Act Two, Scene 1.
Leading insurance executives are addressing the need to have an electronic-commerce strategy and rapidly move beyond "brochure ware" on their Web sites. While the insurance industry has been lagging other financial-services players and e-business start-ups, there is now a sense of urgency and an appreciation for the importance of addressing the "e-insurance revolution."
The issue today is what specific strategy individual insurers should follow and how best to quickly implement it in a rapidly evolving environment with new rules.
Insurers need to learn through a well-orchestrated approach that involves developing and continually refining a game plan; aligning the organization to address e-business opportunities; establishing an effective technology architecture to build the infrastructure; and investing in attractive emerging Internet-based business models.
There's been a tendency to develop e-business as a discrete portion of a company's business strategy. Many organizations are forming high-level e-business strategy teams to establish a corporate strategy as well as encouraging each business unit to develop its own. The more successful efforts include executives, technology architects, experienced e-business builders and strategists from inside and outside the organization.
The Internet demands that insurers create and revise e-business strategies at least every six months to respond to changing conditions; understand competitively what Internet-based insurance start-ups, technology suppliers and the venture capital community are doing; and use strategic alliances with service and technology firms to rapidly deliver capabilities in a shifting environment.
There are few proven business models for the Internet. Therefore a strategic approach that is founded on core operating principals but is flexible and builds upon rapidly gained experience is often the best solution.
Most insurers have their e-business efforts run by information technology and/or marketing functions, which results in limited focus and resources committed. More innovative insurers are putting their top executives with an entrepreneurial bent in charge of their e-business strategy and implementation. Leading-edge companies are using an "incubator" entity to separate the building of new e-businesses from Internet-enabling business processes.
Those insurers who are content to "wait and see" what happens will rapidly find their ability to compete diminished. Having the organizational will to pursue e-businesses is a minimum requirement. But finding and keeping the key resources to pursue e-business is increasingly difficult. There is a limited supply of talent, and this talent is being offered attractive entrepreneurial opportunities by both established and new dot-com companies.
Legacy systems present a great challenge for insurers in light of e-technology needs. Most insurers have begun to build their Web technology capabilities, but they are doing so on a piecemeal basis with each business unit pursuing approaches that frequently are incompatible. This creates it's own set of problems involving enterprise application integration. It can create points of contention that will, at the very least, delay the delivery of the insurer's Web strategy. A cohesive technical architecture provides a blueprint for the development of Web-based technologies throughout the organization and can enable business process re-engineering, using the technical architecture to deliver new efficiencies. The selection of modular core applications provides the greatest flexibility for future and the fastest time-to-market delivery.
Building quality Web sites that incorporate the full scope of insurers' activities is a significant investment and, for many, often encompasses much of the information-technology budget. The returns are even more complicated to project. Usually an insurer's business case initially revolves around cost savings for delivering services to end users and agents or distributors. In general, it is harder to justify the investments based upon increasing revenues because direct insurance sales via the Internet tend to be limited and the ability to track ultimate sales from Internet shopping activities is complex.
But the impact on shareholder value is significant. Companies implementing a clear e-business strategy, in general, are being rewarded handsomely by the stock market with 15% to 20% gains. Investments in dot-com entities also are providing significant returns for more aggressive e-business players that are willing to get past the initial negative earnings impact. Leading insurers are utilizing venture capital investment vehicles to gain insights, a foothold and attractive returns in emerging insurance dot-com companies.
Steven Landberg, a Best's Review columnist, is a principal of Nextera Interactive, New York.
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|Date:||Jan 1, 2000|
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