Timing Is Everything In Insurers E-commerce Efforts
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There should be little doubt that the Internet is starting to play a major role in the way insurers transact business. Over the last 10 years, the Internet has grown significantly faster than all other distribution channels and this growth is accelerating.
Overall, the Life and Property-Casualty insurance market has grown at almost 5% per year, however distribution via the Internet is growing by over 22% annually.
This growth is evident in the estimated 27 million consumers who have shopped online for auto insurance over the last two years. Of those consumers, more than 21 million were researching and requesting quotes.
Clearly, e-business is a strategic inevitability that insurers will need to deal with over the long-term. The fundamental question is not whether an insurer should invest in e-business infrastructure, but rather the timing, magnitude and prioritization of those investments.
The primary guiding principle used to leverage resource allocation should be the value potential of these investments.
In spite of the notable increase in online interactions, insurers have had varying degrees of investment appetite and incorporation of strategic intent for e-business strategies. Aggressive investors followed the exuberance of the initial e-business explosion and spent millions of dollars developing infrastructure and functionality. This rush to build out capabilities was driven by the belief that there were first mover advantages, and by an aggressive estimate of how significant e-business would be in the near-term.
Conservative adapters only put the minimum investment into e-business capabilities. It was their belief that consumers would never adopt e-business distribution and services, or that they would be very slow to do so. These insurers believed that they had a significant lead time in which to transform their information technology infrastructure.
The remaining insurers were perplexed. They believed that e-business distribution and services would become an important tool, but they did not know where to start investing.
Given the uncertainties around the speed and size of these changes, many have not understood what to invest in first, and according to what prioritization.
We have identified a potential action plan for each of the varying approaches and will highlight a value driven framework to drive their efforts going forward.
Aggressive: Those who embraced e-business and built complex functionality within the first few years of the new era have established a presence, but now need to reassess their core capabilities.
While many of these companies were premature in releasing large-scale rollouts, these insurers will need to continue their investments to integrate these capabilities into their core legacy infrastructures.
Conservative: Although original projections of e-business growth may have been optimistic, these insurers must acknowledge that over the next 10 years they will need to have the ability to provide products and services via the Internet in order to compete.
