In the everyday management of business operations, it is easy to get caught up in the details of carrying out job responsibilities and working on projects. After all, that’s what most people are paid for. But owners, executives, principals, and managers also have a special responsibility to look at their operation with a bigger picture view. What’s business as usual today can and does change.
The following five trends are not alarming predictions. In fact, most have been developing to some degree for the last few years. What is more alarming, however, is how little attention these issues are getting in much of the insurance technology press. True, an occasional article here and there or a thoughtful industry paper may touch upon these trends, but not to the degree that anyone, agents in particular, seem to get too concerned about. That’s a shame. Given the typical speed with which some segments of the industry react, some will get left behind and never know what happened.
Trend 1: Hybrid management systems will supplant traditional agency management systems. In a number of articles over the past few years, Sounding Line has discussed the concept of hybrid management systems, an integration platform of sorts that interacts with multiple carrier Web sites as well as providers of third party services.
While vendors will continue to evolve their present respective agency management systems, these systems will become increasingly complex and cumbersome. And while a number of new Web-enabled add-on products and features add significant capability, they still are tied to the basic agency management system.
While much remains to be seen as to how all this pans out, agencies need to be thinking about their technology strategy five to ten years from now — not in a detailed sense, but in general terms. Part of agency management’s job will be to assess the technology strategy, development philosophy, and general corporate culture of today’s automation vendors.
In my opinion, it’s quite likely that some of today’s vendors will be essentially irrelevant to the needs of the more forward-thinking agencies in the not too distant future. In fact, several larger and well-known agencies (JBL&K; Howard, Smith & Hunter; and Seitlin & Company) have already defected from the traditional vendor ranks, having migrated to new, more flexible and accommodating Web-based systems. (see the June 2003 News Notes for more info). There is nothing written in stone to mandate that today’s automation vendors must be in business five to ten years from now. Automation vendors, like all other businesses, must adapt to change to meet customer expectations, demands, and needs. I expect several vendors systems to be discontinued within three years — and maybe even a vendor out of business.
Trend 2: Agents will need to become more Internet savvy and dependent on carrier Web sites as companies "turn off the paper." Here’s a topic that is just beginning to get lots of attention. Instead of going into much detail here, I direct you to the ACT portion of the Big I Web site ()
Act has recently published a report called “Turning off the Paper to Agents; The Key Responsibilities for Each of the Parties”. The report “outlines several steps and safeguards that carriers, agents, and vendors should follow so that these workflow changes work positively” as “carriers provide agents with electronic information and discontinue sending the paper policy information to agents.”
This trend furthers the goal of reducing paper, a long-talked about issue within the industry. Agencies that have implemented paperless strategies should welcome this development. On the other hand, those agencies that have nominally and begrudgingly automated, remain fixated on antiquated paper handing, storage, retrieval, and archiving, and have yet to seriously adapt to an Internet-enabled work environment, will become increasingly handicapped in doing business. For some agencies, heeding the warning now may even be too late.
Trend 3: Outsourcing — in many different forms — will increasingly consume management’s attention. Over the last several years I’ve commented variously about this trend. However, the trend is getting significant coverage in the larger technology press and thoughtful analysis from technology research sources as Gartner, Forrester, ZDNet, and others.
The issue of outsourcing is broad, complex, and multi-dimensional. It’s probably overly simplistic to suggest that the motivation for overseas outsourcing is lowering expenses, but that’s a big factor. In fact, a CNN story reports that the “average computer programmer in India costs $20 per hour in wages and benefits, compared to $65 per hour for an American with a comparable degree and experience.” From a cost point of view, that’s a no-brainer.
India, the leading offshore outsourcing market, is getting competition from Sri Lanka, the Philippines, Russia, China, and several eastern European countries. In 2000, about 27,000 tech jobs went overseas. But according to Forrester Research, if the current pace continues, nearly 472,000 will land overseas by 2015.
But it’s not just IT and software development jobs that are being pushed overseas. Human resources management, customer service, telemarketing, call centers, and other business processes are also moving to countries with a well-educated English-speaking workforce.
So, how might all this affect insurance agents? Several possibilities come to mind. You might write business for technology company clients that use offshore outsourcing. If so, there may be insurance implications. Your agency might use telemarketing and customer service call center services that could move overseas. If so, that might impact the service you and your customers expect. Your system vendor, ASP, other software vendors, and business partners might use offshore outsourcing that could have some bearing on your operations. Microsoft, for example, whose various products are the backbone of the insurance industry, is moving over 2,200 tech support jobs overseas.
While a growing trend, offshore outsourcing is not the “bed of roses” some might have you believe. Often overlooked is computer security in parts of Asia, which some report as abysmal. Others decry the loss of American jobs to low-wage overseas workers. Some express concern about the erosion of American tech dominance and leadership.
Computers and the Internet may have ushered in the global economy, but most purchasers of services probably want to know who’s providing them and where they are coming from.
Trend 4: Technology security will increasingly become more difficult and frustrating, even as most insurance entities remain under-protected. When it comes to technology security, most insurance-related businesses are living on borrowed time. It’s not a question of if a business will suffer a disaster, but when. Worms, viruses, and hacker attacks are on the increase. Hacker attacks as of July 2003 are already twice as many as all of 2002. Some security experts claim that nearly half of the businesses that have suffered a hacker attack don’t even know it.
Despite the potential for nasty things invading a computer system or network from without, most security threats come from within, which raises other issues and different strategies for protection. For example, as pointed out previously in Sounding Line, password security, or lack thereof, is typically the weakest link in an organization’s computer security scheme. Another problem, which is on the rise, is malicious tampering by disgruntled employees. Many agencies would probably like to think they are “one big happy family,” but that’s not always the case.
While technology security should be everyone’s business, management needs to take the lead and visibly champion the issue. Directors and officers of an organization are charged with the serious responsibility of protecting and managing resources. Compromised technology resources can expose an organization to serious financial and legal consequences. While outsourcing technology functions and responsibilities to third parties might seem like an easy solution, management is ultimately responsible.
Trend 5: Agents that remain apathetic about having a credible Web presence will “die on the vine.” True, many agencies still don’t have a Web site and appear to be doing fine, but that’s likely to change simply due to the normal competitive pressures businesses face.
Visibility and credibility are key ingredients in any organization’s marketing efforts. You need to be visible to get noticed. And once you are noticed, you need to make a good impression. A credible Web presence enhances those objectives. Businesses do not have the luxury of controlling their customers’ expectations; rather, businesses need to ascertain customer expectations and devise strategies for meeting them.
In reality, a credible Web presence is not a magic bullet or agency savior. Instead, agents without Web sites will stand out negatively for not having one. In other words, while having an agency Web site won’t “make” an agency, not having one could “break” an agency in the minds of fickle consumers who use all sorts of criteria when deciding who to buy from.
Once the decision to have a web site is made, there’s little point in creating a nominal, marginally useful, and indistinguishable Web site. Even if your agency is well known, your Web site could distance you from the competition, simply because people are motivated by attractive graphics and relevant messages.
In the end, having a credible Web presence or not, is a telling clue about how an agency approaches business in general. From a consumer’s point of view, if an agency can’t be bothered with having a Web site, maybe the agency can’t be bothered with lots of other things that are more crucial in the consumer’s mind. If too many consumers adopt that rationale, an agency without a Web site will lose business to agencies that do. When it’s all said and done, having an effective Web presence is simply part of the admission price for getting into the game.
When it comes to technology security, most insurance-related businesses are living on borrowed time.
© Copyright 2003 by Sound Internet Strategy. All rights reserved
Part of agency management’s job will be to assess the technology strategy, development philosophy, and general corporate culture of today’s automation vendors.
It’s probably overly simplistic to suggest that the motivation for overseas outsourcing is lowering expenses, but that’s a big factor.