Recent surveys investigating the uptake of e-business in the insurance industry have painted a mixed picture. Figures published in one report show that consumers have embraced online financial services faster than any other. While a second survey revealed that the industry is suffering from a serious case of navel-gazing, focusing on its own needs rather than customers' and business partners' priorities.
Positive news came in the shape of the Embracing Technology report published earlier this month by Mori and Internet bank Egg, which showed that consumer Internet usage had matured significantly, particularly with regard to managing their finances online. It found that of the 22 million Internet users in the UK, about 34%, had either bought or applied for a financial product online. One of the most popular products was insurance, which had been bought by about 17% of Internet users.
But findings from a report published last week by IT consultancy firm Cap Gemini Ernst & Young revealed that most insurance companies are deeply disappointed with the take-up of online services by both customers and business partners, known as intermediaries.
The report showed that both customer and partner usage of online channels fell well short of expectations. In the survey, which looked at the use of technology in 120 financial services firms in 13 countries, 100% of UK respondents admitted that customer use of online channels had been lower than anticipated. This had meant that the anticipated cost savings from e-business initiatives had not materialised.
According to Jonathan Charley, financial services analyst with Cap Gemini Ernst & Young, although it was clear that expectations had been set too high, a closer scrutiny of the research revealed that initial online offerings had not appealed to either customers or business partners.
With an increasing maturity of Internet users, complex Web sites and sluggish response times for online queries were driving customers away. Responses to the survey showed that about 40% of UK insurers were taking more than eight hours to respond to an e-mail query. "With many of these sites, it's a lot quicker to pick up the phone rather than to go through numerous Web screens," Charley said.
Kevin Paterson, head of transformation and e-business at management consultancy Winchester White, said user convenience was central to the success of an online initiative. "It's often easier to pick up the phone.
"The investment has definitely gone in but a lot of expectations were set at board level and the business case was generally based on volume. People thought, 'If we spend this amount on technology, we will reduce our per-unit cost.' But the volumes were just not there because [these channels] weren't convenient," he said.
"Technology isn't a solution - it's an enabler. Companies have got to start looking at it from a wider perspective, about how it can change the way they interact with the customer."
According to Charley, having seamless links to back-office processes is key to improving user experience. Integration with the back-office and straight-through processing were critical but at the moment, they were not happening, he added.
Phillip Bungey, chief technology officer of Lloyds.com, the insurance portal launched by Lloyds of London, agreed that the main challenge was achieving straight-through processing. "If you're offering 'bit processing' people just won't do it. If you can't do the whole interaction in one go, then there's much less of an incentive to use these channels," he said.
Charley said one of the main problems was that insurers had created electronic channels based on their own requirements rather than their business partners' needs.
"At the moment, e-initiatives are more about making life easier for the insurance companies than for their intermediaries," Charley said. "The process is not aligned at all - it's geared towards receiving application forms rather than considering the process that the intermediaries are going through with the customer. The issue is to get insurance companies to look at how they could help their partners," he added.
Paterson holds a similar view. Until now, insurers have been taking an "inside-out" approach to development when they should have been looking outside, then developing inwards towards the business. "Organisations are still thinking inside-out. Rather than developing internally what they think is good for [their customers and partners] then making it available to them, insurers should be looking to their customers, and using that as a starting point for developing systems," he said.
"That's quite a shift in mindset which is fairly significant. They need to start with the people who use these systems, and develop them in a way that benefits both customers and intermediaries, rather than developing something internally then making it available and hoping the customer will use it."
Despite the disappointment over the low take-up of online services, respondents were still positive about driving up the number of online transactions, which they saw rising from 1% in 2000 to 14% in 2004.
Bungey believed a change in mindset is beginning to occur in companies which have invested in e-commerce where it didn't do exactly what they thought it would. "They have now got to the point where they are trying to re-evaluate what they need to do to get more of what they expect," he said.
Paterson agreed that a change is beginning to occur, but admitted that the target of 14% of transactions online by 2004 is "quite ambitious". Although some firms were doing usability tests and getting both customers and partners involved, the majority of firms still needed to think along the lines of convenience, he said.
"It is achievable but e-commerce initiatives have to be designed from a customer's perspective, and they have to be made far more attractive than ringing a call centre," Paterson said. "The current mindset has to undergo a radical change if this is to become a reality."