895 Thesis: How Web 2.0 impacts Business Models of Insurance and Financial Services Companies

A research project submitted to the faculty of San Francisco State University in partial fulfilment of the requirements for the degree.

Master of Business Administration

by

Audrey Gruman

San Francisco, California

May, 2009

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CERTIFICATION OF APPROVAL

I certify that I have read: “How Web 2.0 Impacts Business Models of Insurance and Financial Services Companies” by Audrey Gruman, and that in my opinion this work meets the criteria for approving a research project submitted in partial fulfilment of requirements for the Master of Business Administration degree at San Francisco State University.

_______________________________________ Paul Beckman, Ph.D.

Associate Professor, Information Systems

_______________________________________ Sally A. Baack, Ph.D Associate Professor, Management

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ABSTRACT

How Web 2.0 impacts Business Models of Insurance and Financial Services Companies

The purpose of this project is to study which Web 2.0 features and functionalities

could be adopted by insurance and financial services providers and how they could

help those companies reinvent their business models. The research method used was a

literature review through professional journals such as wired.com,

informationtechnology.com, group-edited blogs such as techcrunch.com, different

business organizations’ web sites, and analysis gathered from Research Centers such

as Pew. The research also includes interviews of 2 experts in the field. The outcome

of this project will be a recommendation of what Web 2.0 technologies to implement

in the insurance and financial services businesses to ensure a positive impact on their

results.

I certify that the abstract is a correct representation of the contents of this research

project.

_______________________________________           _____________________

Paul Beckman, Ph.D. Date

Associate Professor, Information Systems

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Table of contents List of Tables …………………………………………………………………..……vi List of Figures……………………………………………………………..….…..…vii Introduction…………………………………….…………………………….……….1 1. Business Technology trends………………..........…………………....…….…..….3 1.1 Exploration of Web 2.0 technologies………………………………….…….....…3

1.2 Focus on the popularity of web 2.0 technologies………………………….……...9

1.3 Focus on the use of web 2.0 technologies…………………………….….......….11

o 1.3.1 Interface with customers…………………………….....….…...…..11

o 1.3.2 Interface with suppliers/partners…………………..….…….….…..12

o 1.3.3 Manage collaboration internally……………………..…..…..…….12

1.4 The two levels of impacts on the organization……………….….…...….....……13

1.5 Key success factors to implement Web 2.0 technologies………….…….....……14

1.6 Barriers to adoption to Web 2.0………………………………...……....….……16 2. Exploration of the Insurance Value Chain…………………………….………….17 2.1 Insurance Value Chain analysis………………………………….…….......……29 2.2 Overview of insurance distribution channel challenges…………....….…..……30

o 2.2.1 The insurance market is driving by “three Ds” trends..….....…….30

o 2.2.2 Too many processes lead to a lack of personalized services…...…32

o 2.2.3 Information and paperwork overload……………..….….………..33

2.3 Overview of state-of-the-art and interactive processes.…………………….......33 3. Recommendations …………………………………………………...…….…….35 3.1 Outbound and Inbound Communication..............................................................35

3.2 Knowledge and data management.......................................................................39

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3.3 Alternative Business Models...............................................................................42

Conclusion……………………………………………………....…………...……..43

References………………………………………………………………….………45 Appendix…………………………………………………………………..………58

vi

List of Tables

Table 1 – Top hurdles facing agents…………………………………………………31

vii

List of Figures Figure 1 – Popular bets……………………………………………………………..10 Figure 2 – Use of Web 2.0 technologies……………………………………………11 Figure 3 – Interface with customers………………………………………..………12 Figure 4 – Interface with suppliers/partners……………………………..…………12 Figure 5 – Manage collaboration internally………………………………………...13 Figure 6 – Insurance Value Chain……………………………………………….…18 Figure 7 – Insurance Web Communication and Collaboration Landscape………...36

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Introduction The concept of web 2.0: The age of collaboration "The web has created a paradigm shift: Web 2.0 is now changing the very way we live,

the ways in which we communicate and even how we work together. There's no going

back. This paradigm shift is insistent, and doesn't simply stop at the company's

reception desk. Quite the opposite is true: the capability to work better and faster

together as a collective, and to learn from one another, is becoming a decisive

competitive advantage.”[1]

Technologies known collectively as Web 2.0 have spread widely among consumers

over the past five years. Social-networking Web sites, such as Facebook and MySpace,

now attract more than 100 million visitors a month. From entertainment to

communications to e-commerce, consumers are increasingly taking charge of the

creation, distribution and consumption of digital content. [2] According to a Research

and Markets Institute study, by 2013, 155 million US Internet users will consume

some form of user-created content, up from 116 million in 2008. The number of user-

generated content creators will grow by similar proportions, reaching 115 million in

2013, up from 83 million in 2008. [3]

As the popularity of Web 2.0 has grown, companies have noted the intense consumer

engagement and creativity surrounding these technologies. Many organizations, keen

to harness Web 2.0 internally, are experimenting with related tools or are deploying

them on a trial basis. [2]

2

Web 2.0 is the use of lightweight, intuitive, Web- level tools of social interaction and

networking. For financial services firms, it might mean taking some of Web-based

services that rely on user participation and user-contributed data, and generally

involve some philosophies that have made similar sites so popular in the consumer

realm and applying them to business software and client portals. [4]

The insurance industry has been particularly slow to leverage collaborative

technologies such as blogs, wikis and podcasts. While these communications tools

offer an opportunity to involve customers, partners and shareholders in a direct and

often more-personalized conversation, they can be perceived as a challenge to existing

corporate communication controls and processes. [4]

The value added of Web 2.0 technologies is the ability to understand the strength of

the new technology and its alignment to the ‘real’ business need. If the tool does not

make companies nimble, increase productivity or reduce cost, not matter how ’sexy’ it

is, the new tool is not going to be worth implementing.

In this research project, we will capture a snapshot of current practices and attitudes

towards various Web 2.0 areas, with a focus on their application to key insurance and

financial services areas such as customer communication, distribution, underwriting,

claims, and especially the challenge of internal communication and knowledge

management.

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1. Business Technology trends

Web 2.0 technology acceptance is growing in the insurance and financial services

businesses. These new participative tools have a far more important organizational

impact, and also involves a stronger bottom-up element than previous technologies

adopted in the business world, such as enterprise resource planning (ERP), customer

relationship management (CRM), and supply chain management (SCM). Also,

compared to earlier technologies, web 2.0 disruptive tools are less technically

complex to implement. According to a survey from McKinsey, Building the Web 2.0

Enterprise: McKinsey Global Survey Results,” a growing number of businesses are

substantially committed to investing in Web 2.0 technologies. The investments in

Web 2.0 technologies are estimated at $1 billion but the level of investment is

expected to grow at a rate of 15% per year over the next 5 years. [2]

1.1 Exploration of Web 2.0 technologies

Web 2.0 tools cover a wide range of participative technologies including blogs, wikis,

podcasts, information tagging, prediction markets, and social networks. [2] These

interactive technologies require users to generate and exchange new information and

content, and make comments on other participants work.

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Wikis, commenting, and shared workspaces are systems for collaborative publishing.

They allow many authors to contribute to an online document or discussion. They

facilitate the co-creation of content and applications among a broad base of

participants. [2]

Blogs, podcasts, videocasts, and peer to peer tools allow web users to communicate

and share information among a broad base of individuals. [2]

Blogs (short for Web logs) are online journals or diaries hosted on a Web site

and often distributed to other sites or readers using RSS (Really Simple

Syndication will be explained later).

Business value of Enterprise Microblogging: Example of Twitter

Embracing disruptive technologies such as Twitter or other kinds of microblogging

tools is a new trend at the enterprise level. Ed Cone, at CIO Insight in his blog

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“Enterprise twittering comes of age”, cited Twitter as an invaluable sales/promotional

tool for small companies.

Twitter is a service for friends, family, and co–workers to communicate and stay

connected through the exchange of quick, frequent answers to one simple question:

What are you doing? [5] Right now, messages are limited to 140 characters. Twitter

is an aggregation tool available for short snippets of content along with links to rest of

the content. It is a phenomenal tool for blog promotion, and for finding and sharing

content with others. Twitter is the ultimate portal to all content.

Following is an exploration of business benefits of using twitter.

Large companies are taking advantage of this tool:

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To update customers of the company deals and coupon codes.

Dell, for instance, started experimenting with Twitter in March of 2007 at an annual

tech/music festival in Texas. Dell says Twitter has generated $1 million in revenue

over the past year and a half though sale alerts. People who sign up to follow Dell on

Twitter receive messages when discounted products are available at the company’s

Home Outlet Store. They can click over to purchase the product or forward the

information to others. [6]

To offer an alternative customer support option:

JetBlue, for instance, offers Twitter-based customer service, even providing the name

of the customer support employee on duty. [6]

To get closer to customers:

Via their Twitter profile Southwest Airlines runs unofficial, entertaining discussions

with their customers. HRBlock runs ask-and-answer sessions with their customers. [6]

To react to customers’ feedback:

Popeyes, which is a chicken fast food restaurant answers their clients’ feedback in an

entertaining tone and also updates their Twitter listeners of current deals and

discounts. [6]

To offer an alternative subscription option:

ATTNews updates their Twitter-followers of the news published at the website.

Forrester Research posts updates of their recent site discussions. [6]

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To post company news:

BreakingPoint, which is a content-aware testing systems company that is reinventing

application, performance and security testing, posts updates of company and industry

news and also discusses it with their Twitter-listeners. [6]

To promote the corporate blog:

Kodak Chief Blogger both posts the company blog updates and discusses them with

the company customers. [6]

Podcasts are audio or video recordings—a multimedia form of a blog or other

content. They are often distributed through an aggregator, such as iTunes.

Peer-to-peer networking (sometimes called P2P) is a technique for

efficiently sharing files (music, videos, or text) either over the Internet or

within a closed set of users. Unlike the traditional method of storing a file on

one machine—which can become a bottleneck if many people try to access it

at once—P2P distributes files across many machines, often those of the users

themselves. Some systems retrieve files by gathering and assembling pieces of

them from many machines. [2]

Prediction markets, information markets, and polling use the collective power of the

web community and generate collective answers. Collective intelligence refers to any

system that attempts to tap the expertise of a group rather than an individual to make

decisions. Technologies that contribute to collective intelligence include collaborative

publishing and common databases for sharing knowledge. [2]

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Tagging, social bookmarking/filtering, user tracking, ratings and RSS (Really

Simple Syndication) add additional information to primary content to prioritize

information or make it more valuable.

RSS (Really Simple Syndication) allows people to subscribe to online

distributions of news, blogs, podcasts, or other information. [2]

Social networking and network mapping leverage connections between people to

offer new applications.

Social networking refers to systems that allow members of a specific site to

learn about other members’ skills, talents, knowledge, or preferences.

Commercial examples include Facebook and LinkedIn. Some companies use

these systems internally to help identify experts. [2]

Web services are software systems that make it easier for different systems to

communicate with one another automatically in order to pass information or conduct

transactions. For example, a retailer and supplier might use Web services to

communicate over the Internet and automatically update each other’s inventory

systems. [2]

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Mash-ups are aggregations of content from different online sources to create a new

service. [2] The term mash-up comes from the hip-hop music practice of mixing two

or more songs. This capability to mix and match data and applications from multiple

sources into one dynamic entity is considered by many to represent the promise of the

Web service standard, also referred to as on-demand computing. [7] An example

would be a program that pulls apartment listings from one site and displays them on a

Google map to show where the apartments are located.

Digg, for instance, is a mashup of various news Web sites controlled almost entirely

by the users of the Web site. According to a report conducted by Comscore

worldwide in February 2009, Digg has 19 million unique visitors and nearly 85

million page views.

1.2 Focus on the popularity of web 2.0 technologies

According to a McKinsey Global Survey about how businesses are using Web 2.0

conducted in March 2007, organizations focus their investment in trends that promote

automation and networking online. 80% of the respondents of the survey are investing

primarily in web services development; peer- to- peer networking seems to be very

popular among 47% of the respondents. [8]

10

Popular betsIs your company investing in any of the following web 2.0

technologies or tools?

80

48

47

37

35

35

33

32

21

6

26

28

39

42

40

39

43

54

0 10 20 30 40 50 60 70 80 90

web services

collective intelligence

Peer-to-Peer networking

Social networking

RSS

Podcasts

Wikis

Blogs

Mash-ups

Not under consideration

Using or planning to use

Source: 2007 Mc Kinsey Survey on Internet Technologies conducted among 2,847 executives

worldwide, 44 percent of whom hold C-level positions.

63% of the respondents in the financial services sector are planning to increase

investment in web 2.0 technologies over the next 3 years.

The study suggests that 2/3 of the organizations that invest in web 2.0 technologies

pursue specific strategic goals:

- Maintain a market position

- Gain a competitive edge

- Match competition

- Address customer needs

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1.3 Focus on the use of web 2.0 technologies

According to the McKinsey survey, executives use web 2.0 technologies to

communicate and share information with customers and business partners and to

reinforce collaboration between the business units of the organization. [8]

70

51

75

0

10

20

30

40

50

60

70

80

Use of web 2.0 technologies (%)

Interface with customers

Interface withsuppliers/partners

Manage collaborationinternally

Source: 2007 Mc Kinsey Survey on Internet Technologies conducted among 2,847 executives

worldwide, 44 percent of whom hold C-level positions.

Organizations use Web 2.0 technologies more often for internal purposes than for

external communication. However, a growing numbers of companies use web 2.0

tools to get into new markets and are focusing their efforts on increasing interactions

with customers, suppliers and outside experts. For instance, companies involve

customers in product-development efforts, which is the process of co-creation.

o 1.3.1 Interface with customers

Organizations intensify their efforts to increase interaction with their customers. They

use web 2.0 tools to get customer participation in product development, to improve

customer service, to acquire new customers in existing markets, and to let customers

interact with each other. [8]

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19%

34%

47%

Customer-to-business feedback

Customer services

New customers,new markets

Source: 2007 Mc Kinsey Survey on Internet Technologies

o 1.3.2 Interface with suppliers/partners

Companies use web 2.0 tools to build networks outside the organization. These tools

help companies tapping networks of experts, getting supplier participation, lowering

purchasing costs, achieving better integration with suppliers, and carrying out other

partner/supplier processes. [8]

17%

83%

Purchasing

Better interfaceintegration, bettercommunication

Source: 2007 Mc Kinsey Survey on Internet Technologies

o 1.3.3 Manage collaboration internally

Organizations use web 2.0 tools to manage collaboration internally. According to a

MacKinsey survey conducted in 2008, companies successfully use web 2.0 tools for

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internal recruiting, developing products and services, enhancing company culture,

managing knowledge, training, and fostering collaboration across the company. [9]

49%51%

Product DesignDevelopment

Know ledge Management

Source: 2007 Mc Kinsey Survey on Internet Technologies

1.4 The two levels of impacts on the organization

Web 2.0 tools substantially raise the productivity of transactional processes. Indeed,

web 2.0 intervenes at two levels:

- Internal to the enterprise including employees and contractors: content

generation technologies allow employees across the organization to

collaborate on knowledge management, sharing best practices, communicating,

and coordinating activities. Web 2.0 tools also allow experts to share

knowledge, and ideas among business units of the organization.

- External to the enterprise including customers, partners, and suppliers:

collaborative contribution technologies enable third parties to participate in

product development, exchange data through EDI (electronic data interface)

which is an easy mechanism for companies to buy, sell, and trade information,

and that enables the transfer of data between different companies using

networks such as the Internet, provide feedback, and aid in customer support.

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It also enables the organization to spread marketing messages in a more

efficient way.

1.5 Key success factors to implement web 2.0 technologies

Web 2.0 tools at the internal and external levels enable the aggregation of opinions

from many individuals and provide strategic decision support, help generate new

ideas across the organization, and find solutions to problems. According to a

McKinsey survey, businesses leverage these technologies and seem generally

optimistic about their benefits, especially in how Web 2.0 tools help a company refine

its strategy. A successful implementation of web 2.0 tools involves six key factors of

success [2]:

1) Getting popularity through top management’s influence

The top management has a role model within the company and should focus its

efforts to promote participative tools across the company. The CIO, for instance,

could help increase faster the adoption of web 2.0 technologies within the

organization through the substantial use of these tools.

2) Matching employee’s needs and web 2.0 functionalities

Participatory tools are driving a high business value when management is able to

determine the best application that fits employees’ needs and scale up within the

organization. AGF which is a French insurance company, for example, provides

several collaborative tools to its employees so that new employees can faster learn

best practices of the company. However, human resource staff uses these tools for

sharing recruiting tips and information about potential candidates.

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3) Encouraging regular use across the organization

Also, web 2.0 technologies need to be used on a regular basis to ensure a

successful implementation. Some companies, for instance, introduce a wiki-based

knowledge management tool that employees are expected to use on a daily basis

but the level of participation falls in the long run. Google is a great example of a

successful implementation of participatory technologies. Engineers use wikis and

blogs as a main way to communicate about their work progress. Thereby,

managers can provide feedback and guidance in a real-time manner. Also, web 2.0

technologies allow engineers to communicate and share information more easily

with other business units, provide backup help when needed, and coordinate

projects more efficiently. Pixar is another example of a successful implementation

of web 2.0 tools. Indeed, the company built video into wikis that allows animators,

software engineers, managers, and directors to analyze and discuss real clips and

frames from a movie. Therefore, more relevant critiques arose and animators were

able to work in a more effective way.

4) Stimulating the use of web 2.0 through employees’ rewards

In order to encourage employees to use web 2.0 technologies, management should

promote it as a way to gain public work recognition through blogs or wikis.

Arcelor Mittal [2], for instance, offered prizes to employees during prominent

meetings for valuable contribution and thus stimulated creative ideas for business

improvement.

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5) Encouraging experts participation

Participative tools are more effective when targeted users actually use them. P&G

[2], for instance, introduced wikis and blogs to encourage collaboration among its

workgroups and targeted opinion leaders and technology-savvy users within the

organization to get the most rich and valuable content possible. Best Buy’s [2]

employees also experienced web 2.0 tools through internal information markets in

order to produce more accurate sales forecasts. Forecasting experts, participants

with broad operational background, were involved in the process of sales

forecasting and helped to produce more valuable business outcomes.

6) Anticipating and managing legal, and IT issues

Web 2.0 tools involve legal and IT security issues/challenges and organizations

should be able to handle them to find the right equilibrium between laissez-faire

and “big brother policy”. To mitigate risks, management should prohibit

anonymous posting, make participants active in blog management by integrating a

“flag as inappropriate” button, which temporarily removes suspect postings until

they can be reviewed. Also, participatory technologies should involve a

contribution tracking system to assess the degree of involvement of authors.

1.6 Barriers to adoption to Web 2.0

One of the most important barriers to adoption of Web 2.0 in companies is the lack of

potential financial return of investment (ROI). According to a survey conducted by

Forrester Research, 28 percent of respondents do not understand the potential

financial return of Web 2.0. In addition, corporate culture does not encourage Web

2.0 use cited by 22 percent of respondents, and companies do not provide enough

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incentives to adopt or experiment with Web 2.0 technologies cited by 20% of

respondents. [10]

2. Exploration of the Insurance Value Chain The insurance industry is facing enormous challenges as well as opportunities. Factors

including globalization, product commoditization, industry consolidation, regulatory

changes, innovative distribution channels, and shrinking margins have presented the

insurance industry with a new reality: securing a new competitive advantage is more

difficult than ever. Today’s insurers must streamline their operations and make them

cost effective in an environment of overcapacity. Insurance companies need to

differentiate their products and focus on customer satisfaction and retention, while

maintaining a competitive cost structure, in order to secure market share from an

increasingly demanding customer base. [11]

From client prospecting to settling claims, business processes within the insurance

value chain are oriented to build customer satisfaction. The insurance value chain is a

means for companies to achieve a sustainable competitive advantage through a focus

on the customer experience. To achieve a long-term competitive advantage,

insurance companies must align technologies and business processes. Maroney,

managing director for the insurance industry within Microsoft’s Financial Services

Group, says that “the insurers that have achieved a significant measure of success on

today’s competitive market have brought together their business and technology

efforts in order to create transformational business processes”. [12]

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Insurance value chain

Product development and configuration

Insurance products are complex and insurers have difficulty providing product

benefits in simple terms. Also, insurance is a touchy subject for customers who are

reluctant to think about the circumstances in which insurance becomes critical. In

addition, purchasing an insurance product is a more intensive experience than buying

other types of financial products, ranging from moderate (auto insurance) to intensive

(medical testing for disability income or life insurance).

Insurance carriers need to envision better customer service and be able to deliver

more relevant products. Indeed, because customers expect immediate responses to

their questions, insurance companies need to leverage their wealth of available

information to provide targeted answers and offer personalized, value-added products

and services. Thus, insurers need to provide product information in a clear,

educational and compelling manner that would help potential clients to quickly

understand the risks they face and the solutions available to them.

Customer experience Employee experience Operations experience

Point-of-Sale and Service

Product Development and Configuration Underwriting Claims Processing

Policy Administration Reinsurance

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As insurers need to find new opportunities to grow, they should also address the new

generation’s values and lifestyle by innovating in their product design process. New

generations of financial products customers are price sensitive, and have more eco-

friendly attitudes than older generations, and insurers need to provide products that

are specific to them. For instance, still few insurers provide pay-as-you-drive auto

insurance that uses technology to track car usage and determines insurance premiums

accordingly. Some insurers provide mobile phone insurance coverage or riders for

laptop computers to interact with tech-savvy new generation of customers.

Additionally, insurers should create innovative products that match with the new

generation’s values such as green financial products. For instance, some insurers

develop policies that, for an additional premium, will pay for environmentally

friendly repairs, such as the replacement of heating or electricity systems. Some

insurers provide pay-as-you-drive policies that match the price of the consumption

level of an automobile and the price charged for insurance. These policies are

environmental initiatives to encourage individuals to drive fewer miles.

As a result, these strategies that match consumers’ lifestyle and innovative product

design can help insurers differentiate themselves, develop long-term relationships

with new generation of customers and improve the customer experience.

Real-time pricing

The product development process includes the pricing phase. Insurers need to imagine

how to provide more accurate prices and reduced risks. Insurers could invest in a real-

time pricing structure that could accurately assess risk at any given time and prices

coverage accordingly.

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Automation of process applications

Processing applications is one of the biggest challenges in the insurance industry.

Underwriters must process applications rapidly to prevent competitors from offering

coverage more quickly. In addition, insurers need to manage multiple sources of

application information including responses to requests for additional information.

Another challenge is to reduce underwriting costs. Companies must have efficient and

accurate underwriting processes to reduce administrative expenses. Underwriters have

access to inconsistent information that makes follow-up challenging. Finally, the basis

for underwriting decisions is increasingly subjected to legal discovery requests which

are time-consuming and resource-intensive to fulfil.

IBM has created an insurance-specific interface “Ultera/P8” [13] that displays in a

single spot all information needed for the underwriting process. The solution replaces

paper-based work management with a digital document and electronically-guided

workflows to improve processes efficiencies and reduce costs. The underwriter

interface is a consolidated case file that displays all sources of information in a single

spot. Underwriters can easily add, modify, and remove requirements from

applications and process. The document review interface help underwriters easily

identified and track which documents they have previously evaluated. The solution

captures and stores documents submitted by paper or fax. To enable straight

processing, applications that are clean and complete can be automatically

underwritten and approved without staff intervention. For applications requiring

special considerations, underwriters work with a specialized interface that increases

productivity and accuracy by providing only the documents and data necessary for

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decision-making and an appropriate task completion option. In addition, the solution

creates tasks for all needed underwriting requirements and the order in which the

tasks have to be fulfilled. The solution enables efficient process management across

departmental boundaries within the insurance organization and approval or denial of

applications on a timely basis. The solution improves performance, reduce costs, and

efficiently respond to legal discovery request.

Streamlining Claims Processing: Towards a Better Customer Experience

Insurers are looking for opportunities to increase customer satisfaction. Insurers have

identified the claims process as a tool for achieving customer satisfaction rather than

just a potential process for improving operational efficiency. Claims processing is

considered as the moment of truth for the insurance carrier since the customer expects

the insurer to fulfil its promises. Claims processing is an effective differentiator for

insurance carriers that enables them to achieve sustainable competitive advantage in

customer service.

Market Analysis: Generation Y represents the customer of tomorrow in the

Insurance Industry

As the U.S insurance industry searches for new drivers of growth, they should focus

their efforts to attract the customers of tomorrow called “Generation Y”. Gen Yers

were born between 1982 and 1993 and are typically at the leading edge of new

technologies. As customers of financial services, Gen Yers are financial freshmen,

independently dependent, practically motivated, tech savvy, entrepreneurially spirited,

diverse, and socially mindful. [14] To better capture this new opportunity, insurers

should identify the key characteristics of Gen Yers as consumers of financial services,

and understand how this new category of customers will purchase insurance products.

22

Thus, insurers would be able to adopt a customer-centric business approach and

improve the quality of the customer experience for all generations, including older

customers that are more immediately profitable clients. In addition, insurers that will

be able to align their customer experience strategies with changing customer

preferences and expectations, will better differentiate themselves from competitors in

the mature and challenging insurance business. [15]

Clearly, Gen Yers represent a tremendous opportunity for insurance companies.

Indeed, Gen Yers are expected to become the wealthiest generation ever, with an

annual income of up to $200 billion.[16] In addition, Gen Yers represent about 10

percent of the U.S. labor force and their economic influence is expected to grow (see

Figure 4). In the short term, Gen Yers represent a huge opportunity for auto and home

insurers since they are expected to buy about 25 percent of new cars and trucks sold in

the U.S by 2010, and up to 40 percent by 2020. [17] In addition, Gen Yers are

expected to buy their homes earlier than older generations such as baby boomers.

Indeed, the average age of a first-time home buyer from Gen Y was 26, three years

younger than for Gen X or baby boomers. [18]

Since life events typically trigger financial decisions, insurance companies should get

ready to reach out this new target. According to a survey, about one out of every three

people who moved, got married, or changed jobs, were between 18 and 28 years old.

[19] As Gen Yers face life events such as purchasing a first home, a first car, or

having a first child, they tend to see insurance products as pricy, confusing, and

unnecessary. Therefore, insurance companies should focus their efforts on educating

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and helping Gen Yers to choose and understand the value of financial and insurance

products to overcome unexpected risks that can occur in their life.

Because insurers need to investigate the characteristics of Gen Yers to capture the

enormous opportunity of this new target, Deloitte conducted a study in 2008 to

understand the attitudes and beliefs of Gen Yers.

As Gen Yers have easy access to a large amount of information about financials

products and services through the Internet, they are overwhelmed by the different

options offered to them and they are not confident in their financial decision (cited by

57 percent of people surveyed). [20] In addition, Gen Yers cited that insurance

products were too complex and were confused when they had to choose an insurance

product. [21] Therefore, insurers have an opportunity to educate Gen Yers about the

value of financial protection.

Despite the fact that Gen Yers are very independent to do research on financial

products and services, they often seek recommendations and validation from family,

friends, and financial advisors (43 percent of Gen Yers surveyed cited parents as a

source of recommendation for choosing financial products and services).[22] In

addition, a study by Life Insurance and Market Research Association (LIMRA) found

that “references from friends, relatives, and co-workers are the most influential” when

selecting a life insurance company.[23] Accordingly, insurers inherit Gen Y customers

through their own or agent relationships with baby boomers parents. Furthermore,

professional financial advisor are very involved in the decision-making process of

Gen Y. A study by Life Insurance and Market Research Association found that

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insurance professionals are the most used sources of information for life insurance. It

is also important to mention that Gen Yers often use the Internet to find a suitable

combination of price and service, then validate their research, and buy the policy

through an independent agent or over the phone. [24] Thus, insurers have an

opportunity to improve the delivery of professional advice and use existing customers

as advocate and influential advertisers for their brand.

As Gen Yers are naturally looking for financial products and services at an affordable

price, and given the fact they easily access information and recommendations on

competing products and services, insurers need to focus their effort on cultivating Gen

Y’s loyalty more directly. One study of auto, health, home and life insurance found

that Gen Yers rate price as the most important attributes when choosing a policy. [25]

In addition, one survey found that “Gen Y is the least loyal generation: only 49

percent of Gen Yers are reluctant to switch from their existing insurance company to

another, compared to 67 percent of Gen Xers (27-43 years old, see appendix 4 for

details), 71 percent of young baby boomers (44-62 years old, see appendix 4 for

details), and 75 percent of older baby boomers (63-83 years old, see appendix 4 for

details)”. [26]

As Gen Yers are tech-savvy and are actively engaged with a variety of digital and

social media, insurers should intensify their interactions with these customers through

those new channels of communication. A Deloitte study found that Gen Yers’ use of

social networking sites, chat rooms, blogs, and virtual worlds is substantially greater

than older generations. [27]

25

In addition, Gen Yers expect that they could access online functionality through their

mobile phone whenever and wherever they want. Over time, all generations will see

web technologies as a new way to interact with their insurance company. For example,

a Deloitte study found that 86 percent of Gen Yers, 73 percent of Gen Xers (27-43

years old, see appendix 4 for details), 64 of baby boomers (44-62 years old, see

appendix 4 for details), and 40 percent of veterans (63-83 years old, see appendix 4

for details) are watching or listening to content created by others, including Web Sites

and blogs. [27]

Gen Yers are more driven by an entrepreneurial spirit than previous generations. A

survey conducted by Inc.com found that 59 percent of Gen Y company owners

describe themselves as “serial entrepreneurs” who plan to start more than one

company in their lifetime, compared to only 33 percent of baby boomers. [28]

Moreover, according to the same survey, as entrepreneurship programs are rising in

business school, 18 to 24 years old people in the U.S are starting businesses at a faster

rate than 35 to 44 years old people. The survey concludes that Gen Yers’ intention to

start a business at an earlier stage than older generation is reflecting Gen Y’s

confidence, independence, impatience and enthusiasm. Thus, there is a tremendous

opportunity for commercial insurers to match this new category of business owners’

needs with specific financial products and services, and to explore Gen Y’s

expectations of B2B relationships.

As Gen Yers represent a multi-faceted group, insurers should better adapt the

customer experience to their diversified needs. Gen Yers are more racially and

26

ethnically diversified than older generations (one-third of Gen Yers in the U.S

identify themselves as “non-white”) [29], they come from diversified household

compositions (non-traditional or single-parent), and they are shaped by diverse

professional experiences from part-time jobs or internships to full-time jobs and their

own business.

Given that Gen Yers are more environmentally and socially conscious than older

generations, insurers should take the opportunity to create innovative and appealing

products that demonstrates the commitment of the brand to the community and the

environment. According to a survey conducted in 2006, Gen Yers are “the most

socially conscious consumers to date”, and 83 percent “will trust a company more if it

is socially/environmentally responsible”. In addition, the survey found that many of

Gen Y’ customers value eco-friendly services, and 46 percent of them would “shop at

a retailer more if the retailer were to go green”. [30] Also, 47 percent said they would

“pay more for environmentally friendly services, products, and brands.” [31] Thus,

insurers should be able to improve the customer experience by building relationships

on green and social values.

Marketing Approach: Insurers must develop new marketing strategies to

encourage customer intimacy

Because insurers need to attract and retain new customers, there is a great opportunity

to identify new ways of communication and develop powerful and effective outbound

communication strategies. Gen Yers principally rely on word-of-mouth and their

personal networks such as friends, and family to choose an insurance company. Thus,

insurers should identify parents of Gen Yers in their customer base and should

27

educate them to transfer information about potential risks and solutions available

proposed by insurance companies to their children. Additionally, insurers should

analyze in-depth the life events that trigger insurance needs.

There are several marketing techniques that insurers could use to reach out Gen Yers.

For instance, insurers could advertise their products in high schools, universities,

student clubs, and sporting events. Therefore, insurance companies could educate

their future potential customers at an early stage about risks, financial protection, and

help them with financial independence through seminars or informational sessions.

Another effective way to reach Gen Yers and older generations is through websites, as

they conduct online research about auto and life insurance products. According to a

study conducted by Forrester Research, “nearly half of all U.S. auto insurance

researchers using the Web, the Internet has become the most popular channel for

researching auto insurance and now yields the highest number of applicants.” [32]

Additionally, insurance companies’ websites attract high-income customers. A

research conducted by Forrester Research found that “those who research auto

insurance online have an average annual income greater than $70,000 and higher

average asset levels than the overall population (greater than $200,000 in investable

assets and greater than $100,000 in retirement assets).” [33] To attract new customers

more effectively, insurance companies should look at emerging technologies such as

Web 2.0 technologies including web-services, online social networks, products

reviews and ratings, and viral marketing strategies (marketing strategy based on word-

of-mouth). These new marketing strategies enable companies to gain visibility in a

fast and effective way and also present a positive brand image among young

customers.

28

Distribution approach: Insurers must develop cross-channel experiences to

reach Gen Yers

Gen Yers challenge the existing distribution channels in the insurance industry,

especially the Web channel, by requiring more efficiency and more personalized

experience throughout the value chain. One study found that 20 to 25 percent of

insurance customers across all generations do not consider themselves satisfied with

their Web interactions.[34] Another study found that many companies have poor

search capabilities, buried content, small front sizes with wasted spaces, frequent

crashes, missing information, and little integration with other channels. [35] Clearly,

the Web channel allows insurance companies to integrate their different distribution

channels and provide flexible options to their customers to interact with them and

purchase insurance products.

Experts of the insurance industry recommend more user-friendly and convenient Web

sites through features including easy-to-locate customer service numbers, online chat

with a representative. In addition, insurers’ websites should provide a customized

customer experience by developing enjoyable and educational content. Furthermore,

insurers should look at mobile-friendly functionalities such as iPhone applications to

reach Gen Yers.

Insurers should leverage the Web channel to support face-to-face or telephone

channels and then provide a better customer experience. Gen Yers are looking for

advice to validate their choice of insurance company through physical or virtual

networks. Therefore, insurers should develop online features such as “click to call”,

29

online chat with an advisor when making a decision to purchase insurance or financial

products. One study of European Net users found that 42 percent of those who did not

purchase auto insurance online did not because they wanted to speak to a customer

representative before purchasing a policy. [36]

In addition, Gen Yers will more likely use self-service features such as managing and

updating policies and viewing a statement online. To solve this issue in a timely and

more efficient manner, insurers should provide a 24/7 agent-assisted service.

Therefore, this new Web service could be very useful to handle renewal, add issues or

cancel policies online. As a result, insurance companies could analyse more

efficiently the reasons for dissatisfaction and why their customers cancel their policies.

It is important to mention that the integration of distribution channels through the

Web can be perceived as a threat by agents and brokers. However, experts of the

industry consider that the Web channel will increase the traffic in insurance agencies

and they will have more time to focus more on developing a personalized relationship

with the customers. As a result, insurers will need to support and educate their

distributors by providing them training opportunities, performance tracking tools,

technological decision-support tools, and better information quality. Because insurers

will need to provide the best quality tools to support their distribution partners,

insurers will be able to differentiate from their competitors.

2.1 Insurance value chain analysis

The complexities in the insurance industry are triggering the need for change and

improvement to business processes. Insurance carriers need to invest in long-term

strategic advantages and identify high-value activities that may be empowered by

30

cutting-edge programs and applications for tomorrow's mass market based on industry

insights and proven technology innovations in use by today's early adopters. The best

insurance companies and tomorrow’s highest performers are already gaining an early

perspective on how emerging technologies may help them lead the market. Early

innovators in the insurance industry will then be able to capture and capitalize on new

opportunities for growth, value creation and sustainable high performance.

Insurance companies of the future will be more agile and able to leverage automation

within business processes and knowledge management within the whole organization.

In addition, insurance companies that will be able to leverage cross-channel

distribution strategies will improve substantially the customer experience along the

customer life cycle.

2.2 Overview of insurance distribution channel challenges

The insurance market is increasingly complex, with a growing trend of diversification

and commoditization of insurance products.

2.2.1 The insurance market is driving by “three Ds” trends:

- The increasing diversification of insurance products. As carriers rapidly

diversify their insurance products, agents must be continuously made aware of

new insurance policies, processes and products. Since insurance agents sell

products and services from different carries, carriers need to provide easy and

effective ways to sell their services. Thereby, carriers can increase agents’

loyalty and market share.

31

- The insurance industry faces a decrease of differentiation between products.

Thereby, both agents and providers need to focus their efforts on gaining a

competitive advantage through investments in people, technology, branding,

advertising, and sales processes.

The ultimate goal of insurance companies is to improve the customer

experience. One way carriers can offer the best service to their clients is to use

demographics. The key factor of success for carriers is to offer personalized

services to both their clients and their agents. Agents’ loyalty is threatened by

a high rate of turnover among agents, and policy cancellations or transfers.

Because costs of distribution and paper processing time are increasing, agents’

loyalty and customer satisfaction are declining.

Top hurdles facing agents

Paper forms Retyping information from paper forms inevitably introduces inaccuracies

Inefficient data input

Using multiple forms requires that important data be rekeyed multiple times, an unnecessary inefficiency that also offers more opportunity for error.

Delays in transaction processing

Every error or piece of missing or incomplete data brings transaction processing to a halt. Once the error is corrected, forms must be resubmitted, leading to further delays.

Compliance errors

Nothing is more frustrating for agents than being told that the correct certification is not in place to allow them to sell a particular product.

Poor display of product information

When clients and agents aren’t looking at identical data, charts, graphs, and other displays, the result is poor communication and wasted time. Agents must take extra time to present and explain policy and product information to clients. Otherwise customer frustration may lead to lost sales.

Inaccessible customer information

Not knowing key facts about clients’ personal situations and insurance goals presents a significant barrier to cross-selling and upselling.

[37] Interactive, online applications increase agent productivity. Rep. Nov. 2007. Adobe.

32

2.2.2 Too many processes lead to a lack of personalized services

Because insurance customers need guidance to navigate properly on the insurance

market, an advisor for individual, personalized service is critical to ensure customer

satisfaction. However, agents lack time to establish and maintain a strong customer

relationship. Instead, agents spend much of their time on administrative and tedious

back-office tasks such as enrolling clients, processing overwhelming policy changes,

and declarations. As a result, both agents and customers are dissatisfied which results

in lost sales.

2.2.3 Information and paperwork overload

Because of the ever-increasing range of insurance products combined with specific

rules and agents’ need to be up-to-date with new insurance offerings and policies,

agents spent an increasing amount of time researching and comparing insurance

options and dealing with compliance issues. A recent study (ACORD-User Groups

Information Exchange, 2006) among 7,500 agents suggested that “learning and using

various company proprietary systems” was their main challenge. Indeed, agents need

to learn several systems to process applications for different carriers and types of

policies. Moreover, half of the agents cited duplicate data entry as their biggest time

waster. [37] Clearly, there is room for improvement concerning paperwork reduction

and simplification of processes. Agents would be then able to focus on customer

acquisition, customer retention and customer service.

Agents have 2 clear needs: less paperwork and back-end processes to provide

personalized services to insurance customers

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2.3 Overview of state-of-the-art and interactive processes As customers use online and offline channels such as the Web, call centers, and

mobile devices to find insurance options, insurance agencies must implement creative

solutions to increase customer awareness of new products and to maintain customer

loyalty. It seems very clear that insurance agencies need to increase the amount of

time spent directly with customers.

According to an IBM Corp. survey conducted among 1,000 U.S consumers in June

2007, and published in a company press release dated June 7, 2007, more than half of

consumers cited personalized service and human interaction as the factors driving

loyalty to their agents. Also, more than half of U.S insurance consumers said that they

wouldn’t switch to a faceless agent, such as website or call centers, even if doing so

could save them a considerable amount of money. In other words, insurance

companies need to find new ways to decrease the amount of time spent by their agents

on low-value tasks such as paper processing in order to have more time to focus on

their clients’ unique needs and to maintain customer loyalty.

Interactive and online applications help insurance agencies streamline business

processes, allowing agents and advisors more face time with clients and more time

build long-term relationship. A recent survey conducted by ACORD-User Groups

Information exchange (AUGIE) suggests that the adoptions of new technologies had

enabled their agency to become a more effective sales organization.

34

In addition, 88% of the agents surveyed believe that new technology procedures have

had a significant impact or moderate impact on proactive client servicing in the

agency, and 84% cited new technology procedures as a significant way to reduce staff

processing time.

Innovative and participative processes create user-friendly portals that agents can

use to manage customer relationships and paperwork in an easy and efficient way.

The resulting time savings allow agents to focus on more profitable activities,

increase their commitment to their carriers, customize services, costs savings,

improve clients’ loyalty and satisfaction, and grow their customer base to increase

their carriers’ market share.

Furthermore, as flexibility and personalization are critical to improving agents’

satisfaction, there is plenty of room to provide them with web-based hubs where they

can do their work and process information. Moreover, agencies need one central hub

to process and store information while tracking compliance and regulatory

information. In addition, agents need to customize what they see onscreen to be

current with their daily priorities. Therefore, intuitive and comprehensive interface are

clearly the solution to create an efficient work environment.

Finally, training and education are critical to get agents up-to-date quickly on new

products, services, and mandates. Comprehensive and interactive e-learning programs

seem to be essential to helping agents in their day-to-day work.

35

3. Recommendations

The recommendations below for matching social software and insurance and financial

services companies’ needs are a result of the research and interviews conducted to

elaborate this research project.

The research project includes two interviews. The first interview has been conducted

with Hsan Htein, Account Representative at Alliant Insurance Services; the second

interview has been conducted with Richard Best, End User Integration at City

National Bank.

Insurers should avoid getting swept up in the hype about Web 2.0, but should not

ignore the real potential to create business value in targeted areas, a potential already

realized by some of their peers. Here, then, are the key areas to implementing web 2.0

tools: inbound and outbound communication, training, distribution, and data and

knowledge management.

3.1 Outbound and Inbound Communication

Web 2.0 technologies are relevant for the insurance industry and have a great impact

on the way insurance companies manage their outbound and inbound communication

with customers and agents. Insurance companies need to adopt social tools to

transform the customers and agents’ experience as a social experience (Figure 7).

36

Figure 7: Insurance Web Communication and Collaboration Landscape [38]

There is a great opportunity for Web 2.0 in financial services firms to design

interactive client portals. However, a large majority of financial services firms still

use fairly basic, HTML-style client portals. Technologies like AJAX, Adobe (San

Jose, Calif.) Flash and Microsoft (Redmond, Wash.) Windows Presentation

Foundation (WPF) allow developers to build sites that engage the client more

effectively.

The insurance industry shows consistently higher levels of blogging activity (see

appendix 1). For instance, the Sexy Insurance! website is a social networking site

exclusively for the insurance industry that allows insurance professionals from all

over the world to meet with other people working in the insurance field, post blogs,

create personal pages, share videos and pictures. Users can create groups as well share

tips and best practices on diverse topics such as selling life insurance over the phone,

Agent Blogs and Forums

Agent-Client Collaboration

CLIENT

AGENTINSURER

- Employee Portal - Employee Collaboration

- Agent Portal - Agent Collaboration: Blogs, forums

- Public Website - Public Collaboration

Insurance Related Public Forums

- Client Self-Service - Client Collaboration

37

corresponding with Retail Commercial, Insurance Agents & Brokers for social and

business networking, learning about the Chinese or Swiss Insurance market, and so

forth. [39]

In the insurance industry, the trend is the use of portals to disseminate information

and share information with clients. For instance, Zywave has developed a strong

position in developing industry-leading employee benefits and property and casualty

insurance software solutions for brokers and their clients. The company reports that

560 brokers are currently using its MyWave product. [40] Insurers are increasingly

using SharePoint technology, a standard Web-based collaboration application

provided by Microsoft. Few insurers are using Microsoft Sharepoint applications for

two-way communication, although the software is designed for this purpose including

collaboration around documents and the exchange of structured data online.

Also, there are some interesting possibilities for augmenting the traditional support

channels (call center, etc.) with self-service tools like wikis. A popular participatory

technology is Wiki software, of which Wikipedia is a leading example. There has

been little use of this technology so far in the insurance industry. However, two

initiatives have been launched RiskWiki (www.rims.org/riskwiki), an online glossary

of risk management terms, and the Riskipedia, created by Risk Management Reports.

38

Increasingly, the concept of SaaS (software as a service) is also entering the insurance

industry. Instead of buying the product upfront, users for it as they use it in the same

way they would with a service. Software as a service ensures users are working with

the latest versions, simplifies maintenance of the application, and allows for faster

deployment of incremental upgrades to the software. [41]

Zinsure is an insurance 2.0 mobile software that brings insurance carriers into the

mobile life of their customers [42]. Zinsure is SaaS and allows users to stay connected

anytime and anywhere with their insurance company through software applications

for iPhone and Android type phones. The software provides applications such as

digital and interactive insurance ID cards, roadside assistance applications with

Google Maps and Telephony integration for call handling, claims applications to

capture the incident picture, customer notifications application for renewals, billing,

and payments. [42]

Web 2.0 technologies may allow firms to better collaborate internally and externally

on knowledge management and problem resolution with customers and business

partners. Twitter represents a tremendous opportunity in the insurance field. Twitter

can be used as a broadcast system to allow insurance companies to reach agents and

brokers quickly and efficiently. Indeed, as agents and brokers receive hundred of e-

mails a day, it can take a minute to get an e-mail from their hierarchy. In addition,

Twitter can be used as a marketing or public relations channel and enhance a

company’s reputation. Through Twitter, insurance companies can post corporate

accomplishments and post links that redirect users to the corporate web site, press

releases, and promotional sites. In addition, agents and brokers can tweet about their

39

work, developments in their industry, and new products. Furthermore, insurance

companies can use Twitter to promote themselves as employing influential leaders.

However, insurers should use microblogging carefully. As employees tweet about

their companies, it can possibly have a negative impact on the insurance companies’

reputation. Another alternative for insurance companies would be to use other

microblogging tools designed for the workplace such as Yammer [43] and

Present.ly[44].

Furthermore, insurance companies can collect feedback and get new ideas about their

products and their agents or brokers from customers through microblogging and also

get early warnings of problems.

3.2 Knowledge and data management

In the insurance industry, data ownership is considered a competitive advantage.

Insurers can reinforce this advantage by creating a unique and difficult to recreate

database. As Web 2.0 technologies allow users to add and modify data, this creates

higher barriers to entry for competitors. For instance, the Internet-based company

Advisen cited as the “Bloomberg of the insurance industry”, provides insight into

underwriting, marketing and purchasing commercial insurance. Advisen's web-based

workstation incorporates real-time analytics and research on over 1.5 million

companies and 70 industries. Advisen currently serves nearly 350 leading commercial

40

insurers, insurance brokers, risk management departments of major corporations, and

other related organizations. [45]

Web 2.0 technologies may allow financial services firms to deliver Web-based

applications such as online quotations and online claims processing. Tech-savvy firms

may benefit from a great competitive advantage by using Web 2.0 tools: global

collaboration through visual applications using unstructured data and multimedia;

informed decision support through real-time events and data feeds from multiple

sources; and regulatory compliance through centrally managed applications with a

consistent look and feel.

Twitter, for instance, represents an effective way to manage knowledge throughout

insurance companies. As agents and brokers are overwhelmed by insurance products’

information, microblogs can be used to post useful links to relevant files and content.

In addition, Twitter can be used to identify experts in a more efficient manner as

agents can see who knows what in real time.

As insurers are starting to realize the value of social software and the potential of

open communication, they should largely invest in new training tools for agents and

brokers. For example, firms should experiment with podcasting to distribute best

practices and industry information within agents and brokers, and should also explore

the use of wikis as platforms to document IT standards and reference architectures.

Twitter would be a way for agents and brokers to share information and best practices

more easily and in a real time with little burden on the “trainer”. Also, Aviva USA,

part of Aviva plc, the fifth-largest insurance group in the world, believes that

41

innovation and technology creates a competitive advantage and has launched an

initiative to enter the virtual Internet-based world of Second Life. [46] In April 2008,

Second Life had nearly 14 million “Residents” and an economy of $19.6 million (4.9

billion Linden dollars). Since launching in 2003, consumer and technology companies

have invested in Second Life to develop training tools, set up meetings and organize

corporate presentations.

According to Tom Godlasky, Aviva USA’s president and CEO, who was named one

of five “tech-savvy CEOs” in the June issue of Insurance & Technology magazine,

"Aviva's island in Second Life strengthens our commitment to helping our agents and

their customers build bright futures."

Aviva has created a virtual private island in Second Life to recruit, educate, and train

agents. Agents can download the software and create an avatar at secondlife.com to

join Aviva in Second Life. There is no fee for registering an account or participating

in Second Life. Aviva’s island offers free virtual gifts for visitors, a training centre

and a “Bright Futures Centre” which includes an interactive tool that helps agents

learn about the lifecycles of potential customers, a wellness area lifestyle tools and

provide a “wellness toolbar” for users to track Second Life and real world activities.

42

According to Mark Heitz, president of sales and distribution for Aviva USA, “Second

Life provides Aviva with a rich environment for connecting with agents. Aviva’s

product innovations are aided by technology, and we think an island in Second Life is

one way to use technology to help agents learn about Aviva and our products.”

The company is also evaluating how it might use its presence in Second Life to

improve the customer experience, reach new customers and benefit employees.

Additionally, insurers may develop better customer experience strategies through

suitable tailored product offerings, marketing, and distribution. Insurance companies

can also use a customer-centric approach to respond to the rising needs of financial

services products and raise the quality of the customer experience throughout the

value chain.

3.3 Alternative business models

Traditional insurers should carefully watch the new business models emerging in the

insurance and financial services industry. Peer-to-peer lending and peer-to-peer

insurance are already very popular among customers. Peer-to-peer insurance is based

on pooling people together to insure each other at rates cheaper than they currently

pay, without automatically losing the money they pay as a premium. [47] Cure, for

instance, is a leading example of peer-to-peer insurance. Cure is a not-for-profit

automobile insurer based on reciprocal exchange, which means premiums are used to

pay management fees and claims. Money remaining after those expenses either is

returned to the company to prevent future rate increases or is returned to

policyholders. [48]

43

Kiva is a leading example in the peer-to-peer lending field. Kiva is a non-profit

charity that allows donors to choose individuals in emerging countries to donate to

through Kiva’s website. Each recipient gives a small description of what they are

going to do with the money, and can use PayPal to send money to Kiva which will

then send the money to the local microfinance institution coordinating the transaction.

Kiva gets about 100,000 unique visitors a month. [49] MicroPlace is a for-profit

subsidiary of eBay based on the same concept as peer-to-peer lending. MicroPlace’s

vision is to help alleviate global poverty by enabling everyday people to make

investments in the world’s working poor. [50]

Conclusion

Technologically up-to-date tools such as Web 2.0 technologies, satisfying and

entertaining Web experiences, are quickly becoming an expectation of new generation

of financial services’ customers, not just of those with a purely direct business model.

Financial services firms may consider their investment in Web 2.0 technologies as an

ongoing effort to enhance IT portfolios to provide meaningful business services to

their customers and partners. Indeed, these services are directly used by partners,

44

distributors and customers over the Web, resulting in more flexible and cost effective

interactions.

Whereas there are major adoption challenges, insurers should explore the potential

Web 2.0 technologies to keep their competitive advantage in an oversaturated industry

and be seen as first mover by tech-savvy new customers.

45

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47

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[25] “Service Trumps Price As Consumers Get Older: Consumer Priorities For

Financial Institutions, Insurers, And Retailers” Forrester Research 30 July 2007.

[26] “Customer Relationship Snapshot: Insurers - How Relationships Differ Across

Generations Of US Consumers” Forrester Research 29 Apr. 2008.

[27] “The State of the Media Democracy: Deloitte’s Reality Check on the Future of

Media – Select Highlights” Second Edition, Deloitte Development. Rep. 5 Sept. 2008.

Deloitte. <http://www.

deloitte.com/dtt/cda/doc/content/us_tmt_MediaSurvey_Handout. pdf>.

49

[28] “The Making of an Entrepreneurial Generation: How new technologies, a

proliferation of resources, and a disenchantment with the corporate world are making

Generation Y the most entrepreneurial in history”. 2008. Inc.com.

[29] “Who are the Millenials: a.k.a. Generation Y” Deloitte Development LLC 2005. [30] “Gen Y gets involved” USA Today 24 Oct. 2006. [31] “Gen Y’s Echo Attitude” Chain Store Age Oct. 2007. [32] “The Web Dominates U.S. Auto Insurance Research” Forrester Research 11 Sept. 2008. [33] Ibid. [34] “Customer Relationship Snapshot: Insurers - How Relationships Differ Across

Generations Of US Consumers” Forrester Research 29 Apr. 2008.

[35] “How to Design Better Car Insurance Web Sites” Forrester Research 5 July 2005. [36] “The Web Dominates U.S. Auto Insurance Research”. Rep. 11 Sept. 2008. Forrester Research.

[37] Interactive, online applications increase agent productivity. Rep. Nov. 2007.

Adobe.

[38] "Web 2.0 in the Insurance Organization." Upload & Share PowerPoint

presentations and documents. 15 May 2009

<http://www.slideshare.net/jnorwood/web-20-in-the-insurance-organization-

presentation>.

50

[39] Sexy Insurance! - Social Networking for the Insurance Industry. 11 May 2009

<http://www.sexyinsurance.com/>.

[40]"Insurance technology company providing employee benefits and property and

casualty software." Insurance technology, claim software for employee benefit and

property and casualty insurance brokers. 11 May 2009

<http://www.zywave.com/zywavepublic/about.aspx>.

[41]"Insurance Web 2.0." Risk Management and Insurance Education and

Information. Nov. 2007. 11 May 2009

<http://www.irmi.com/expert/articles/2007/berrya11.aspx>.

[42] : : Zinsure - mobile insurance software: :. 11 May 2009 <http://www.zinsure.net/>. [43] Yammer. 11 May 2009 <https://www.yammer.com/>.

[44] Present.ly. 11 May 2009 <https://presentlyapp.com/>.

[45] ADVISEN Ltd. 11 May 2009 <https://www.advisen.com>.

[46] "Aviva USA First to Launch Presence in Second Life Aimed at Life Insurance

and Annuity Agents. " Business Wire 6 June 2008 ***[insert pages]*** ProQuest

Newsstand. ProQuest. SFSU, San Francisco, CA. 28 Apr. 2009 http://0-

www.proquest.com.opac.sfsu.edu/

51

[47] Peer to Peer Insurance - discount insurance pool. 11 May 2009

<http://www.peertopeerinsurance.com/>.

[48] CURE Auto Insurance - Drive Well. 11 May 2009 <http://njcure.com/index.asp>.

[49] Kiva - Loans that change lives. 11 May 2009 <http://www.kiva.org/>.

[50] Invest wisely. End poverty. | microfinance at MicroPlace. 11 May 2009

<http://www.microplace.com>.

52

Interview with Hsan Htein, Account Representative at Alliant Insurance Services

Alliant Insurance Services is the premier specialty insurance broker and ranking

among the 15 largest insurance brokerage firms in the U.S. Alliant Insurance provides

property and casualty, workers compensation, employee benefits, surety, and financial

products and services to more than 20,000 specialized clients nationwide, including

public entities, tribal nations, healthcare, energy, law firms, real estate, construction,

and other industry groups.(http://www.alliantinsurance.com)

How does the concept of Web 2.0 apply to the insurance/financial services industry?

3rd File sharing, issuing certificate of insurance, updating calendar of events, program

manuals, policies, insurance summaries for our clients to be able to download. They

can also request certificate of insurance, foreign travel insurance and other necessary

document. They can also view the upcoming calendar and event and search the other

members. (Program website: www.csurma.org)

Do you see any opportunity for Web 2.0 in insurance/financial services

industry?

Yes definitely. More insurance companies are starting to use web-based services for

their products

According to your own experience, what is the business value of Web 2.0

technologies?

Definitely save paperwork -- means save money and time, more efficient, reliable,

better at record retention.

Does your company implement Web 2.0 technologies?

Yes

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If yes, how does your company implement Web 2.0 technologies?

In house IT department is responsible for our company website

www.alliantinsurance.com and some client could have an access to download

information. Potential clients can also browse through our products. There is an

intranet for employees use.

If not, what are the reasons for a lack of interest in Web 2.0 in your company?

We need to educate our own employees as well as our clients to use web based

services.

What kind of Web 2.0 technologies is your company implementing?

File sharing with underwriter (via extranet), issue Certificate of Insurance (via 3rd

party vendor: https://wwa.i-csr.net/Utilities/signon.asp), Property schedule (clients

could update their own property schedule – via our IT department). Each department

can decide whether they want to use their own IT department for web based services

or hire vendor according to their budget and services.

In which activities do you see opportunities to implement Web 2.0

technologies?

Instant insurance quote, Instant messaging between the customer service and clients

that prefer customized massager program, web-based forum for our members/clients

relating to insurance, risk management program and safety issue, similar to Facebook.

Do you see Web 2.0 as an effective mean for insurance/financial services

company to differentiate themselves from other companies in the same field?

I think it is very important for companies these days to keep up with the web-based

services in order to keep the competitive edge.

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What are the security, privacy and legal issues, if any, of Web 2.0?

I am not sure about this one but as far as I concern relating to doing business with

vendors for web business both parties are responsible for security and privacy issue.

What are your recommendations for a successful implementation of Web 2.0

technologies in the insurance/financial services industry and/or your

company?

I would like to see more user friendly program – it is user friendly for our clients

(even though most of them want to call us directly) but not for us (employees) who

are responsible for the website. Third party vendors are sometimes pain in the neck to

deal with. Since we have partial control over the website, to be able to tweak around

in the website is a major headache. Sometimes vendors want more money for some

minor changes. The issue is they don’t want to give us full control of the program.

Any college kids these days can make those changes if they have full control over the

website it. There might be some underlying issue that only they know and we don’t.

This is just my opinion on third party vendor. I hear the same issue with our in house

IT department as well but since I don’t work with them much I don’t have an opinion

on this.

What kind of benefits do you think your customers get from web services?

Our clients get responses from us in timely manner, it is structure in a way that they

don’t have to get a hold off one of us in order to receive document or view calendar or

look contact info for other members, request certificate of insurance and travel

insurance. (www.csurma.org)

What kind of web services do you propose to your agents? What kind of

benefits do you think the agents get from web services?

File sharing program, secure instant messaging program with underwriters.

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Do the agents have an extranet / specific interface to get products information,

pricing, documents including best practices, e-learning?

Our Alliant intranet website provides mentioned services for our own brokers and

employees only.

What kind of new web services would be useful to streamline processes for

customers and agents/brokers?

We have basic foundation on web services to streamline process for customers

however we need to educate our client as well as our own employees who are still

using fax machine and USPS services. Also, I prefer web service vendors be more

flexible and understand their client’s business and its’ industry.

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Interview with Richard Best, End User Integration at City National Bank The primary focus of his position is application usability review, technology

education and communication. Areas of focus include liaison role with Application

Designers, Information Services Colleague Education, Colleague Technology

Awareness, Colleague Technology Training Aides, Application of appropriate E-

Learning Training Solutions.

City National provides entrepreneurs, professionals, their businesses and their

families with complete financial solutions on The way up®. Highly personalized

client relationships, combined with a full range of sophisticated financial products –

commercial lending, private banking and wealth management capabilities – plus the

best talent in the financial industry distinguish City National from its competition. No

bank is better able to serve all the financial needs of successful entrepreneurs.

(http://www.cnb.com)

What are you doing in your day-to-day activity?

My job is to explore the usability of emerging technologies including Web 2.0

technologies, social networking environment such as Facebook and Twitter that

enable companies to communicate with clients, employees and business partners. I am

doing market research about emerging technologies, traditional portals, competition

analysis, and I focus my effort to understand and match the specific client companies’

needs and communication technologies. My domain of expertise is online training for

employees. I report directly to the Strategic Technology Manager that manage

alliances with vendors, and the CIO of the company.

Who are your clients?

We mainly serve small and medium size company, the retail banking industry, the

entertainment industry, and international businesses.

I think that smart and forward looking companies that are willing to spend time and

invest money see the business value of using Web 2.0 technologies.

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What kind of Web 2.0 technologies is your company implementing?

We implement web based training and organize webinars. City National Bank uses

Microsoft Sharepoint for managing projects, setting up meetings,

uploading/downloading documents, storing files, managing calendars, blogging and

making comments.

In which activities do you see opportunities to implement Web 2.0

technologies?

I see a tremendous opportunity in inbound and outbound communication, especially

in the retail banking industry. For instance, twitter is a very powerful tool to spread

messages and provide useful information to our customers about product promotion,

and interest rate for example. Additionally, Iphone applications are very popular in

the retail baking industry.

Also, Web 2.0 technologies help colleagues to communicate through instant

messaging for example.

As Web 2.0 technologies allow companies to communicate with clients in a cheaper,

faster, and easier way, I think that Web 2.0 technologies have a real business value.

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Appendix1 Web 2.0 in Insurance: Finding real business value today and tomorrow

WEB 2.0 IN INSURANCE:

Finding Real Business Value Today and Tomorrow Research Report

July 2008

http://www.novarica.com/preview_web_20.pdf

Among the key findings of the report:

* 39% of US insurers currently use Wikis for internal communication

* 22% of US insurers currently use blogs for internal communication

* 13% of US insurers are currently using mash-ups of public or subscription services to enrich their underwriting or claims processing environments with elements like GoogleEarth.

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Appendix 2 Claims Value Chain

Streamlining Claims Processing Towards a Better Customer Experience. Rep. 2002. Wipro Technologies. <http://www.wipro.com/datadocs/whitepaper/Streamlining_Claims_Processing.pdf>.

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Appendix 3 A customer-Centric Approach for targeting Gen Y

Insuring the Catalyst-Customer: Generation Y and the Insurance Industry. Rep. 12 Aug. 2008. Deloitte. <http://www.deloitte.com/dtt/cda/doc/content/us_fsi_insuringcatalyst_customer_genYandInsurance081208.pdf>.

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Appendix 4 Work Force Generations

Insuring the Catalyst-Customer: Generation Y and the Insurance Industry. Rep. 12 Aug. 2008. Deloitte. <http://www.deloitte.com/dtt/cda/doc/content/us_fsi_insuringcatalyst_customer_genYandInsurance081208.pdf>.

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Appendix 5 Examples of Customer Experiences along the Customer Life Cycle

Insuring the Catalyst-Customer: Generation Y and the Insurance Industry. Rep. 12 Aug. 2008. Deloitte. <http://www.deloitte.com/dtt/cda/doc/content/us_fsi_insuringcatalyst_customer_genYandInsurance081208.pdf>.