If you're like me, the Internet seems promising and exciting but also confusing and disconcerting. We're certain the Internet will change everything, but it's not obvious exactly how or when. And in our world of insurance, the Internet picture is murky indeed. Occasional flashes of insight briefly illumine this new landscape but for the most part, we're operating in the dark--or at least in the twilight.
In the coming months, I'm going to shed more light on the subject by offering information and insight that can help you create a sound Internet strategy, find and evaluate relevant resources, and then implement your plan. To get us started, I'm going to introduce some general concepts that can be used to sort through and categorize the burgeoning number of insurance technology offerings.
For the past 30 years, the insurance industry has used computers to reduce expenses by making processing more efficient and by helping insurance professionals become more effective. Insurance companies developed or bought policy, claims, and accounting systems. Agencies migrated from batch service bureaus to mini computers, to PCs, and then to networked PCs for marketing, rating, service, and accounting functions. Once agencies and companies each had their own systems, interface developed to link them--and soon interface networks (IVANS) and interface standards (ACORD) appeared. I call this family of services, vendors, and issues "classic insurance automation."
Classic insurance automation is a mature industry. Today's agency management systems, rating, and so on, are evolutionary developments of product categories created a quarter century ago. Were Rob Thompson, creator of the '70s' Redshaw system, to look at today's offerings, he would see something better but not unfamiliar. The technology has evolved but has not changed dramatically. There have been changes, however. Where we once had scores of vendors, today we have a handful. Where we had significant version-to-version developments in systems, we now have tweaks and fixes. It's a world we've gotten familiar with and understand pretty well. Not much is going to happen to classic insurance automation except perhaps for returning to the service bureau model--in the guise of the Internet-based ASP (application services provider).
Classic insurance automation is focused on two things: automating manual processes and providing tools to insurance professionals. It's done a reasonable job attaining those goals, but it's crucial to notice that the focus has been internal--that is, inside the industry. Interestingly, even with the billions of dollars spent, from the customer's point of view, it's not obvious that all this effort has created better service experiences than were common 25 or even 50 years ago. Where once a customer could walk into a general agency and walk out with a policy (once-and-done), classic insurance automation has made it more difficult in some respects for agencies to provide responsive service. The division of labor between agency and company, the multiple locations of data, processing errors and so on conspire to create sometimes unpleasant and frustrating customer experiences. To a great extent, some insurance companies have increasingly disintermediated willing agencies, making them less important, and thereby disenfranchising the customer.
Classic insurance automation, including agency-company interface, was not intended to directly serve the customer. The customer was to benefit as a by-product of the increased efficiencies of processing and from improved effectiveness of the insurance professional. Classic insurance automation is in-facing--that is, it is intended to directly serve the industry, not its customers. No matter what anyone says about extending classic insurance automation out to customers, it will always be essentially in-facing.
It's understandable that classic insurance automation is in-facing. In the past, customers expected intermediaries--who had access to knowledge and technology--to serve them. They did not expect to serve themselves. But the Internet is rapidly changing consumers' expectations. More and more in the larger world, consumers can handle their own sales and service needs, for instance, transacting stock trades, bank transfers, and airline ticket purchases, thus bypassing professional intermediaries.
Not long ago there was talk of far-reaching disintermediation. Professional intermediaries--whether brokers, insurance agents, or travel agents--would become superfluous. I don't think complete disintermediation in insurance is likely soon--for all kinds of reasons. A minority of the population will be comfortable with disintermediated insurance buying but most won't. On the other hand, a large number will be comfortable with and perhaps demand (partially) disintermediated insurance service.
So it's the service area we need to pay the most attention to. Increasingly, consumers of financial services are being provided Internet access to account information and transaction initiation. They can help themselves directly in ways they never could before. And though consumers still want someone to talk to or see in certain circumstances, they're pleased to have more convenient control over their affairs.
These new Internet-based, self-directed service and sales capabilities are out-facing and conceptually quite different from classic in-facing automation. Out-facing services are intended for the direct use of the customer, not the insurance professional. The trend toward out-facing services in insurance is an instance of the much larger economic and social movement to self-service.
Not surprisingly, the really interesting ferment in technology in general and insurance in particular is in creating and implementing successful out-facing services through the Internet. Even before the Internet, there were fits and starts at using technology to provide out-facing insurance services, but they weren't practical. Now, with the Internet, the technology is practical and practicable, and hundreds of vendors and insurance companies are providing modules that agents can use in their out-facing Web sites.
But this plethora of possibilities brings with it certain problems. How does an agent create a strategy for out-facing services? What available modules are relevant and how can they be evaluated? How can an out-facing Web site be put together, hosted, and maintained? How does the out-facing site interact with existing, classic in-facing automation--whether in the agency or at the company?
The financial services industry, in general, is establishing and improving out-facing services Web sites at a rapid pace. Some insurance companies and agencies have begun or are eager to do so. And hundreds of vendors believe they have something relevant to offer. But do you as an independent agent really need to do anything about out-facing services? Haven't you struggled with classic, in-facing services for years and spent more money than you would care to count? With dot-com direct insurance sales seeming much less of a threat, can't you relax for a while? Isn't a brochure Web site plenty? And isn't all this talk about out-facing services and the Internet just another scam to remove money from your wallet?
Why, in short, should you put any effort into out-facing services? There are some good reasons: because it's what your customers (will soon) want; because it can make your agency more efficient--more customers with the same staff; because you need to find ways to provide more value to your customers and to distinguish yourself from the competition--wherever it comes from; and because you want to create a modern identity for your agency--so you can attract and retain customers and staff. Fortunately, providing out-facing services can be a step-by-step evolutionary process. It need not take much time or cost much money to be rewarding.
To review. In order to make sense out of the convergence of the Internet and insurance, it's enormously useful to distinguish two different ways technology can be used for insurance: in-facing services and out-facing services. The former are provided to insurance professionals through classic insurance automation and generally don't have much to do with the Internet. The latter are provided through the Internet to insurance consumers and allow them to help themselves.
Practically speaking, the real challenge of the Internet for independent agents isn't disintermediation but rather finding ways to use the Internet to re-intermediate. One clear strategy is to provide appropriate out-facing services that deliver additional value. Hundreds of vendors want to help you do that.
Out-facing services are likely to be most effective when offered as part of an agency service package, not as some dot-coms have thought, detached from any traditional face-to-face professional support. You've digested in-facing, classic insurance automation. Now it's time to begin to understand and then implement out-facing services through your Web site. In future columns, I'll outline how you can develop a practical Web strategy, find and evaluate the pieces you need, and get the job done. *
The author
John Ashenhurst is president of Sound Internet Strategy, publisher of "Sounding Line," a monthly newsletter that focuses on insurance and the Internet. Ashenhurst has created and written about insurance technology since 1975. For more information, visit the "Sounding Line" Web site (www.soundingline.com).