Insurance Industry Poised for Growth Through Innovation
New York — While the insurance industry faces challenges over the short and long term—due to a softening market, pricing pressure and increased global competition—there is tremendous opportunity for carriers that pursue growth strategies in addition to cost efficiencies, according to “Global Insurance Industry Outlook – Mid-Year Update 2008,” a report from New York-based Deloitte.
“The insurance industry faces a tremendous challenge as it pursues future growth,” says Rebecca Amoroso, Deloitte’s U.S. insurance leader. “While profitable growth is the key to success in a mature industry such as insurance, it can be prohibitively difficult to achieve through conventional strategies simply because the industry is mature. It is vital that insurance executives take a fresh look at the industry and seek fundamental change at all levels of the organization, from its people strategy to its client and product strategy to its processes and infrastructure.”
The report provides insight about insurance industry trends through a review of critical issues, an examination of core fundamentals and an analysis of underlying factors.
Viewing distribution as a profit, not cost, center that drives differentiation and growth can help insurers achieve success through better alignment with agents and a multi-channeled approach towards marketing. To do so, insurers need to get closer to the consumer and to their producers and distribution partners, according to Deloitte. Many insurers are finding it worthwhile to enhance communications and support for independent agents.
Another place of opportunity is the retirement market. Unlike competitors such as mutual fund companies, it is able to offer “guaranteed” products. Deloitte warns though, in the midst of the rush to serve the financial needs of retirees, insurers also must make sure they continue to create products for, and forge relationships with, younger consumers.
According to Steven Callahan, senior consultant and practice development director with Dallas-based Robert E. Nolan Co. Inc., Generation Y will be entering the workforce en masse, bringing with them their demands for products that have automatic plan features. As an example, the use of social networking, online collaboration and Web conferencing may provide the path for delivering personalized service to this technically adept generation.
Deloitte suggest insurers focus on developing enterprisewide cost-reduction programs and taking advantage of the opportunities offered by offshoring, outsourcing and emerging use of Web and IVR technologies—all the while creating new products and capabilities for service customers in a multi-channel world.
While technology is often a key ingredient in cost-reduction efforts, insurers also are looking to ensure they restrain unnecessary IT expenses. One driver is the cost of maintaining interfaces among multiple legacy systems, which are often the result of a series of acquisitions that have not been fully integrated.
One promising strategy is virtualization or grid computing, where software and data are centralized, moving from PCs to central servers. Zurich North America Commercial initially went through a phase of virtualization to consolidate servers and boost utilization.
“We used virtualization to homogenize our hardware and software environment,” says John Laferriere, head of Global Technology for G-ITO (global IT operations) for Zurich North America Commercial.
The Schaumburg, Ill.-based company then used virtualization in non-production and, subsequently, production environments. “We are currently using virtualized and non-virtualized environments for production,” Laferriere says, adding the company also used virtualization to improve application efficiencies. “We’ll run an application family within a virtual environment.”
New analytics tools such as synthetic data and unstructured text applications add to the already powerful analytics repertoire and create opportunities for both profitability and efficiencies in claims administration, underwriting, marketing and distribution. Companies will have to capture and analyze multiple sources of data—internally from diverse product databases and claims systems and externally from a range of public domain data sources—to develop insights that enable better and more informed decisions.
Find the complete Deloitte report at www.deloitte.com/us/insurance.
Source: Deloitte Touche Tohmatsu and INN archives
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