The Best of Both Worlds.

Insurers need not abandon traditional business models to gain a foothold on the Internet. They can phase in online offerings based on demand.

If the fear of disintermediating brokers is keeping insurers from seeing how they should be using Internet technology to support their brokers, they may be missing the bigger picture. Insurers instead should be concerned with how their competitors are using technology to acquire market share and make it easier for their business partners to succeed. The relationship between agents and insureds who buy policies online is just one aspect of the business that insurers should be reviewing. The key challenge in this new business environment is to identify which tasks, markets and products can be Web-enabled so the human sales organization can focus on more complex, higher-margin business.

Insurers don't have to abandon traditional "bricks-and-mortar" business in favor of a pure online venture or jump with both feet into uncharted territory. Instead, they can focus on striking the right balance between the online and offline worlds, which will allow them to phase in operations according to demand. The competitive advantage is embedded in the fact that they are established bricks-and-mortar companies. Insurers should take the opportunity to leverage core assets with Internet technology to become one of the industry's most sustainable new-economy success stories.

When developing an e-commerce strategy, insurers must answer the hard questions first. They need to think about the future, the business model and its organizational impact. An e-commerce strategy encompasses a plan that is both business and technology oriented. This is a difficult process.

First, look at the primary Internet business models for the insurance industry--portal, storefront and extended value chain. These models offer research content, multiple price quotes, instant service and, in many cases, breadth of products beyond insurance.

If an insurer wants to enhance its brand image, provide other value-added services and market only its products, a portal model may make sense. A portal offers the insured a one-stop financial-services mall, where several needs and questions can be resolved.

A storefront is transaction-focused. It provides a simple one-to-one buyer/seller relationship online. Finally, an extended value chain allows insurers to improve and innovate internal processes for all participants in the value chain--insureds, agents, underwriters, partners and others--to lower product- and service-delivery costs.

To create a breakthrough business model for a new enterprise, insurers may need to apply more than one or all of the primary Internet models to support different areas of their business. For example, an extended net portal business model is a hybrid designed to drive up volume and leverage online capabilities throughout the entire value chain.

The portal component provides a starting point or anchor site for the agent or insured community connecting to the Web. It captures "eyeballs," yielding opportunities for additional premiums while enabling cross-selling of other products or services. Extended value-chain elements streamline activities such as application processing, underwriting and premium billing as it gives the insured the choice to interact online and offline. Storefront functionality generates quotes and accepts online applications that can be initially forwarded to the agent and later sold directly to the consumer.

The extended net portal supports varying degrees of direct and indirect sales and service channels, provides added value to both the agent and the insured while balancing potential channel conflict and allows a phased approach to e-transformation--from agent empowerment to insured self-service support to longer-term "build-your-own policy" direct sales functionality.

Because any business model implies a complex set of decisions in subsequent stages, organization excellence ultimately will be achieved by aligning business and technology throughout the enterprise. Gone are the days when participating in the new economy simply meant hanging up a shingle on the Web. Today, successful companies will be those that recognize the Internet for its true value: not simply a new distribution channel or customer touch-point, but a strategic tool that touches every aspect of the enterprise--both on the Internet and in the real world.

Faisal Hoque is chairman and chief executive officer of enamics Inc., a technology consulting company based in Stamford, Conn.