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The Opportunity: New technologies including the use of the Web have allowed insurance companies to deploy real-time processing models without compromising business controls.
The Reality: Current application portfolios and technology infrastructures are not positioned to use the new technologies in a real-time, seamless process.
Many of the components of the new products and service delivery model are deployed today. The majority of insurance companies have deployed Web sites for access by agents and consumers. Typically, company and agent portals include general information (products, contact, press releases, etc.) as well as some inquiry capability to back-office systems. In cases where inquiry capabilities exist, the information is usually from the prior day's entry and processing. The use of expert underwriting rules-based systems have become commonplace over the past few years. Document management and the ability to view policies, billing and other key information via online or Web is normal. Access to third-party consumer information databases is also common but much of this is done through overnight batch file exchanges. The majority of insurance companies continue to be challenged with business processes and business application portfolios that are not aligned for delivery in the new seamless, real-time product and service model.
A Technology View of the New Model
The new model requires that a number of technologies be highly integrated and viewed as seamless from the perspective of the consumer, agent and insurance company personnel. It must be built with a well-defined infrastructure and application portfolio (business) plan aligned with and in support of the business process plan. The infrastructure and applications portfolio that gives agents and consumers the ability to transact business via intuitive navigation on the Web using all of the company's controls is a complex and difficult integration of technology hardware, software and processes.
The new model includes technology components such as:
- Web enablement;
- Expert systems (rules and/or scoring);
- Access to third-party consumer information databases;
- Document management and "on-demand" printing;
- High levels of privacy and security; and
- Automated reporting (exception).
All of these components are part of the seamless, real-time, integrated model. Underwriters and business management will use real-time, online trending information reporting systems based upon their unique, well-defined business rules ("red flagging" or exception reporting). Building technology infrastructures and application portfolios with flexibility is critical to the organization. Many organizations will use combinations of internally developed software, purchased (vendor) software and software and services provided by application service providers (ASPs). As information sharing with business partners is critical, the organization should adopt and comply with vendors and industry business partner standards such as those developed by IVANS (and e-business solutions provider) and ACORD (an insurance industry standards association).
Challenges and Positioning in Technology
Technology departments have significant challenges confronting them. Some of the primary challenges include:
- Management of technology costs;
- Management and balancing of existing technologies with implementation of new technologies;
- Acquiring and/or ramping up skill levels of existing staff;
- Finding and implementing software solutions for the new model;
- Organizing projects to ensure all technology projects are consistent with the needs of the entire organization; and
- Timeliness of implementation and managing company risk(s).
Technology is playing an ever-increasing role in the successes of companies. Technology capabilities directly impact the cost and service levels of delivering products and services to agents and consumers. This strategic importance demands significant senior management attention to the overall planning and deployment of technology and to ensure alignment to the business goals and objectives of the company. As technology budgets are typically limited and are a significant part of the overall expense of an organization, it is important that the company determine the priorities and tradeoffs of all of the demands placed on the technology department. It is extremely important that projects are planned for in a holistic or enterprise manner to ensure that projects are consistent with the overall technology strategy (seamless integration).
In most companies, maintenance of existing technologies consumes a significant share of the overall technology budget. It will not be easy to commit the resources necessary to move to a new model. Tradeoffs challenge the technology departments to find new and creative ways to exploit existing "embedded" business logic, move traditional "over-night" and "batch" functions into real-time environments, provide ever-increasing levels of automation and provide for continuously increasing levels of security of information. The costs to create the new model's infrastructure and application portfolio can be significant. Technology departments are also challenged to improve their business and technology knowledge and skills to meet the needs of the more complex integrated system(s).
A holistic approach to building and managing the new infrastructure can create significant savings opportunities. This approach can reduce costs in areas such as server consolidation, tool selection, desktop deployment and management and disaster recovery. Application evolution, integration, prioritization and sharing can also benefit from a holistic approach. Companies will find that selective sourcing and use of third-party outsourcers may also create significant budget opportunities and provide critical skills that may not currently be present within the department.
A final challenge to consider is the amount of time it takes to implement the changes to gain advantages as well as mitigate risks (change management) within an organization. Different organizations can handle different levels of risk and the number and speed of changes. Each organization must consider the cost, ability of their respective staffs (including external partners and agents) to accept change. It must also consider its processes to ensure product and service quality does not suffer. Insurance companies and the technology department are being challenged to respond rapidly to the demand of the marketplace. This challenge includes balancing the management of existing technologies and building toward the new model. Continued expectations are focused on the rewards that delivery of the new model will bring through helping the business obtain additional market share, reducing costs and improving services.
The fourth and final article in the series is devoted to detailed planning and preparing for the deployment of the model. You may also visit the first and second articles, Insurance Evolution: Achieving Competitive Product and Service Deliveryand Insurance Evolution: Operational Opportunities and Challenges.