This article originally appeared on the BeyeNETWORK
Opportunity: Successful deployment of the new model will result in reduced costs and improved services, and it will build on the company's future competitiveness.
The Reality: The majority of insurance companies are not positioned to deploy real-time systems from a business or technical perspective. With budget constraints, lack of a holistic strategic plan, complacency and the lack of skilled personnel, companies may be challenged to meet these requirements in real-time.
The convergence of consumer/agent expectations and newly embraced technologies are positioning the industry for major improvements to the product and service delivery process. The solution requires a complete and integrated company strategy. It involves business-driven re-engineering efforts, as well as sophisticated and integrated technologies and applications in support of those business functions. Insurance policies such as homeowners, personal automobile and commercial lines business owners' policies are well-suited to automated underwriting and pricing rules. These lines of business also comprise the high-volume transactions in the majority of companies with the most potential gain for the company and agent.
The more complex transactions and policy types will continue to require the attention of highly-skilled personnel and continue to be processed in traditional ways. Business application software in support of real-time processing and automated decision-making must be purchased or developed. These applications will also be needed to allow for the higher levels of service expected by consumers. Additional efforts need to be given to the complexity of security of information in the insurance regulatory environment. Business partners are taking lead roles in the business transformation and must be aligned with the company strategy.
Regulatory bodies are active participants in defining expectations pertaining to security and use of consumer information and must also be in a partnership role to implement the new service expectations successfully. The cost of such a strategy can be quite high. But, the absence of such a strategy places the company at a tremendous marketing and "cost of doing business" disadvantage.
Outline for Success—Key Components in a Comprehensive Plan:
With the opportunities and challenges outlined, the following recommendations are made and should be included in the company's overall business and technology strategy in the insurance organization:
--Develop a company strategy that is driven by business objectives and does the following;
- Meets the current and future needs of the product and service model;
- Reduces true cost of doing business; and
- Manages the risk of new technologies.
--Develop business application technologies with easy navigation but good security, essential for servicing agents and consumers.
--Establishing a comprehensive plan that ensures all business application components will compliment one another in developing an integrated solution for agents and consumers.
--Establish an implementation plan that meets the company's objectives while managing the company's risk for change.
--Create an open-system environment that allows for use of application service providers (ASPs), purchased software and proprietary software to ensure that components can be interchanged without high cost and business interruption.
--Plan and create an application portfolio that is based upon newly modeled business process flows and highly integrated systems using business intelligence, thus requiring minimal need for human decision-making interventions.
--Plan for and develop applications and supporting infrastructures that readily comply with regulatory requirements such as Sarbanes-Oxley, The Freedom of Information Act, etc.
The insurance company's new product and service delivery model is a reality and will be commonplace within the next two years. For organizations that have not already developed a comprehensive plan, time and expertise may become one of the greatest challenges. Companies that have deployed the new model and capabilities expect to win market share as agents and consumers realize and embrace the lower costs and improved services they receive. The stability and capabilities of the technology model continue to improve and mature while the cost of delivering the technology continues to decrease.
Technology is having an ever-increasing influence on a company's ability to be successful in servicing the marketplace and reducing company and agent costs. Companies are challenged to change business processes and align technology capabilities to meet the expectations and needs of agents, consumers and the company.
This is the critical first step in the transformation process. Historical experience indicates that the transformation's success is highly dependent upon the process being business-driven. High expectations will be on the technology department to align a technology strategy that includes future maintenance and enhancements that will meet the ongoing needs of the business and establish the holistic company enterprise rather than mutually exclusive, independent projects.
While there are a multitude of tools and technologies available to assist in the transformation, leveraging the company's existing investment in systems and technology—while providing for the future—requires significant planning and expertise in order to control costs and time. Speed of delivery must be balanced with a company's capacity to accept change and manage technology risk and costs. New and sophisticated business applications are being deployed on the Web and are being integrated into a comprehensive system enterprise, aligned with key business partners including ASPs. Common data formats such as XML have improved the ability for companies, business partners and agents to share information more readily. The combination of business process change, real-time application systems and infrastructure modifications will work together to create a single, seamless system to bring about a major change in the delivery of insurance products and services.
Selecting the appropriate blend of new applications, enhancements, conversions, migrations, systems integrations, business intelligence engines and infrastructure is highly complex. Time, costs and expertise are major threats to many organizations. The benefits realized by moving to the new model far outweigh the costs and risks of staying with the traditional model.
Over the next two years it is expected that a number of companies will deliver on this model. These companies will realize the relative benefits to agents, consumers and their respective cost of doing business and ease of doing business.
To view the other articles in the Insurance Evolution series, click here—Achieving Competitive Product and Service Delivery, Operational Opportunities and ChallengesandUsing Technology in the New Delivery Model.