Insurers See Mixed Results for New Technology Investments, Survey Says

January 8, 2002

According to a just-released Tillinghast-Towers Perrin survey, insurers using traditional business measures are discovering spotty evidence of success for their new technology investments. Yet, even in the aftermath of the Sept. 11 terrorist attacks, they continue to be optimistic that the technology will eventually offer top- and bottom-line business results.

In a Business Wire report, the survey was the second in a series of industry “pulse” surveys conducted by Tillinghast-Towers Perrin, the worldwide management and actuarial consulting firm. Insurers made up the overwhelming majority of respondents drawn from the 248 North American financial services companies participating in the Tillinghast e-Track Program. The first survey found an insurance industry confident that new technology will drive significant industry change.

However, in this second survey insurers note measuring only mixed results to date. They are looking for refined measurements that will capture new success factors, especially in the area of distribution and customer management. This focus on customers-both distributors and end-users-dovetails with the first survey where insurers said that new technologies have made owning the customer relationship a key to success and that distribution and customer management has become their number one technology investment priority for the next three years.

Over the past three years, insurers have measured the most improvement for their new technology investments in business processes and operations. Most dramatically, more than 80 percent of respondents stated that technology has driven improvement in both employee productivity and turnaround time.

Yet only about half of the respondents have seen evidence of technology-driven success in net operating results, return on capital invested and growth. Fewer have seen evidence of success using other traditional measures like market share, retention ratio and return to shareholders. And nearly half (48 percent) indicated they were looking for ways to refine their measures to capture new success factors engendered by new technology. An additional 15 percent of respondents believe they need to radically retool the way they measure success.

The survey also indicates, however, that many insurers have not started to implement their refined metrics.

Despite the mixed results to date, respondents expect new technology to drive measurable improvements across the board over the next three years. A majority of respondents expect to see new-technology-driven improvements in customer profitability (70 percent), company profitability (78 percent), market share (78 percent), customer retention (81 percent), revenue/premium growth (83 percent), expenses/expense ratios (88 percent), turnaround time (90 percent), and employee productivity (94 percent). And while a third felt technology would be irrelevant for improving loss ratios, a majority still felt it would drive improvement there, heavily influenced by property/casualty insurers.

Despite being the largest single-event loss in the industry’s history, most respondents indicated that the Sept. 11 attacks would not significantly affect how quickly they would implement new technologies. In fact, at least 15 percent said the attacks would move up their implementation in distribution and customer management, as well as in business processes and operations. In contrast, a small number said it would decelerate their implementation.

In addition, as companies struggle to process claims and maintain operations affected by the attack, more than one quarter of respondents said technology has played or will play a major role in managing the impact of the attacks on business processes and operations.

Twenty percent said new technology has played or will play a key role in distribution and customer management.

Only eight percent said it has played or will play a major role in underwriting, products and pricing — though 22 percent of property/casualty insurers said it has played or will play a major role in those areas.

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