The insurance market is changing and patterns are emerging which must be considered for the future. Direct writers have firmly established themselves and it is clear that mergers will continue. There are also more subtle developments, such as the consolidation of certain brokers to form local networks in order to compete with national broking houses. New players will continue to emerge, challenging the industry to accommodate them and they will quickly be able to compete. More people and organisations will be supplying, and have access to, a wide range of data available through the internet and this will be collected and used to commercial advantage.
The internet will accelerate the number of opportunities for creative ways of doing business: the need to respond to such opportunities quickly will be heightened.
The global reach of the internet should not be underestimated – it brings a new range of opportunities and challenges. Providing good levels of service to customers in different territories, where varying legal jurisdictions and considerations apply is difficult. Insurance industry players may find themselves under threat from competitors located in lower cost areas of the world.
What can we make electronic?
The web is moving customer relationships closer to a one-to-one level. Whereas traditional product marketing centres on creating a product and selling as many units as possible, the one-to-one approach is to build relationships with customers, work out what they want and then sell those goods and services directly to them. This leads to increased customer loyalty and, in effect, it is not the market share that is measured, but the share of customer. The way in which web technology can personalise content and capture information, makes the web ideal for this one-to-one approach.
The issues specific to insurance fall into two separate and familiar categories: underwriting and claims. Underwriting lends itself more easily to a web approach because the web allows fast and easy comparison between products. Price will often be the differentiator. Claims handling issues are more difficult to resolve using the web alone. The web can facilitate quick and efficient receipt of claims notification, and if that claim is to be paid in full then efficient back end processing can follow, with the policyholder's bank account even being credited directly if required. That may be the process for some claims in the future, but other claims will need varying degrees of investigation or verification.
Looking at settlement processes from beginning to end reveals possible weaknesses in supply chains. Traditional communication methods have proved to be workable in such chains, but trying to replace them with end-to-end web solutions will not be easy. If one part of the supply chain breaks down, the benefits created by this approach will be lost. Customer goodwill could diminish, for example, if goods fail to arrive.
We as loss adjusters need to examine where our strengths lie and what unique value we add to claims handling. At the same time, we need to predict ways in which the insurance industry may change. Arguably, our key strength is knowledge of loss mitigation gained through experience. The web may well increase the speed with which information can be relayed but it is difficult to imagine how the need for site visits may be solved by the web, at least in the near future.
Another current strength lies in supply management. Using web technologies for a wide range of clients being serviced by a wide range of suppliers may require a significant investment in infrastructure and support mechanisms. There may be no choice if we see this as a strength on which we should build.
Existing business models will have to be recalculated in view of the way the web is likely to drive prices down. There may well be issues regarding the economics of several competing firms of adjusters, each having separate representation in the same geographical locations. Possibly, there will be a time when more mergers of adjusters will be inevitable.
Many clients will utilise the web to browse data relating to their own customers. Access to data via the web will become an expected feature but the data has to be accurate and available as early as possible. This will become a measure of quality and adjusters able to provide such data will be well positioned.
Much attention is given to selling directly to customers over the web, but significant benefits can be seen in supply chain management and it is the business-to-business marketplace where the success of the web will be judged. Benefits of the web are numerous, but the state of readiness to take full advantage of what it will ultimately offer is probably overstated. In common with all industries, the insurance industry will inevitably face further changes, and those changes will now be accelerated because of the catalyst called ebusiness.
This article is extracted from the author's full paper ‘How will the Internet change the insurance industry?'