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With the expanding role of the Internet and self-service, the differentiation between the insurance front and back offices is becoming muddled.

Along with the blurring of the insurance process lines comes the blurring of the technology decisions and the role they will play in transforming the industry.If we look at today's list of 'front office technologies to watch,' in the chart on Page 40 we'll find it looks familiar.

The dearth of new front office technology contenders is not a reflection of the lack of technology innovation, but is evidence of the industry's difficulty in leveraging these new technologies and the challenges of integrating them effectively.

Most carriers continue to wait on the technology sidelines with high hopes and a lot of talk about changing the status quo. But changing the industry doesn't start with technology.

To make solid technology decisions and implement them effectively, insurers might take a lesson from hockey star Wayne Gretzky. When asked what made him such a great hockey player, he commented, "I skate to where the puck is going to be, not to where it has been."

Insurers need to start with strategy to determine where they are going to be rather than making process and technology decisions based on where they have been. Planning for and successfully getting there requires insurers committing to change and taking a close look before they take the technology leap by analyzing external trends, the internal business drivers and the underlying business processes. Only then can we have a substantive discussion on front office insurance technologies.

The shift in demographics is no longer on the horizon, but is today's reality. Policyholder profiles, buying habits, and expectations are all affected, with the aging agent/broker population and the insurer employee workforce affecting profiles and habits further still.

We estimate that by 2010, 64 million retiring baby boomers will be replaced with a new breed of consumers and employees (Generation Y) 78 million strong. Over the next 10 to 15 years, Generations X, Y and Z will account for 45 percent of the population, controlling more than 30 percent of the assets.

These new generations are technically savvy and are not loyal to any carrier or agency. Their real-time experiences in other vertical markets will have a direct influence on their expectations for service and products, creating the demand for easily accessible anywhere, anytime service.

While the insurance buyer grows more sophisticated, the number of independent agencies is decreasing, numbering 37,500 in 2006, down from 44,000 in 1996, due to a flurry of consolidations, mergers and acquisitions. Banks and third-party ownership are both expected to increase and the captive agency/broker to remain strong.

Also of interest is the decrease in independent agency-produced quotes and the increase in sales through the Internet and call centers. In 1998, Internet and call centers accounted for less than 1 percent of sales increasing to more than 12 percent of sales in the personal markets today.

These shifts and heightened expectations should create a sense of urgency for carriers to begin reinventing their front office strategies and processes to create an agile platform in preparation for this tidal wave of change.

When it comes to analyzing and determining the best business strategies, why not look to the market leaders? Their strategies are aggressive and bold and these companies often share the following characteristics: they've grown quickly; distributors and customers think of them first; they deliver excellent customer service; and their product lines, distribution channels and geographic footprints are broadly diversified.

Rather than view market change as a challenge, they see it as a growth opportunity. And they view their business capabilities through the eyes of their customers, enhancing their operation accordingly to more effectively deliver a product or a service. While the leaders gain market share, other carriers are falling farther behind as they continue to cling to traditional "front and back" office processes and legacy technologies.

Ask most any insurer and they will tell you their business goals are to expand market share with profitable growth while providing exemplary products and services. What makes the difference between the leaders and the followers is the ability of leaders to translate these goals into a strategy which drives their business processes. The business processes then position them to make the right technology choices. After all, it's all about planning for where you are going to be, not where you've been.

For the most part, today's business processes for supporting the connectivity between agents and underwriting are linear and sequential, often originally designed as paper or phone-based single path processes.

Years of increased expectations and demands have changed the face and reach of delivery channels to include the fax machine and now the Internet. Associated business processes have become a patchwork of workarounds and a mix of manual and automated tasks, resulting in a brittle, complex and inflexible maze. Exception handling, "white outs" and overrides by both the agent and underwriter require seasoned employees to navigate the complexity effectively. A few carriers have begun to chip away at these challenges from a business perspective, but many others often turn to the latest technology du jour with its "fix-it-all" promises. Unfortunately, the "technology first" approach has rarely proven successful and has primarily served to just add to the complexity, frequently falling short in meeting objectives. Fixing the process can be a tall order when you don't know where to begin.

Carriers can start by looking at business processes in discrete elements, like LEGO blocks assembled to enable the dynamic processes needed to adjust and adapt to changing customer profiles, expectations and marketplace conditions. This approach is consistent with the service-oriented nature of new technologies and will fit well when it comes time to move from process design to technology selection.

For example, how can an underwriting process be designed to support enhanced risk selection and exception-based process flows, with precision pricing that happens real-time and differs based upon the applicant profile or marketplace conditions?

Breaking down the process into discrete components allows carriers to leverage concepts such as self-service collaboration, link enabling technologies like work flow and rules engines and employ business process management capabilities.

With a strategy in place and flexible business processes well understood and designed in support of "where you are going versus where you have been," selecting technology is the final step. It is no longer good enough to just align business and IT.

Although well intended, "alignment strategies" often result in parallel paths and different destinations with time and money wasted. The two sides of the organization, business and IT, need to be in lockstep with their collective eyes on the business strategy and goals in order to define the technology roadmap.

While the list of hot front office technologies is pretty much the same list we have been tracking for a couple of years, the IT spend for enhancing the front office process is strong and continues to be a priority for 2008 IT budgets.

The table on Page 40 contains a list of front-office technologies to watch, but due to the ability of these technologies to enable a shift while supporting ease of use, straight-through processing and an agile operation, technologies of specific interest include:

--Mobile technologies. The anytime, anywhere capabilities of instant messaging, PDAs and tablets are becoming mainstream in the industry. With the flexibility, speed and ease of integration, these devices and techniques are capturing, sending and receiving critical real-time data and communication.

--Web portal development and deployment. It is essential for carriers to enable self service and connectivity to policy information/reporting for policyholder and agent/broker. For the carrier, it creates brand recognition and provides a physical conduit for communication.

--Agency system integration with upload and download. This is a necessary capability for agent/broker ease of use and straight through processing. This capability eliminates duplicate data entry while providing real-time agent/broker access to all data.

--Work flow, rules and rating engines. Whether using an off-the-shelf or a custom-built installation, workflow, rules and rating engines are 'must haves' to enable straight-through processing for quoting between an agent/broker as they allow the carrier to quickly adjust and change flow, rules and rates.

All of these technologies can bring value to every carrier, but when they are selected and how they are implemented will vary greatly. Much will depend on each carrier's ability to change their perspective from "where they have been" to "where they are going to be."

DEB SMALLWOOD, former chief transformation officer for Insurance Company of the West, is co-founder of Smallwood Maike & Associates along with CINDY MAIKE, a former director of standards for the Association for Cooperative Operations Research and Development.

August 1, 2008

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