Glimpsing the future: emerging technologies bring insurers a competitive advantage.

The combination of equity exposures, catastrophic losses and the need for reserve strengthening--on top of underlying infrastructural challenges--are causing a turbulent ride into an uncertain future for many carriers. Yet, despite this turmoil, some insurers are significantly outperforming others.

These high-performers seek new technologies that can provide a competitive edge, enabling superior financial performance through boom and bust cycles. They focus on building long-term strategic advantages rather than investing aggressively when the market is strong and summarily cutting programs when the economy and pricing environments weaken.

The next wave of such innovations is on the horizon. While e-commerce and the Internet enable everyone to be interconnected, emerging technologies such as radio frequency identification, sensors and wireless networks will combine to give the Internet eyes and ears--eventually bringing everything online. This vision, which Accenture calls "Reality Online," portends dramatic change and tremendous opportunity for profitable growth and efficiency within the next five years.

Radio frequency identification, which uses wireless, electronic, radio frequency communications to label and identify objects, advances the concept of the bar code significantly. It can be used to store an object's unique identification and attributes and more complex data.

Sensors collect and communicate valuable information about their environment over the rapidly growing wireless-network infrastructure. A network of sensors can then communicate with each other, build consensus on changing conditions and trigger action when appropriate. Wireless networks are central to the emerging instant-response environment as they enable people to be online and be connected all the time.

The implications of Reality Online for insurers are provocative and far-reaching. Here are some examples of how the industry might be transformed:

* More accurate pricing and reduced risk: Imagine a real-time pricing structure that could accurately assess risk at any given time and price coverage accordingly. For example, retailers' policies could fluctuate based on inventories, with surcharges added for items more prone to theft.

* Process efficiency, from new policy application to settlement: A life insurance applicant could share an online medical history to expedite approval and coverage. A property insurer could verify the location of a warehouse and determine how close it is to a fire station or even list items currently in storage. Details of an auto claim, from the time of a theft and means of entry, to road conditions and speed at the time of an accident could be collected and reported.

* Loss prevention: A worker's clothes fitted with radio frequency identification tags could prevent him from entering a restricted area without necessary safety equipment. Sensors could monitor the "health" of insured property, helping to identify potential losses before they happen. Examples include a boiler that is malfunctioning and requires servicing, or a bearing that is worn down and needs replacement before a total loss occurs. Having objects that can communicate and systems that can respond can add unprecedented layers of safety and protection.

* Better customer service and more relevant products: As customers come to expect immediate responses to their questions, insurance companies can leverage the wealth of available information to provide targeted answers and offer personalized, value-added products and services. Examples include the use of a camera phone to file claims faster or to build a detailed home inventory of insured items.

* Information brokerage: As customers begin to share more information with their insurance companies (driving details, home inventories, claims pictures), insurers equipped with this knowledge and the systems to leverage it can broaden their services into the realm of information broker. As consumers try to find the happy medium between tailored offerings and invasion of privacy, they may welcome a trusted broker to help them decide what insights to share and with whom.

Leading insurance companies--and tomorrow's highest performers--are developing their own vision and gaining an early perspective on how emerging technologies may help them lead the market. Their competitors will be challenged to react to the innovations introduced by these companies. Insurers that ignore or simply fail to recognize the coming evolution in new technology applications will be more vulnerable to the next downward cycle, and will diminish their chances to capture and capitalize on new opportunities for growth, value creation and sustainable high performance.

Glenn A. Sieber is the global managing partner of Accenture's insurance group. He can be reached at [e-mail].