Insurance Without Frontiers

The year is 2020.While getting ready to head out on summer vacation tomorrow morning, Mr. Convenience suddenly remembered that the hovercraft was still insured for storage. Being 2 o’- clock in the morning, he decided to contact his insurance broker.

“Computer, Program, Insurance,” he says into his handheld personal device. “Subject, Hovercraft.”

After a brief pause, an automated voice replies: “Connected to database of John Smith Agencies of Springfield. Your transaction request?”

“Amend coverage on hovercraft to active.”

Another brief pause. “Transaction complete,” the automated voice announces. “A confirmation has been sent to your personal device. Coverage has been added based on your account instructions.”

For those of you in the insurance business who are still handling requests with the aid of printed CSIO applications, this scenario probably appears far-fetched. But the technology to do this already exists: your cell phone already takes your voice commands, and the soon-to-be-released Microsoft Natal recognizes your voice, face and movements.

A device could be programmed to ask what you need and take your commands and process them as if you typed them on a keyboard. This device in your home could be used to search recipes in the kitchen, find car parts while working in the garage, call the fire department if there was smoke, access company Web sites or databases to place orders or simply find information.

Once the world accepts a newer, easier way to handle a transaction, there is no turning back. When my mother convinced my Dad to buy an automatic washing machine, she never again washed clothes by hand. She didn’t have to understand how the machine worked, she just knew it saved time and energy — her time and energy.

In the example above of life in 2020, the automatic transaction in this scenario didn’t just happen without any preparation. Mr. Convenience has a good insurance broker who established his accounts properly and gave his clients good advice along the way. When he first introduced himself to the broker, Mr. C. was calling to see about coverage on his new home. The broker, call him Mr. Smith, suggested they review his needs. They spent a few minutes exploring options and discussing what Mr C. wanted from his insurance program. They talked about what deductible he was comfortable with on his vehicles and home; what form of coverage he felt had the best balance of price and coverage and how he wanted his account operated.

The operation of Mr. C.’s account was perhaps the most important part of their conversation. The discussion involved:

• payment method;

• contact method;

• access codes;

• where to find specific account information;

• the name and contact points for his assigned broker; and

• where to find general insurance information.

When he got off the phone, Mr C. used the text message he received confirming all the details to enter codes and passwords in his home computer system, allowing him to access his file whenever and however he wanted. His needs were known, his broker had given his best advice and now he didn’t have to worry about it. If he needed to make a change or wanted to ask a question, he knew how. Access was 24/7, as he had requested. He could call his broker, send an email, send a text message or he could access the account himself and make his own change.

The Technological Revolution happening today rivals the Industrial Revolution; it will transform the way we live and work. Traditionally, the insurance industry is among the last to adopt new technology, but today the insurance business has some pretty tech savvy participants. If insurance clients see transactions are easier and faster, that’s what they will want — just like my Mom wanted that washing machine. How many companies are left selling wringer washers?

Up to now, many broker management systems have been used as little more than accounting systems to figure out how much to pay insurers and for renewal lists. Efforts to bring about SEMCI (single-entry, multi-company interface) haven’t advanced much in 20 years. Each company uses its own portal for brokers to access their systems; lots of brokers and insurers still print documents and mail them to each other, even though the technology to send these same materials by electronic means has existed for a long time.

The excuse not to move forward with technology — i. e. because insurance is a mysterious, personal business about which the average consumer has no idea and therefore must seek out professional help on every decision — is ludicrous. Consumers now book their own travel, so much so that travel agents are disappearing before our eyes. Online stockbrokers are dominating that industry; what isn’t online is being done through the banks. If you had asked stockbrokers about this 20 years ago, they would have said the process of researching companies and trading stocks would be outside the capabilities of the average consumer; that banks were incapable of providing the level of expertise required. Boy, were they wrong!

The consumer of 2020 will be a lot like the GenY customers of today. That’s because they will be the decision makers in 2020. The Baby Boom will be largely irrelevant; offices will be run by staff members who, today, seem impossible to motivate. The majority of consumers in 2020 will be those who are among the most demanding and knowledgeable right now. This is of course assuming that brokers will be able to keep clients happy until 2020!

Here’s a profile of the consumer you are starting to see now. They:

• have more active lifestyles. They don’t have time to come to your office;

• live in a global 24/7 environment. They are not restrained by where they are or what time it is;

• are comfortable with technology and expect to use it; • will buy online, but only if the online ordering technology is easy for them to use;

• are not responsive to traditional marketing. For example, they use the National Do Not Call Registry and TIVO — digital video recording that allows subscribers to select programming of their choice, at the time of their choice (i. e. bypassing traditional advertising);

• made 31 billion searches on Google last month;

• have hundreds of on-line “friends” to ask if they need help; and

• expect you to be an environmentally sustainable company and don’t want the paper copy.

The switch to adoption of new business methods is not going to be easy for the average broker. Most brokers have used technology to reduce the amount of contact with their clients, and the opposite of this strategy will be required. Every administrative duty will need to be looked at for effectiveness; the extra time automation frees up should be spent creating a better relationship with the client.

To be successful a broker will have to:

• keep Web site content fresh and useful;

• use blogs and forums to allow clients to interact;

• develop a social network for staff;

• create efficient processes for simple transactions;

• hire and train brokerage staff members who have a thirst for knowledge, willingness to embrace technology and a desire to communicate effectively; and

• work together with other brokers on joint initiatives to share the cost of new technology and to create new products and brands that will move them toward the future.

All of the direct writers and a few independents are taking these actions now, investing heavily in the future. There is ample evidence that 60% of Canadians will choose to buy direct in the near future. Independent brokers will fight hard for the remaining 40%.

Brokers who are still using the insurance technology equivalent of a wringer washer may find themselves at a distinct disadvantage to both direct writers and independents that are selling with the automatic m odel.