Learning by example. (E-Fusion Conference: Retail; Technology).

Insurers have much to learn from businesses in retailing, services and manufacturing as they grapple with the insurance industry's own peculiar version of the supply chain--the string of buying and selling relationships by which products move to market.

But before an insurer can begin to address the supply chain, it must decide how it wants to position itself as a market leader. That decision will determine what processes are targeted for overhaul, and what technological fixes come into play.

Matthew Flanagan, executive vice president and chief marketing officer of GRX Technologies, cited a book titled The Discipline of Market Leaders as outlining three routes to market leadership: customer intimacy, pursued by the likes of FedEx and Nordstrom; operational excellence, exemplified by Wal-Mart and McDonald's; and product leadership, demonstrated by companies such as 3M and Sony.

Kaj Ahlmann, chairman of the online reinsurance exchange Inreon and founder of a new reinsurer, Six Sigma Re, also reached outside the insurance industry for examples of companies that constantly examine their supply chains. Caterpillar, the construction equipment manufacturer, took its well-developed capacity to speed parts to remote locations--and turned it into a profit center by selling the service to Land Rover.

For a product leader, the question becomes, "What new and innovative products are you going to be delivering?" Flanagan said. Operational excellence--in which a company seeks to become a low-cost provider--entails designing processes to meet that end. Whatever the aim, he said, revamping supply chains "requires intense collaboration" between companies.

Ahlmann said that insurers remain reluctant to surrender any part of their process--distribution, manufacturing or underwriting--by means such as outsourcing. At the same time, the industry has gone through mergers and acquisitions that brought together multiple supply chains without ever rationalizing them, Ahlmann said.

Insurance also differs from many other industries in the complexity of its supply chain, especially in commercial lines, Flanagan noted, pointing out that almost every participant along the chain--insurer, broker and reinsurer--is both buyer and seller.

While GRX digs into the processes companies use and seeks ways to improve them, Ahlmann's Inreon takes a very different tack, positioning itself as a true exchange and never touching the systems of any of its members.

Ultimately, he said, customers will drive change in the supply chain, with technology as the enabler.

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