Technology can transform the way you do business, but only if you pick the right software. Katie Puckett asked IT experts which tools insurance companies can’t function without.
Upgrading business technology can cost thousands of pounds, even millions. But brokers and insurers who don’t invest in IT are jeopardising their survival.
Rampant consolidation has created a tangled web of incompatible IT systems. Businesses are under pressure from regulators to show proof of compliance and from consumers to have an appealing corporate website.
Companies that sell insurance can find it hard to differentiate themselves from the competition. In an ever-tightening market, the equation is simple: understanding your customers’ needs plus earning their trust equals more sales. This is where technology can help. So, rather than having to call
every customer to obtain every bit of information, there are a slew of automated software programs available to do the work for you.
The trick is to distinguish between the tools that can transform a business and those that might be unnecessary add-ons. We asked some of the industry’s top IT professionals which software tools brokers and insurers shouldn’t be without. ‘
With such frantic consolidation in the broking and insurance markets, companies have been left scratching their heads about how to integrate the tangle of different legacy systems.
Middleware is software that lets one system extract data from another. It sits on a company’s central system and mines data from all of its legacy databases, putting it in one accessible place and cleaning up any discrepancies.
Middleware is also useful if there are no longer any employees with the company who know how to use an old system. It can access the old system and transfer the information to the current system.
“This helps you extract data from the different systems of companies so you can understand what kind of synergies and potential rationalisation you have,” explains Mark Elkins, financial services manager at software vendor SAS.
“It makes sure you always have full and up-to-date information.”
Another software house, Insurecom, conducted a survey of 100 recently merged brokerage businesses and found that only a third had completely fulfilled all their business objectives because of lack of integration with legacy systems.
Two thirds of the brokers polled said that, next time, they would concentrate on integrating operations and three quarters said they would be integrating business processes.
Providers are reluctant to provide an estimate of the cost of implementing middleware, since each installation is bespoke. But Elkins says it could be anything from £30,000 to £1m.
“It’s not off-the-shelf software,” he says. “We have to go into a company and tailor it to their needs.”
Customer relationship management, mark II
Customer relationship management (CRM) is software that stores current and potential client details such as names and phone numbers, enabling a business to better manage its customers.
Mention of CRM is likely to raise a few groans after the first wave of products installed at the turn of the millennium failed to deliver any real return on insurers’ investments. But the “mark II” is a souped-up version that goes beyond simply storing basic data on customers.
The new tools allow these details to be accessed and entered by employees in different departments of a company. The information on the system is integrated so its users can receive “pop-ups” to flag up any information that might be relevant to them. For instance, if a staff member on the marketing team finds out a new broker firm is opening and they input that information into the system, a member of the distribution team could receive a “pop-up” telling them about the new business. This gives them an edge because they can call that broker immediately and arrange a visit. Sales could also use alerts from CRM to upsell.
A sophisticated system would allow companies to identify different client groups and target them with new products through the most appropriate channel.
Norman Black, insurance industry principal at software vendor SAP, says insurers in Europe and the US are already using these techniques, but it’s just catching on in the UK.
Black believes it is brokers who have most to gain. “Brokers tend to have transactional systems for processing policies and claims. They don’t do that much upfront. But they’re the people who can benefit from it most because they’re out in the market talking to clients.”
He adds: “The industry is starting to appreciate the importance of integrating back-office processes with the front segment, so you can target the next generation of customers without upsetting the more stable part of the market.”
SAS claims AXA Oyak, a Turkish insurer, boosted sales by 40% by using its marketing automation software to segment its customers more effectively and see exactly where the marketing budget was being spent and what impact it had.
“It reduces the costs of marketing, makes it more effective and more efficient,” says Elkins. “It enables tighter targeting of customers. There’s no point approaching an 80-year-old with a life policy, for example.
“You can also identify opportunities to upsell. A particular motor insurance policy holder may well be interested in another general insurance product whereas, in the past, a customer with a similar profile has made another purchase.”
Customer experience analytics
This achieves a similar result to CRM in terms of getting to know a client. But instead of relying on information entered by employees, this is automated software that tracks customer behaviour.
Much of brokers’ new business comes via the web. But in retail terms, a website is often the equivalent of an unstaffed shop with a confusing layout – you know customers come in, but you don’t know what they were looking at or why they left.
Customer experience analytics monitors your website so you can see exactly how customers are behaving and at what point in the process they give up.
“It’s for analysing what’s behind a specific set of movements within the customer’s view,” says Elkins. “You can see what they’re looking at, for how long, which part of the page their mouse hovered over and at what point they got frustrated. They might be considering another product and that could be used to sell to them.”
Another tool for developing more sophisticated relationships with customers is what Andrew Lloyd, who leads the insurance practice at Logica, calls “virtualisation”. Virtualisation has a number of meanings in IT, including the ability to use multiple operating systems on one computer.
“You can see what customers look at on your website, for how long, which part of the page their mouse hovered over and at what point they got frustrated.
Mark Elkins, SAS
Lloyd uses the term to describe the separation of the way your website looks and how it works. What a customer sees is a mask superimposed on the system beneath, he says. This means sites can be customised to a specific client, so they see a site that caters to their interests. But the underlying system is the same as for anyone else.
Amazon is a good example. If you choose a book, you are presented with a page that suggests similar books you might like to buy. The system automatically selects those books based on users’ shopping habits.
This software can enable insurers to promote different products depending on the type of customer visiting their site. They can do this relatively easily, without having to recode the way the site interacts with the back office.
“Until the last 18 months, the way a site was laid out was controlled by the functionality underneath,” says Lloyd. “Now you can say, ‘I want to have that button on the left,’ and you can drag it across and it still links to the underlying functionality. It’s much easier, and allows you to be more people-focused.”
The concept is not in widespread use yet but, says Lloyd, “an increasing number of people are starting to see the advantages”.
This allows employees to carry out their own work on computer systems instead of having to ask an IT specialist for help.
Making changes to brokers’ systems is often difficult because of the complexity of their legacy systems. Fortunately, with the drive in IT circles toward service-oriented architecture, techies have produced pop-up, step-by-step instructions (using programs such as Wizard) that employees can use to input or extract information from old and current systems.
This builds on middleware in that it enables employees to mine data themselves, giving them more control.
“The back-office IT hasn’t been able to move quickly enough to what the market is demanding,” says SAP’s Norman Black. “But clearly brokers are not going to throw away the investments they’ve already made.
“This is a cleverer way of delivering large-scale change in a system, so you can respond to change in the market. It enables the back office to keep up with how quickly the front office is going to change.”
No matter what software your business uses, compliance is non-negotiable. Any time a business stores customer details, it is vital that the rules are followed.
Compliance software scans systems and checks to see if information is being leaked or siphoned off. It can track which employee is signing into which program, logging the time and date. The software stores these details so they can be shown to a regulator or auditor.
The software also allows companies to read employee emails and monitor website use, although they must be able to show an auditor their reasons for doing so.
“It’s all very well getting excited by innovative products you can bring to the market, but all of that has to be done in a compliant way,” says Black. “Governance, risk, compliance can have a major impact on your ability to do business.”
SAP offers governance, risk, compliance (GRC) software that acts as a “watching” layer on your central system, keeping an eye on what happens. “It’s effectively a police force for the system,” says Black.
“When the regulator comes, you’re able not only to show proper supervisory control taking place, you’re able to demonstrate from the audit logs that it happens in practice. It makes a visit from the regulator relatively painless and inexpensive.”
The price of such a system depends on the size of a company but Black says an average installation would cost between £100,000 and £200,000. He adds that it is an appealing option for many companies as regulations – and the penalties for offenders – get tougher. “The business case for doing this is very strong, whether you have five or 25,000 people. There isn’t much of an option really.”
Once you’ve built these tools into your system, you need to protect the data obtained. Like compliance, this is a growing area of concern, particularly given recent headlines over lost laptops and data CDs.
It is also an area where some companies have tried to cut costs. However, nothing ruins customer confidence like leaked data and, if confidence is ruined, so are sales.
Like any other tool, this product can do different things depending on how much money is invested in it. It can encrypt data and track who is looking at what information. It can also ensure certain areas of a company’s IT set-up are blocked to unwelcome users.
“I don’t think the insurance industry has done that much in this area,” says Logica’s Lloyd. “It needs to be inbuilt into your technology and processes.”
There are multiple products on the market, but Lloyd says your first port of call should be a specialist security consultant who knows the market as well as the products on offer.
This software supports the full cycle of a business’s IT system. It tracks data input and output at each stage of the process and how well that data is being managed. The idea is to expose any holes in the workflow so they can be fixed. If someone is on holiday, for example, they might miss an important message and lose business because of that. This system can pinpoint where the breakdown in communication happened.
Workflow management is an old concept but Lloyd says it hasn’t caught on yet with brokers: “It’s not being extensively used within the broker market but it is something they could well do with paying more attention to.”
He adds: “You need to have the facilities and the technology to know where these things are stored; it’s a combination of hardware and software to trap that intelligently.”
Whichever tools brokers and insurers choose, it’s going to cost them money. But it is always a question of balancing how much the software costs against how much money it will enable you to save.
Lloyd adds that many improvements can be made to brokers’ IT without any cash going out at all. He warns companies against leaping into costly technology purchases without considering how their business is actually working first.
“There’s a lot one can do in terms of saving money, improving efficiency, purely by mapping processes step by step and understanding the interfaces between people.
“I’ve seen savings of between 25-35% without investing in technology.”