Governance
Making multi-distribution work |
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| Governance | |
| Written by Conrad Chuang, Industry Marketing Manager at Progress Software | |
| Tuesday, 31 August 2010 | |
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Why insurers need to examine the technology behind key processes... While the worst of the global credit crisis is over, economic conditions continue to challenge insurance carriers. Many developed economies are facing a weak recovery. For example, growth in US consumer spending over the last four quarters is at roughly half of where it was in the last expansion. In the commercial sector, investments in capital stock are being made, but the aim is efficiency instead of expansion. Longer term, the picture does not brighten. The McKinsey Global Institute projects that deleveraging will continue for the next six-to-seven years. And Reinhardt and Rogoff have determined that, at levels over 90% of GDP, government debt will reduce growth by at least 1%. Anaemic growth hurts investment returns, which, in turn, complicates asset-liability matching and affects shareholder returns. While there are many courses of action, one potential path is improving operations. After all, for every 1% decrease in investment returns, a corresponding 3%in the combined ratio maintains the same return on equity. What steps can a carrier take to undertake such an improvement?Recent industry research from CapGemini and the European Financial Marketing and Management Association holds clues. After interviewing 59 senior executives from leading insurers and reviewing data from 2,250 distributor surveys, the most recent World Insurance Report determined that multi-distribution is one path to success for the world’s insurance companies. In multi-distribution the coordination between a multi-line carrier’s multiple distribution channels is improved. The goal is not only to streamline the new business processes (aka “rate-quote-issue”) for each line of business, but also to coordinate with other product channels to facilitate up-sell and cross-sell opportunities in real time. Rather than attempt up-sell after bind, when the prospect has completed the shopping process, make relevant offers while prospects are still considering options. Marketing research has shown that up-selling is most effective at that stage of the customer lifecycle. While effective multi-distribution can improve operational performance, implementing multi-distribution can be challenging. A new modelMulti-distribution requires transforming an organisation’s people, processes, and systems. The majority of carriers have silos around products and channels. The result has been that insureds tend to associate specific channels (agents, Web portal, advisors) with specific product types even if the products are all from the same carrier. Effective multi-distribution requires cutting across those silos to foster coordination between these channels. There is plenty of room for improvement. On average, most customers hold five to six insurance products, but the average share of wallet for a single insurer is less than two. Organiations are currently at different stages in moving to multi-distribution, but one challenge unifies them. What technology is needed for cooperation and coordination across the multiple parties (insureds, distribution channels and insurers), channels, and products to make multi-distribution a reality? Dimensions of the problemApproaching the problem holistically, we can see that there are several technical aspects that must be addressed. Most obviously, there is a need to knit together the various core systems a carrier has across all their lines of business as well as share existing customer and product information with distributors. This is the “integration” problem. Because cross-cutting processes are novel, there will be a need to invest in technology to design, test and automate the new business and cross-channel coordination processes. This is the “orchestration” problem. Many vendors are focused on solving either the integration or orchestration problem. Some focus just on subsets such as data integration. While these are all worthwhile problems, they are among the set of smaller issues a carrier will have to face. For example, how will you know when new business request has come in? And how do you determine what to up-sell or cross-sell to that request? In an automated environment, when orchestrating across multiple core systems, there must exist a method of finding and tracking those new business requests and applying some type of logic—simple heuristics like business rules or more complex predictive models—to determine what to offer. This is the “visibility” problem. Finally, there is the question of performance. How do you know if multi-distribution is effective? And if it is ineffective, what should be improved? With solid integration, orchestration and visibility in place it becomes easier to retrieve real-time information about performance vs. KPIs and SLAs, as well as information about where processes are going awry. Not only is this useful for catching fallout in ongoing processes, but, taken in aggregate, the data is helpful for determining what type of business process and personal changes are necessary to optimize for multi-distribution. What should organisations do?To implement multi-distribution, carriers should investigate solutions built with responsive process management (RPM). Built on top of solid integration and incorporating market-leading orchestration technology—RPM solutions include the visibility and optimization features required to make multi-distribution a success. The visibility in RPM provides carriers with a real-time view into all new business requests across all channels and the means to determine context so that the firm responds appropriately. When new quote requests enter the system, information from the request itself is used to determine what the best course of action is. A simple check might be to determine if a personal auto prospect is also a life insurance customer. A more complex check might involve use of a mathematical model to determine what products and what channels have the highest conversion rates given a prospect’s demographic profile. This information is used to select the appropriate coordination processes based on rules. For example, the call-center agent handling a personal auto request would receive information that the prospect is not a life insurance customer and that the best approach would be to have a tied agent reach out to that individual directly. The optimization features of RPM allow carriers to evaluate the effectiveness of their current processes and identify where tweaks should occur. This might include simple activities, such as tracking cross-sell conversions by channel and product in real-time. This information can be used to determine where product specialists can be of most value, right now. Activities that are moderately more complex, such as temporary process redesign in the face of natural disasters or mass casualty events, are also possible. In summary, implementing partial solutions without considering the larger context raises the risk of failure. Multi-distribution solutions that embrace responsive process management technologies address all the technical challenge. Responsive process management enables all businesses, not just those in the insurance sector, to be operationally responsive. Deploying the right technologies will allow companies to achieve a higher level of business performance. They will have the ability to respond to changing conditions and business events as they occur, allowing businesses to capitalise on commercial opportunities, reduce risk and drive greater efficiencies in their organisations. |
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