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New technology always reshapes the way we
interact, creating new expectations and new business paradigms.
Survival and success is for the fittest and fastest to
embrace it.
At the beginning of the 20th Century, it
took three months to ship mail and goods from California
to Europe and international telegram services - the only
alternative to surface mail - were prohibitively expensive.
The advent of air travel changed the paradigm.
Now, at the beginning of the 21st Century, the speed of communications
has been completely transformed by ground breaking technologies:
the Internet, web services, XML, and others. Yet many business
models reflect their 19th or 20th century origins. These
outdated models will not endure in an eBusiness-based economy
that is providing opportunities for the creation of new
global forces, including new marketplaces, partnerships
and competition.
An industry facing challenges...
requiring new business strategies
Proactive global financial services companies are moving beyond their traditional business models to respond to the challenges presented
by the eBusiness-based economy:
- Competition - driving industry convergence,
consolidation, new entrants, and value chain decomposition.
- Globalization and Business Environment -
pushing firms to increase efficiencies, create new partnerships,
process transactions faster and globalize.
- Customer Demands - calling for process integration,
choice, ease of access, and direct access to information.
- Technology -
finding the right combination of technologies to respond
to these challenges.
These compelling industry statistics highlight
the need for a change in business strategy:
- 70% of P&C Claims require 4-6 handoffs; 48% take
three weeks to process. (Forrester)
- 75% of the total P&C
claims costs are losses and loss adjustment expenses, which
are increasing. (Forrester)
- Internet importance for insurance
will grow as customers increase use and experience of online
banking and Internet sales of other financial and consumer
products. (LOMA)
- Reinsurance systems integration costs
could be decreased by 60-70% using industry standards and
shared services. (Baine)
- Sales of Life insurance policies
have declined over the past 10 years, while acquisition
costs eat up almost half of each premium dollar. (Forrester)
- Insurance companies could save 10-15% annually per policy
by integrating the Internet into their sales and administrative
processes. (Morgan Stanley Dean Witter)
- New business operations
and application development expenses per written application
increased in 1999 by 137% from $158 in 1996 to $374 in
1999 for life and 170% from $57 in 1996 to $154 in 1999
for annuity. (TCi Research)
- Insurers' planned technology
investments in agent automation will not increase sales
or profits because it will not fix broken business processes
(Forrester) that:
- Create underwriting bottlenecks
fail to enforce industry data standards, but use proprietary standards instead
don't allow life insurers to reach new markets
In this technologically demanding economy
it is more important than ever to respond to the challenges
that face our industry - What
business strategies are our industry leaders pursuing?
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