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THE CHALLENGES OF

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“Cost. A comprehensive vision and the will to implement it. Human resources (both

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quantity and quality) to implement the plans. Cost. The challenge of constantly

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changing technology and trying to weigh improvements against the delays they

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can engender. Cost. Cultural resistance. Inertia. Education of front-line troops and

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support troops. Cost. Sorting out the “best” technological solutions from the myriad

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offered. Making different technologies work with each other. Cost.”

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— LIMRA/DELOITTE FUTURE OF TECHNOLOGY SURVEY

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Looking to the future, there is little doubt technology What were the challenges identified by the in-

by MARY M. ART
Associate Scientist,
Technology in Marketing
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will continue to drive efficiencies through all the key surers in getting to the future? A content analysis
insurance distribution channels. However, in getting of the survey results suggests six top challenges in-

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and Distribution
to the point where the full benefit of these effi- surers expect to deal with as they move to the fu-
Research, LIMRA
International ciencies can be realized, carriers face a host of chal- ture. In order of frequency of citation, these chal-

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lenges. To gain an understanding of the specific chal- lenges are:
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lenges that will be encountered, LIMRA and Deloitte • Financial issues
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Consulting conducted The Future of Technology Survey, • Consumer issues

a qualitative email survey with technology personnel, • Organizational issues
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in February 2002. This survey was part of a larger • Technology advances

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paper jointly undertaken by LIMRA and Deloitte, • Producer issues

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entitled Technology and Insurance Distribution — A • Pace of change

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Look to the Future. The following discussion of these challenges, along

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with supporting verbatim statements, addresses

each of these issues independently. However, it is
important to note they are interrelated: Challenges
in one area impact many other areas. As the above
quote indicates, cost is usually part of the challenge

S p r i n g 20 02 • L I M R A ’ s MarketFacts 43
in each step of the process. An organization also needs the
will to respond to change, and the time and commitment of
all segments: company management, company staff, the field
force, and the marketplace. And no vision of the future of the
insurance marketplace will be achieved without the appro-
priate technology to support it.
F INANCIAL ISSUES Given overriding concerns with the
state of the economy and the substantial cost to develop
and maintain technology, it is little surprise that the most fre-
quently cited challenges deal with financial issues. These fi-
nancial challenges focus on three main themes. The first deals
with the magnitude of the finances required. Quite simply,
computer operations are expensive and technology advances
will require major investments. Each major investment will
require a debate within the company itself: Is this the right
technology to take the company into the future, or should the
company wait to see how competitors react, perhaps letting
others take the gamble? If they choose to wait, what will they
sacrifice if they then need to play catch-up? Will the bene-
fits ultimately outweigh the costs, helping the company achieve
an edge in the marketplace?
“Technology platforms are expensive and changing rapidly. These
are big financial and resource investments for companies to make.”
“Moving many of the operational processes to meet real-time
requirements will be extremely expensive and difficult due to the
variety of mainframe systems most companies are using.”
A second financial theme focuses on the need to keep ex-
penses under control. Applying these technological changes and
keeping up with technological advances can be among the
most expensive undertakings insurance companies will face.
Yet, they may invest with only a nebulous feel of their return
on investment (ROI).
“Control expenses while building infrastructure.”
“Allowing for choice of interaction without adding to overall ex-
pense structure.”
This article is based on information from a collaborative project
between LIMRA International and Deloitte Consulting entitled
Technology and Insurance Distribution: A Look to the Future.
Contributions of the project team to this article are acknow-
ledged: Maria V. Dynia, Assistant Scientist, LIMRA International;
Borbala Gergely, Consultant, Deloitte Consulting; Todd A.
Silverhart, Ph.D., Assistant Vice President and Director; and Matt
Smyth, Principal, Deloitte Consulting
44 LIMRA’s MarketFacts • S p r i n g 20 02
Finally, there are financial challenges dealing with ROI. These
challenges involve issues around the need to achieve ROI and
the difficulties in measuring return. Given the scale of these in-
vestments, and the traditional perception of the conservative na-
ture of the insurance industry, the question is raised whether
any company, regardless of size, will feel comfortable investing
in technology without a certain and measurable ROI.
“New technologies like these cost time and money to implement.
Therefore, we need to make sure there is a good ROI for any solu-
tions that we implement.”
“Too many companies have been burned by new technologies which
never translated into the promised savings and /or increases in
sales.”
C ONSUMER ISSUES Anticipating consumer wants and
needs in terms of product and service has been the job of
insurance companies for years. Carriers will now also need
to anticipate the rate at which consumers will adopt new tech-
nology and be ready for them when they get there. It has long
been difficult to project when consumers will want a new
product, but in this time of rapid change, it has become even
more difficult to guess technology adoption rates, and it is
potentially very expensive to judge incorrectly. Erring on ei-
ther side can be costly: Spend too much and never gain a suf-
ficient ROI. Or, spend too little and risk losing clients to a
more progressive competitor. Furthermore, it is now a matter
of determining not only what current markets want today,
but also what the next generation will expect tomorrow.
“Finally, there is the rate of adoption by consumers. Many experts
were predicting billions of dollars of insurance would be sold on-
line by 2002 or 2003. . . . It has become clear that those estimates
were probably somewhat optimistic. Likewise, while technologies
such as XML or imaging can and will provide short-term benefits,
their long-term viability will be determined by the bottom-line re-
sults they deliver. And if the clients show that they do not need or
want these benefits, then we will have likely implemented too
early.”
Carriers also need to remember that technology is already
raising the sales and service expectations of consumers. How
progressive will consumers expect carriers and producers to
be when it comes to technology? Both of these issues will be
major challenges for carriers.
“The customer expectation bar continues to raise exponentially.”
“Ever changing technology environment and client expectations.”
Privacy and security of personal and financial information
has been an issue for some time, and the Internet only in-
creases the concerns of consumers and the challenges to the
industry to offer assurances about their Web sites. Given these ganizational issues arise that strongly affect the success of
concerns, how willing will consumers be to supply the per- the transition. The most often cited organizational challenges
sonal information needed for an online insurance quote or focus on the culture of the organization and the need for a
application? Will smart cards, replete with our personal health new culture to support the technology initiatives, rather than

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information and biometrics such as retina scans, increase or offer resistance to change:

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allay fears? Companies will need to satisfy these concerns
“The I T challenges will be considerable, but realistically, convincing

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before some consumers will transact online.
the operations, marketing, underwriting, etc. areas that their

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“Concerns about privacy will continue to be a challenge as will al- processes should be revamped will be the biggest challenge.”

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laying those concerns.”

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“As expectations from customers and producers increase, in many
The issues around the consumer go beyond attitudes about
areas, simply changing the mindsets of employees and managers
technology. As always, one of the challenges companies will

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will be a challenge.”
face is how technology can enhance the need for and the im-

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portance of insurance in the face of a public that is sometimes
“Large cultural barriers exist among the agent sales force to get

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less than savvy about insurance and investments. Will tech-
them comfortable with using e-mail for client communication,

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nology, for example, enable video instruction from carriers
using the Internet for online collaboration, and interactive e-meet-

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to high school students, or enable consumers to research prod-
ings, and using technology at point-of-sale for e-app/e-signature.”

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ucts and companies so thoroughly that their concerns will be
reduced or eliminated? These technological changes will only be possible when

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companies take a comprehensive look at their business strate-

,
“Continued education of risks that customers face and the very
gies and gain the full support of senior management. Man-
significant impact of the risks if not properly managed, will hope-
agement will have to keep the company focused on the tech-

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fully be incorporated as part of financial awareness courses early
nology goals if these many-phased strategies are to be

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in students’ curriculum.”
implemented successfully.

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Finally, there is the role consumers will be willing to have
“A comprehensive vision and the will to implement it.”
technology play in the purchase process. Acceptance of such

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technologies as electronic signatures, online service, and pa-
“Focus is always a problem. We need to stick to the same general
perless transactions, among others, will determine the return

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path long enough to reap some of the benefits of our technology.”
on the carrier’s investment in certain technologies. In addi-

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tion, while some consumers will prefer to purchase online,

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the speculation now is that the Internet will be, as a pur-
T ECHNOLOGY ADVANCES In some cases, the actual chal-

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chasing source, simply an alternative channel and will ulti- lenge is the need for additional advances in technology
mately attract about as many buyers as have other nonper- before companies can benefit from the efficiencies technology

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sonal means of buying insurance. Producers, however, can and will bring to insurance distribution. Beyond general state-
should utilize technology to enhance their interaction with ments concerning the challenge of making technology simple,

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their own customers. Quicker quotes, faster policy issue, and fast, and reliable, these issues can be categorized into three
online underwriting guidelines will improve the sales process themes: legacy systems, access issues, and the need for pro-

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from the producer’s end as well. ducer-focused systems.
Mention integrating legacy systems to insurance company
“The biggest challenge will be determining what is the best way
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senior management and they envision high costs, thousands
and consumer accepted way of capturing an electronic signature h
of man-hours, and a vast array of often-untested technology
to get paper completely out of the process . . . .”
options. Existing legacy systems have taken years to build and
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the information on these systems needs to be maintained

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“Many companies feel that a major component in our value propo-

while the systems are enhanced or rebuilt to integrate new
sition among affluent individual and small business owner target
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technologies that improve the way information is stored and

markets is the value added long-term trusted relationship that our
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retrieved. Myriad challenges exist within this process alone:

financial adviser provides. We need to convince our producers and
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their clients that technology will be able to add to this relation- “To cost-effectively evolve numerous legacy systems without dis-
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ship rather than detract from it or compete against it.” rupting the enterprise architecture initiative. A new and better
infrastructure is critical for supporting an Internet-enabled model
and for achieving the performance and stability associated with

O RGANIZATIONAL ISSUES Whenever major business in-

vestments are made or new processes implemented, or-
mission critical applications in this space.”

S p r i n g 20 02 • L I M R A ’ s MarketFacts 45
“Moving many of the operational processes to meet real-time re- producers and their staff to make use of technology without
quirements will be extremely expensive and difficult due to the overwhelming them with information or demands on their time:
variety of mainframe systems most companies are utilizing.”
“First, it will be a challenge to teach agents and brokers how to
use these new technologies . . . .”
A second theme deals with technology access issues. These
issues incorporate the challenges in providing connectivity
“Providing the most appropriate equipment will be a challenge and
(i.e. high-speed, affordable, wireless) with a varied audience
providing the training needed will be a challenge.”
using a variety of platforms. There already are different ex-
pectations by those who are using a dial-up modem from a Beyond training there is the willingness of the producer
five-year old computer versus those with a Pentium IV and and field staff to adopt new technology and integrate it into
a DSL connection. How can technology be used to meet the daily sales and service processes. Producers often feel any
needs of the lowest level of technology user while still ap- contact with a client is an opportunity for an additional sale
pearing to offer an online experience that responds to the and may resist any change in a process that has functioned
more sophisticated user, and beyond that, to wireless users? so well for so long. However, many, many producers have
adapted, and new recruits will learn to sell while using tech-
“Backend process speeds need to be improved. At least today there
nology from the beginning.
are significant numbers of producers that may not access the
A continuing challenge for carriers may be to answer the
Internet via a high-speed service; large number still dial.”
producer’s question of “what’s in it for me?” before some pro-
ducers will utilize a new technology. In some cases, however,
“Another challenge will be to provide truly effective access to these
the push may well come from the tech-savvy and expectant
same systems via smaller technology (wireless handhelds and
client, rather than the carrier.
phones) with their limited screen ‘real estate.’”
“To figure out how technology can be a producer’s friend, not com-
In addition, there is the need for systems that meet spe-
petition. To see the real benefits of aggregation to themselves, not
cific producer needs: keeping in touch with the customer and
just the customer.”
the carrier, for example, via email or online chats. There is a
need to alert the producer to contact his or her customer, per-
“From a field manager or agent’s prospective, the integration of
haps due to a major life event or a service request made di-
technology at every level must become an integral part of their
rect to the carrier. Producers also want to be able to easily
business plan. Field reps must accept and take advantage of cus-
access a range of information about their clients, from age
tomer demands to transact business online. This may require that
and income to types of products owned or introduced.
certain products and programs be re-packaged in a way that is
“Having an email system that the agent can use to communicate more suitable for online delivery.”
with customers, with a system for pre-approving the content, could
be beneficial also. It is important for the agent and company to
stay in touch.”
P ACE OF CHANGE The unprecedented technological ad-
vancements that have come to light over the past several
years are not likely to slow down. The change sparked by the
“It will be essential to have software that will notify the agent
rapid developments itself poses challenges for carriers looking
when a ‘service call’ needs to be made or a key event is taking place
to take advantage of the technology. One set of challenges
(annual review, birthday, etc.). The agent needs the ability to in-
emerges simply from the rate at which technology is evolving.
quire into his customer database to prospect and communicate
with customers.” “The challenge of constantly changing technology and trying to
weigh improvements against the delays they can engender.”

P RODUCER ISSUES Despite all the new technology that en-

ables consumer self-service more of the time, the majority
of insurance sales are made through a producer, and research
“Ever changing technology environment and client expectations.”

Surely it is not prudent for companies to implement every

indicates this will not change. However, producers need to
become technologically savvy in order to keep pace with client
needs and expectations. The producer and the agency office
must be tech-ready. This requires someone who understands
how to use the technology — and someone to pay the cost
as well.
One clear challenge noted by survey respondents is training
new development. Given the staggering rate at which new
technologies are introduced, carriers face an additional set of
challenges managing that pace of change:
“Managing the pace of these investments to ensure our producer
technology platform remains competitive.”
The industry itself must also adapt to the pace of change.

46 LIMRA’s MarketFacts • S p r i n g 20 02
For many applications a lag exists between the time when a
technology becomes available and the time when insurance
carriers make sufficient changes in technology to allow them-
selves to realize benefits. The insurance industry has been ac-
cused of moving too slowly in adapting to the Internet: This
is, at least in part, due to the product itself and the culture
that has been built around it.
“While technological advances seem to be announced with an ever-
increasing frequency, their adoption is not always as quick or as as-
sured as the press releases might imply. It will take time for the stan-
dards to be finalized and then to permeate throughout the industry.”
A DDITIONAL CHALLENGES Beyond the issues outlined
above, a few others received lesser attention from survey
respondents, but are no less important to companies facing
them. The majority of the remaining issues are concerned
with changes to business processes, implementation, legal
regulations and compliance, customer relationship management
(CRM), and multichannel issues.
“Business process change is painful,” noted one respon-
dent. Changes to business processes include a wide range of
agenda items. While some clearly would overlap the need for
organizational and technological changes discussed above,
others may involve developing a customer-centric focus or
designing forms and processes that can be used by people
with a range of technological capabilities and on a variety of
devices. Plus, respondents point out that even once the high-
tech process is in place, the parallel manual process will still
need to be maintained for a period of time. And while it is
important to simplify and facilitate the application process,
some parts of the process, such as medical underwriting, may
never be replaceable by technology.
Companies must ask themselves when should they im-
plement new technologies and how quickly can they do so, be-
cause while it is important to maintain a competitive edge,
it is also essential to launch a successful program and plan it
for a time when the needed resources — financial, techno-
logical, and human — are all available. Furthermore, compa-
nies need to carefully choose from among new technologies
because some will inevitably fail, while others will endure.
“We must also get better at ongoing operations. Each major change
creates a new two- or three-month wave of instability.”
Regulatory and compliance issues are nearly always a part
of the insurance industry’s quest for change and growth and
they will play a part in the future of technology as well. Com-
panies are certain that where the consumer is concerned, the
government will see the need for protective legislation. Plus,
some wonder about how organizations such as the NASD and
legislation such as Health Insurance Portability and Ac-
countability Act (HIPAA) will continue to impact the ways in
which information may be provided.
“One challenge is the uncoordinated regulatory environment rela-
tive to the technology environment. Open architecture provides a
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much better substrate for technological innovation to occur. Insur-
ance obviously has state regulatory barriers and, as such, tailored
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solutions must exist that channel specific solutions to different pop-
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ulations of potential clients. The less open a system is, the more likely
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that technology will sputter as it searches for common solutions.”
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Competition with other carriers makes it important to
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keep pace with what others in the insurance industry are doing
as well as what competing financial services companies are
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doing for the consumer and the producer. Some suggest that
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this may be an even greater struggle for smaller companies.
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“Delivering Internet based client functions and services in a timely
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manner vis-à-vis our competitors.”
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CRM initiatives are being talked about in most companies
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and applied in many. One challenge surrounding CRM is simply
understanding the goals to be achieved, while others
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center around successfully implementing it and achieving an ROI.
It is also important to achieve both performance and func-
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tionality while keeping data current, respondents reported.
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“We have more customer information than any other industry but
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we seem to be unwilling or unable to use it. . . .”
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Multichannel issues involve assuring customers a seamless
experience regardless of the channel they choose for each op-
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eration, and in addition, addressing the different needs of and
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creating the value for each distribution channel.
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“Given our commitment to our current distribution, we do not en-
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vision channel conflict between our producers and our alterna-
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tive distribution. But we will need to synchronize information ex-
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change via various interfaces, e.g., the phone/I VR, producers, a Web
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site, a strategic partner.”
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C ONCLUSION It is clear from the challenges cited by
these insurance personnel that overcoming each will
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require considerable planning and foresight, as well as
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an awareness of what each person involved in the process,
whether customer, producer, or home office employee, wants
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and needs. The results of this survey are not surprising, but
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rather reinforce what we know about people, our economy,
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and readiness to change. Financial issues and the level of
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willingness to utilize technology will overshadow the entire
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process. This level of willingness will range from not at all
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interested to a genuine eagerness to explore. Companies
will need to constantly evaluate where their company
management, employees, field people, and markets are on
this continuum. Getting all pieces in sync is perhaps the greatest
challenge.

S p r i n g 20 02 • L I M R A ’ s MarketFacts 47