The Insurance Tech Guru

Industry consultants and observers (including me) have been critical of insurance companies in particular for being too conservative and all-too-willing to stick with what is admittedly a comfortably profitable status quo. We have watched impatiently while other industries successfully adopted new technologies, and we rolled our eyes and shook our heads when the insurance industry finally adopted those same technologies as much as five years later. Why can’t this industry be part of the leading edge, or even the bleeding edge of technology, we asked? We are just so un-cool.

It is important to realize, however, that insurers actually have some good reasons to be gun-shy about technology advances. First, there’s the old saw about not fixing what “ain’t broke.” In fact, as early adopters of mainframe technology, insurance companies saw a huge increase in productivity that they frankly expected to last them for years to come—and that promise has been realized, with so-called “legacy systems” still in place today (much to the dismay of pundits such as myself).

Meanwhile, while our business may fluctuate between robust and lean times, business overall is pretty darn good in the insurance industry. So, if the dollars are rolling in using what insurers have now, those insurers might understandably ask, “Why should I spend the time, money and manpower to upgrade what I have?” Sure, everyone wants to inflate the bottom line, but in many cases insurers have not seen the gains to be made as compelling.

Secondly, when carriers have judged that gains from technology would be compelling, they have jumped into the fray, only to emerge a bloody mess. Take the example of customer relationship management (CRM), which was touted by many (again, including yours truly) several years ago as a technology that would help insurers focus their sales and marketing efforts while at the same time maintaining positive relationships with their most profitable customers. CRM made a world of sense for business, and certainly for insurance, but it proved to be a miserable failure in our industry.

Of course, critics (NOT including yours truly), were quick to say that CRM was an impractical and useless bit of nonsense that had cost insurance companies millions of dollars and yielded virtually no benefit. Yet nothing could have been further from the truth. Sometimes it’s not the technology that is bad, but rather its implementation and use, or lack of use. Post-mortem studies on CRM projects pointed to a lack of backing from top management and a failure to change corporate cultures to adapt to the paradigm on which CRM depends.

Yes, CRM was a failure in insurance, but it was the humans who failed, not the technology. The unfortunate fallout from this episode, however, was that CRM was virtually pronounced dead in our industry, even though the industry actually needs a technology that can help it focus on the best customers and pay less attention to the tire-kickers. The more unfortunate fallout was that technology took the blame, and insurers were all the more reluctant to sink dollars into new tech initiatives.

It seems the latest potential victim of this fallout may be yet another highly useful technology, business process management (BPM). BPM is a platform that provides a systematic approach to improving business processes in order to make an organization more efficient and improve the bottom line. The potential benefits include cost reductions, flexibility for processes and rules modification, help with compliance and support of legacy systems.

Seems like a slam dunk for insurance, right? Yet research has shown that most insurers will pass on implementing BPM. While there are some industry-specific issues, and while there is certainly a considerable cost, one wonders if the main reasons insurers are saying no is that they just don’t want to get burned by technology again. Maybe they even have confidence in the technology, but lack faith in their human resources to interact profitably with that technology. Either way, it’s a sad state of affairs.

All of this mean that vendors of BPM and other technologies that could benefit the insurance industry need to step it up a notch in educating, selling and, yes, soothing the fears of a sensitive buying public. It also means being realistic about what products can and can’t do, about implementation times, cost of ownership, and many other factors. Mostly, however, it means that not only will vendors have to sell their products, they will also have to show potential customers how to change their organizations in order to effectively use those products.

It’s a daunting challenge, but one that must be met in order to ensure the success of technology initiatives in our industry.

So what's your take? How can vendors break through to reach insurance customers without scaring the life out of them?

This article appeared in the Spring 2007 issue of IASA's "Interpreter."