Surfing the e-business wave

Feeling slightly weary, the five of us walked across the convention center lobby and sank into chairs. My insurance company was the lead sponsor of a two-day business fair titled “The E-business Revolution” and I had invited four of my brokers as guests. We had listened to the speakers and already toured the product exhibits. Now, I ordered drinks and snacks from the hovering waiter and tossed my jacket on to a spare chair. “Whew!” I sighed, “did you take all that information in?”

Bob Davies, my broker friend who ran a successful midtown brokerage, gave me a wry smile. “Dave, my mind is still spinning with all that talk about the new technology, which is driving new forms of customer relationships, and which are evolving into alternative distribution channels.” He flopped back in his chair, “I think I’m getting a headache”.

“Me too! I’m definitely suffering from information overload!” The voice came from Harry, a suburban broker with a substantial personal lines business. Completing our little half-circle were Al, whose operation in a small town 160 kilometers outside the city was highly automated, and Joanne who ran an efficient all-female brokerage with her partner, Shirley.

“Tell you what, though,” Joanne said, putting her shoulder bag down beside her chair, “there’s one message about our business that’s coming through loud and clear — marketing, technology and distribution are no longer stand-alone disciplines — they are all being squeezed together”. “The term is ‘convergence’, isn’t it?” Al interjected. “It seems to be one of today’s favorite buzzwords. We’re seeing the convergence of marketing, technology and distribution as the electronic world takes over our traditional insurance structure.”

Al loosened his tie, paused in thought and scratched his head. “Seems just like yesterday when we were adapting to the challenge of computerization and advanced technology. Now they’ve touched off a whole new set of changes.”

“You’re right,” Harry groaned. “After hearing all those statistics about the advancing world of e-business, you begin to wonder if we won’t all be dinosaurs in a few years.” He flicked up his fingers as he read from his notes. “About 50% of Canadians say they’re likely to buy auto insurance over the Internet. Almost 60% say they would buy house or tenant coverage over the Internet. In three years, more than 15% of all property and casualty business is expected to be transacted over the net.” He sighed and looked around our group, “is the Internet going to take over our lives?”

I shook my head in sympathy. “Well, there’s not much doubt that the Internet is busy changing our lives, whether we like it or not.” I added, “just look at banking, it used to be we’d all line up inside a branch and deal with a teller. Now, automatic teller machines have put a big dent in that tradition. Personalized bankcards have also changed things. Right now, I’m told, about 10% of Canadians do their banking via the Internet, and I’ve read that another 10% will likely follow them within a year.”

“–Hey! That still leaves most people not banking that way,” Joanne interjected with a laugh. “Didn’t we all just hear the results of an InsurPoll survey that shows almost 80% of our customers have no desire to buy insurance online?”

I glanced down at my notes. “You’re right, Joanne,” I said. “Most people in that survey said that although cost is definitely a big factor in buying insurance, they also want access to the expert advice of professionals, and they’re not at all sure they’re going to get that if they buy insurance online.”

Our drinks and snacks arrived, and after these were distributed it was Bob Davies who spoke up. “You know, people say they won’t buy insurance online — but I also remember reading that story which said consumers feel price is still the biggest single factor that determines which product they buy.” “And…” he added holding up a finger for emphasis on the point he was about to make, “another third put speed and convenience next in line. All of these factors seem to favor the online option.”

Beside him, Al took a handful of peanuts and nodded his head. “I agree. Look, we all know that electronic transactions of any kind cost less than traditional methods. So, if we can successfully link our services to the Internet, we can trim some overhead cost out of our product. The cost of insurance falls and consumers are happy.””The key point in all this,” I spoke up, “is that in the long run, the customer has to be the winner. If we worry about our traditional alliances, or if we try to protect our own turf, we’ll look and sound defensive — and we’ll wind up losing.”

There was a grunt of agreement from Harry. “This whole process has to be a win-win situation. The way I see it, the customer will win because new distribution platforms will not only offer insurance more efficiently, it’ll also be more cost-effective.” “Harry — that’s a win-win for the customer,” Joanne pointed out. “Where’s OUR win-win?” There was a second’s dead silence, so I jumped into the fray. “Glad you asked, Joanne,” I said. “Insurance companies like mine win because now they can really start to make full use of the expensive technology we’ve all invested in. So, our cost structure improves. That’s a big win. And because we become more price-competitive, we can better match the product cost of our competitors who may be using different distribution channels to compete.”

“…like direct writers?” Al growled. I nodded in his direction. “Yes, they’re in there of course. But don’t forget there are other alternative distribution channels which have opened up. Retailers, for example. They see insurance as just another service they can offer to customers who’re shopping in their store anyway.” “Isn’t that what they call ‘brand-building’, Dave?” Bob Davies queried. “When the customer starts to associate one store with more and more of his, or her, needs?” “Yes, it is,” I agreed. “It’s a fundamental of marketing strategy. “And from brand-building comes brand loyalty. The car manufacturers have done it successfully for years. It’s why they all went into car financing years ago. Why let banks or finance companies take that business when you could build brand loyalty through Ford, or GM or Chrysler financing? The same sort of marketing philosophy brought banking services into your local food stores. The customers thought enough of your food store to come and shop — why not cash in on that loyalty by offering another service under your good name? It’s just another way of tying the customer closer to you.”

A waiter set down a round of drinks we had ordered, allowing for a moment of pause as we digested the content of our discussion. Then, Harry posed the next question. “Dave, let me get this straight. In selling any kind of product, the Internet merges both marketing and distribution into one step. Buyers access the website, they see what’s on offer, they absorb the marketing built into the website, they point-and-click to the order form, complete that and type in their credit card number. The transaction’s complete. So here’s my question to you…why wouldn’t companies think seriously about cutting us out of this equation?”

I set my drink down. “Harry, there’s a one-word answer to that question: service. All the slickest convergence, all the simplest point-and-click purchasing in the world can’t substitute for service to consumers when they need it. There’s been a real backlash against the rotten service that many consumers have had through buying via the Internet. Trying to get a quick refund for unsatisfactory merchandise bought through the Internet has turned a lot of buyers off. Fact is, service is still the hallmark of good insurance. One other thing,” I added, “online insurance buying still only offers the simpler coverages like property and auto”.

Bob Davies nodded in agreement and looked across at me. “Speaking of service, Dave. I’m one of your lead brokers who has been offered a dedicated computer linked to your head-office system. On the one hand I’m tempted because I feel it’s a natural step forward f or me.” He paused for a second and frowned, “on the other hand I’m concerned that this may not be the best way for our industry to go”.

At this point, Al sprang back into the debate, “I know what you mean Bob. If every company you represent wanted to install its own dedicated computer in your office, you’d have a roomful of computers each linked to a single company!” Beside me, I heard Joanne’s trademark guffaw. “Okay!” she said with a laugh, “it’s time for the magic phrase, folks, single entry multiple company interface. Tell me, Dave…” she shot me a quizzical look, “are we any closer to actually getting SEMCI up and running?”

It was my turn to give my small group of brokers a wry smile. “Let’s just say…we’re still working on it. Right now, SEMCI is like the promised land for insurance companies, and for brokers too.” There was a groan from Harry. “Such a simple concept, a process that allows an agency like mine to enter and store information one way and one time only, regardless of what that information is subsequently used for — and how often it’s used — within my agency. Then, communicating this information to multiple companies in a standard format.”

“Well, you’ve just put your finger on the big problem!” Joanne remarked. “Trying to get all insurance companies and vendors to dump their pet proprietary systems in favor of a universal system. Most of them probably believe their system is the best one on the market, and the ‘big boys’ probably aren’t too willing to hand over years of work in developing their system to other companies who haven’t reached first-base yet in developing their own concept.” I cleared my throat and looked around at my broker friends. “Well…of course, there’s another problem with SEMCI. Some of the bigger companies who’ve developed their own proprietary broker interface systems are busy working on second generation systems that they hope will be even more effective. When there’s so much corporate motivation to be better than your competitors, it’s well-nigh impossible to calmly hand over technology and systems you feel are the best in the business.” I shook my head, “I know we’d all like to see a seamless interface solution, but I don’t see it happening overnight”.

As I finished talking, Bob Davies leaned over and patted my arm. “I think you’re probably right there, Dave. But you know, brokers like me, and Joanne, and Al and Harry — we all have our own ideas of what we’d like to see incorporated in a SEMCI system.” He set down his glass and leaned forward in his chair. “Call it our broker ‘wish list.’ And here’s my number one wish for a viable SEMCI — that it be easy to use.” He folded his hands in front of his chest as if in prayer. “Please — make it broker friendly, simple and easy to learn. And, bug-free.”

“I’ll second that motion,” Harry said. “And here’s my offering for that SEMCI wish list. It has to have point-of-sale capability, both for policy issuance and servicing.” “Agreed!” Al said quickly. “And let me add this wish to the table, that it have a robust and comprehensive management information capability.” He held up a cautionary finger. “One that’s also secure.” Joanne Newman was nodding her head in agreement. “I’ll buy all of these,” she said, smiling. “And can I put in a wish for a system that will eliminate double-entry and will easily integrate with my present vendor system?”

I picked up my jacket and rose to my feet. “Hey, if it were in my power, you’d have that whole wish list — by tomorrow! And how about comparative quoting for good measure?” “Why not, Dave?” my friend Bob Davies said, as we moved towards the exit. “And now I have one extra wish on my list. I wish I could remember where I parked my car.”