Insurers have never been change-friendly, but to still see underwriters, brokers and claims adjusters hauling piles of paper around the market is just ridiculous. Why is this industry so technophobic? What's the downside of going high-tech? After attending ACORD's London Conference last week, I have a feeling the only thing the insurance industry has to fear is fear itself. If you’re not afraid of your own electronic shadow, read on!
Indeed, with many of the necessary data standards and much of the required technology infrastructure already in place to allow for electronic trading, ingrained traditions and fear of change are now the biggest hurdles facing insurers and brokers looking to go digital, according to experts speaking last week at the ACORD conference.
“Technology is the least of your worries,” said Sue Langley, director of market operations and North America at Lloyd’s of London, during a panel on the future of placing.
“Fear is a big hurdle—the fear that I’m not going to have the same personal relationship with the brokers and underwriters,” she said. “Ideally, you won’t lose that with electronic placing, but you will be able to dispense with the queues for simple changes or endorsements.”
“It’s almost like we’re pausing for breath,” added Paul Jardine, CEO of Catlin Underwriting Agencies Ltd. and chair of the Lloyd’s Market Association. “We’ve got the tech in place, so now we have to win the hearts and minds of the market.”
Mr. Jardine said that it might be time to throw down the gauntlet so progress becomes more of an imperative. “We have targets on contract certainty and claims going electronic, and we may want targets on electronic placing as well,” he added.
Mr. Jardine also cited “commoditization” as one of the “fear factors” holding up progress on electronic trading.
“A bigger challenge is to become more of a portfolio manager and look at the bigger risk picture, rather than the loss of face-to-face contact on smaller risks,” he said. “We need to make sure that when we are deploying expensive talent, it should be where it’s most cost-effectively employed.”
Throughout the conference, the inability to secure senior management support for the implementation of standards and the move to electronic trading was cited by speakers here and in attendee surveys as one of the main challenges facing the market.
“Leadership is a finite resource in any organization,” said Mark Kinsella, chief technology officer at Benfield in the United Kingdom. “You’re constantly competing for the attention and backing of those who exert leadership so standards are made a priority throughout the operation.”
The information technology department and the various business divisions they serve must therefore work together to make a compelling business case for standards implementation as well as electronic-trading, or risk losing budget battles to shorter-term concerns.
“If we don’t get some significant volume being handled electronically soon, it’ll be seen by senior management as a ‘nice to have’ rather than as a ‘have to have’ priority--especially in a softening [property-casualty] market with the pressure on to contain costs to keep profitability up,” said Mr. Jardine.
“We cannot depend on a ‘Field of Dreams’ mentality that if we build it, they will come,” he added. “We need to show the volume to justify the investment.”
Any thoughts on other factors that might be holding up e-trading in insurance?
Comments (4)
What is the average age of the employees at Lloyd's?
If they are like most of the U.S. insurance industry, they probably average 55 and up.
What is the age of the management that is resisting the technology? Insurance is not an industry for the young, and I think the tech mastery in our industry will come when young employees filter through the management positions. (That will be what, 10 more years?)
Our office may be extreme--eight employees, one in his 20s, one in his 40s, one in her 50s, three in their 60s, two in their 70s.
As you can imagine, any new technology initiatives can be very challenging.
Posted by Jared Morgan | October 23, 2007 2:51 PM
Posted on October 23, 2007 14:51
Technology can be very scary, but it is so rewarding when the right systems are implemented.
My agency is completely paperless. All documents are scanned and attached to the client files. We even fax through the computer.
In many cases we have convinced our clients that electronic copies of their policies e-mailed to them are a better way to go than paper copies that are mailed. We even have all of our voice mails come into our e-mail, so we can attach a voice mail as part of a clients file.
Because we do everything possible through our computer system, we are able to help our clients anywhere we are. If one of our employees can't make it into the office, they can log in with their computer and assist our clients.
Unfortunately not all of our insurance carriers are this integrated with technology. Those are the ones that turn most of my office off. It is hard to deal with a carrier that has to put you on hold (or call you back later) so a file can be found and reviewed.
Technology is the way to go and carriers (and agencies) will have to leap forward quickly. If not, clients that are technology savvy will find another agency/carrier to work with.
Posted by Sara Polly | October 24, 2007 11:41 AM
Posted on October 24, 2007 11:41
Consistent and uniform applications would lower some fear on the operator side of things. I realize that this increases the fear of others, who see "their customers" being stolen.
Since purchases and implementations are made by management and higher, the key would be in reaching them and lowering their fears.
Posted by Linda Gerke | October 26, 2007 11:21 AM
Posted on October 26, 2007 11:21
We went through the "glorification" of the electronic age repeatedly over the past 20 years with numerous highly paid IT department heads, each bringing in his own group of "cronies" from past failed experiments.
Each hired masses of costly consultants, purchased equipment that didn't really improve our workflow or productivity, and added to staff so that the IT department equalled the size of all underwriting and claims operations throughout the company.
Massive dollars were expended, and after the last debacle we ended up in the same position we were in at the beginning, alas much poorer.
The entire new IT regime was ousted after about 7 years of huge spending. The upside was we all had fancy new computers and flat screens--though we couldn't use them in the way we needed, as they were so locked down due to poorly handled security, but we had them.
In the interim, we were still working with the old, antiquated programs that we developed 10-to-15 years ago, and shuffling paper, as it was the only way to assure communication needs were met. We could not depend on computers to communicate.
One case in point was providing $2,000 laptops to field personnel, but disabling the wireless feature due to security concerns. Thus they were useless in communicating while in hotels or motels, since most now have wireless (wi-fi) access exclusively, and few have dial-up accessability.
Thus reports could not be generated while in the field, and personnel were continuously late in submitting critical reports, or had to return home or to the office at night to plug in to a secure connection. Instead of fixing and beefing up the security issue, they let this remain a problem for over a year.
The second was disabling Web sites so investigators couldn't gain access to determine exactly what operations were prior to a visit, etc. Distrust of some employees' use of the Internet resulted in locking everyone out of sites that people needed to carry on business, so those requiring access simply used their home computers or didn't bother doing the research necessary, as IT was adamant that they were in control and the top executives stood behind them.
Imagine having to do an accident investigation at a casino and being locked out of their Web site because it is "gambling" related? Or a fire at a company that does lead castings, and finding you can't even search to find their second location on the Internet since they also make lead bullets and that's a forbidden category?
The joke was we were an IT operation with an insurance department!
I don't buy into the "over 55," or over any age for computer literacy. I'm way over 55 and consider myself very computer literate. (Although I can't type well and freely admit that.) In fact, I can even disassemble one and rebuild it if need be.
Maybe that's unusual, but you learn what you need to not only survive but to excel in this business and any other.
If a company wishes to languish by the wayside and not move into new technology to be highly competitive, the others will pass them by. Soon the road will be littered with the bones not of dinosaurs, but of company executives who failed to move into the future and just dried up in the warm sun of those who did...along with the bones of those IT executives who just thought they knew the way to make a company run better, but didn't!
Posted by BJ | October 26, 2007 11:50 AM
Posted on October 26, 2007 11:50