too many companies have been burned by new technologies which

never translated into the promised savings and /or increases in

sales.”

CONSUMER ISSUES Anticipating consumer wants and

needs in terms of product and service has been the job of insurance companies for years. Carriers will now also need

to anticipate the rate at which consumers will adopt new tech-

nology and be ready for them when they get there. It has long

been difficult to project when consumers will want a new

product, but in this time of rapid change, it has become even

more difficult to guess technology adoption rates, and it is

potentially very expensive to judge incorrectly. Erring on ei-

ther side can be costly: Spend too much and never gain a suf-

ficient ROI. Or, spend too little and risk losing clients to a

more progressive competitor. Furthermore, it is now a matter

of determining not only what current markets want today,

but also what the next generation will expect tomorrow.

“Finally, there is the rate of adoption by consumers. Many exper ts

were predicting billions of dollars of insurance would be sold on-

line by 2002 or 2003. . . . It has become c lear tha t those est imates

were probably somewhat opt imist ic. Likewise, while technologies

such as XML or imaging can and will provide short-term benefits,

their long-term viability will be determined by the bottom-line re-

sults they deliver. And if the clients show that they do not need or

want these benefits, then we will have likely implemented too

early.”

Carriers also need to remember that technology is already raising the sales and service expectations of consumers. How

progressive will consumers expect carriers and producers to

be when it comes to technology? Both of these issues will be

major challenges for carriers.

“The customer expectation bar continues to raise ex ponentially.”

“Ever changing technology environment and client expectations.”

Privacy and security of personal and financial information

has been an issue for some time, and the Internet only in-

creases the concerns of consumers and the challenges to the

This article is based on information from a collaborative project

between LIMRA International and Deloitte Consulting entitled

Technology and Insurance Distribution: A Look to the Future .

Contributions of the project team to this article are acknow-

ledged: Maria V. Dynia, Assistant Scientist, LIMRA International;

Borbala Gergely, Consultant, Deloitte Consulting; Todd A.

Silverhart, Ph.D., Assistant Vice President and Director; and Matt

Smyth, Principal, Deloitte Consulting



industry to offer assurances about their Web sites. Given these

concerns, how willing will consumers be to supply the per-

sonal information needed for an online insurance quote or

application? Will smart cards, replete with our personal health

information and biometrics such as retina scans, increase or

allay fears? Companies will need to satisfy these concerns

before some consumers will transact online.

“Concerns about privacy will continue to be a challenge as will al-

laying those concerns.”

The issues around the consumer go beyond attitudes about

technology. As always, one of the challenges companies will

face is how technology can enhance the need for and the im-

portance of insurance in the face of a public that is sometimes

less than savvy about insurance and investments. Will tech-

nology, for example, enable video instruction from carriers

to high school students, or enable consumers to research prod-

ucts and companies so thoroughly that their concerns will bereduced or eliminated?

“Continued education of risks that customers face and the very

significant impact of the risks if not properly managed, will hope-

fully be incorporated as part of financial awareness courses early

in s tudents’ curriculu m.”

Finally, there is the role consumers will be willing to have

technology play in the purchase process. Acceptance of such

technologies as electronic signatures, online service, and pa-

perless transactions, among others, will determine the return

on the carrier’s investment in certain technologies. In addi-

tion, while some consumers will prefer to purchase online,

the speculation now is that the Internet will be, as a pur-

chasing source, simply an alternative channel and will ulti-

mately attract about as many buyers as have other nonper-

sonal means of buying insurance. Producers, however, can and

should utilize technology to enhance their interaction with

their own customers. Quicker quotes, faster policy issue, and

online underwriting guidelines will improve the sales process

from the producer’s end as well.

“The biggest challenge will be determinin g what is the best way

and consumer accepted way of capturing an electronic signature to get paper completely out of the process . . . .”

“Many companies feel that a major component in our value propo-

sition among affluent individual and small business owner target

markets is the value added long-term trusted relationship that our

financial adviser provides. We need to convince our producers and

their clients that technology will be able to add to this relation-

ship rather than detract from it or compete against it.”

O

RGANIZATIONAL ISSUES Whenever major business in-

vestments are made or new processes implemented, or-

ganizational issues arise that strongly affect the success of

the transition. The most often cited organizational challenges

focus on the culture of the organization and the need for a

new culture to support the technology initiatives, rather than

offer resistance to change:

“The IT challenges will be considerable, but realistically, convincing

the operations, marketing, underwriting, etc. areas that their

processes should be revamped will be the biggest challenge.”

“As expectations from customers and producers increase, in many

areas, simply changing the mindsets of employees and managers

will be a challenge.”

“Large cultu ral barr iers exist among the agent sales force to get

them comfortable with using e-mail for client communication,

using the Internet for online collaboration, and interactive e-meet-

ings, and using technology at point-of-sale for e-app/e-signature.”

These technological changes will only be possible when

companies take a comprehensive look at their business strate-

gies and gain the full support of senior management. Man-

agement will have to keep the company focused on the tech-

nology goals if these many-phased strategies are to be

implemented successfully.

“A comprehensive vision and the will to implement it.”

“Focus is always a problem. We need to stick to the same general

path long enough to reap some of the benefits of our technology.”

TECHNOLOGY ADVANCES In some cases, the actual chal-

lenge is the need for additional advances in technology

before companies can benefit from the efficiencies technology

will bring to insurance distribution. Beyond general state-

ments concerning the challenge of making technology simple,

fast, and reliable, these issues can be categorized into three

themes: legacy systems, access issues, and the need for pro-

ducer-focused systems.

Mention integrating legacy systems to insurance company

senior management and they envision high costs, thousands

of man-hours, and a vast array of often-untested technology options. Existing legacy systems have taken years to build and

the information on these systems needs to be maintained

while the systems are enhanced or rebuilt to integrate new

technologies that improve the way information is stored and

retrieved. Myriad challenges exist within this process alone:

“To cost-effectively evolve numerous legacy systems without dis-

rupting the enterprise architecture initiative. A new and better

infrastructure is critical for supporting an Internet-enabled model

and for achieving the performance and stability associated with

mission critical applications in this space.”


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“Moving many of the operational processes to meet real-time re-

quirements will be extremely expensive and difficult due to the

variety of mainframe systems most companies are utilizing.”

A second theme deals with technology access issues. These

issues incorporate the challenges in providing connectivity

(i.e. high-speed, affordable, wireless) with a varied audienceusing a variety of platforms. There already are different ex-

pectations by those who are using a dial-up modem from a

five-year old computer versus those with a Pentium IV and

a DSL connection. How can technology be used to meet the

needs of the lowest level of technology user while still ap-

pearing to offer an online experience that responds to the

more sophisticated user, and beyond that, to wireless users?

“Backend process speeds need to be improved. At least today there

are significant numbers of producers that may not access the

Internet via a high-speed service; large number still dial.”

“Another challenge will be to provide truly effective access to these

same systems via smaller technology (wireless handhelds and

phones) with their limited screen ‘real estate.’”

In addition, there is the need for systems that meet spe-

cific producer needs: keeping in touch with the customer and

the carrier, for example, via email or online chats. There is a

need to alert the producer to contact his or her customer, per-

haps due to a major life event or a service request made di-

rect to the carrier. Producers also want to be able to easily

access a range of information about their clients, from age

and income to types of products owned or introduced.

“Having an email system that the agent can use to communicate

with customers, with a system for pre-approving the content, could

be beneficial also. It is important for the agent and company to

stay in touch.”

“It will be essential to have software that will notify the agent

when a ‘service call’ needs to be made or a key event is taking place

(annual review, birthday, etc.). The agent needs the ability to in-

quire into his customer database to prospect and communicate

with customers.”

PRODUCER ISSUES Despite all the new technology that en-

ables consumer self-service more of the time, the majority

of insurance sales are made through a producer, and research

indicates this will not change. However, producers need to

become technologically savvy in order to keep pace with client

needs and expectations. The producer and the agency office

must be tech-ready. This requires someone who understands

how to use the technology — and someone to pay the cost

as well.

One clear challenge noted by survey respondents is training

producers and their staff to make use of technology without

overwhelming them with information or demands on their time:

“First, it will be a challenge to teach agents and brokers how to

use these new technologies . . . .”

“Providing the most appropriate equipment will be a challenge and

providing the training needed will be a challenge.”

Beyond training there is the willingness of the producer

and field staff to adopt new technology and integrate it into

daily sales and service processes. Producers often feel any

contact with a client is an opportunity for an additional sale

and may resist any change in a process that has functioned

so well for so long. However, many, many producers have

adapted, and new recruits wil l learn to sell while using tech-

nology from the beginning.

A continuing challenge for carriers may be to answer the

producer’s question of “what’s in it for me?” before some pro-ducers will utilize a new technology. In some cases, however,

the push may well come from the tech-savvy and expectant

client, rather than the carrier.

“To figu re out how technology can be a producer’s fr iend, not com-

petition. To see the real benefits of aggregation to themselves, not

just the customer.”

“From a field manager or agent’s prospective, the integration of

technology at every level must become an integral part of their

business plan. Field reps must accept and take advantage of cus-

tomer demands to transact business online. This may require that certain products and programs be re-packaged in a way that is

more suitable for online delivery.”

PACE OF CHANGE The unprecedented technological ad-

vancements that have come to light over the past several

years are not likely to slow down. The change sparked by the

rapid developments itself poses challenges for carriers looking

to take advantage of the technology. One set of challenges

emerges simply from the rate at which technology is evolving.

“The challenge of constantly changing technology and trying to weigh improvements agains t the delays they can en gender.”

“Ever changin g technology environment and client expectations.”

Surely it is not prudent for companies to implement every

new development. Given the staggering rate at which new

technologies are introduced, carriers face an additional set of

challenges managing that pace of change:

“Managing the pace of these investments to ensure our producer

technology platform remains compet itive.”

The industry itself must also adapt to the pace of change.



For many applications a lag exists between the time when a

technology becomes available and the t ime when insurance

carriers make sufficient changes in technology to allow them-

selves to realize benefits. The insurance industry has been ac-

cused of moving too slowly in adapting to the Internet: This

is, at least in part, due to the product itself and the culture

that has been built around it.

“While technological advances seem to be announced with an ever-

increasing frequency, their adoption is not always as quick or as as-

sured as the press releases might imply. It will take time for the stan-

dards to be finalized and then to permeate throughout the industry.”

ADDITIONAL CHALLENGES Beyond the issues outlined

above, a few others received lesser attention from survey

respondents, but are no less important to companies facing

them. The majority of the remaining issues are concerned

with changes to business processes, implementation, legal regulations and compliance, customer relationship management

(CRM), and multichannel issues.

“Business process change is painful,” noted one respon-

dent. Changes to business processes include a wide range of

agenda items. While some clearly would overlap the need for

organizational and technological changes discussed above,

others may involve developing a customer-centric focus or

designing forms and processes that can be used by people

with a range of technological capabilities and on a variety of

devices. Plus, respondents point out that even once the high-

tech process is in place, the parallel manual process will still

need to be maintained for a period of time. And while it is

important to simplify and facilitate the application process,

some parts of the process, such as medical underwriting, may

never be replaceable by technology.

Companies must ask themselves when should they im-

plement new technologies and how quickly can they do so, be-

cause while it is important to maintain a competitive edge,

it is also essential to launch a successful program and plan it

for a time when the needed resources — financial, techno-

logical, and human — are all available. Furthermore, compa-

nies need to carefully choose from among new technologies

because some will inevitably fail, while others will endure.

“We must also get better at ongoing operations. Each major change

creates a new two- or three-month wave of instability.”

Regulatory and compliance issues are nearly always a part

of the insurance industry’s quest for change and growth and

they will play a part in the future of technology as well. Com-

panies are certain that where the consumer is concerned, the

government will see the need for protective legislation. Plus,

some wonder about how organizations such as the NASD and

legislation such as Health Insurance Portability and Ac-

countability Act (HIPAA) will continue to impact the ways in

which information may be provided.

“One challenge is the uncoordinated regulatory environment rela-

tive to the technology environment. Open a rchitecture provides a

much better substrate for technological innovation to occur. Insur-

ance obviously has state regulatory barriers and, as such, tailored

solutions must exist that channel specific solutions to different pop-

ulations of potential clients. The less open a system is, the more likely

that technology will sputter as it searches for common solutions.”

Competition with other carriers makes it important to

keep pace with what others in the insurance industry are doing

as well as what competing financial services companies are

doing for the consumer and the producer. Some suggest that

this may be an even greater struggle for smaller companies.

“Delivering Internet based client functions and services in a timely

manner vis-à-vis our com petitors.”

CRM initiatives are being talked about in most companiesand applied in many. One challenge surrounding CRM is simply

understanding the goals to be achieved, while others

center around successfully implementing it and achieving an ROI.

It is also important to achieve both performance and func-

tionality while keeping data current, respondents reported.

“We have more customer information than any other indust ry but

we seem to be unwilling or unable to use it. . . .”

Multichannel issues involve assuring customers a seamless

experience regardless of the channel they choose for each op-

eration, and in addition, addressing the different needs of and

creating the value for each distribution channel.

“Given our commitmen t to our cur rent distr ibution, we do not en-

vision channel conflict between our producers and our alterna-

tive distribution. But we will need to synchronize information ex-

change via various interfaces, e.g., the phone/IVR, producers, a Web

site, a st rategic par tner.”

CONCLUSION It is clear from the challenges cited by

these insurance personnel that overcoming each will

require considerable planning and foresight, as well as

an awareness of what each person involved in the process,whether customer, producer, or home office employee, wants

and needs. The results of this survey are not surprising, but

rather reinforce what we know about people, our economy,

and readiness to change. Financial issues and the level of

willingness to util ize technology wil l overshadow the entire

process. This level of willingness will range from not at all

interested to a genuine eagerness to explore. Companies

will need to constantly evaluate where their company

management, employees, field people, and markets are on

this continuum. Getting all pieces in sync is perhaps the greatest

challenge.

the challenges of getting to the future market facts, spring 2002)

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