By CYRIL TUOHY, managing editor of Risk & Insurance®
Scene 1: Picture this image, potent enough to make every carrier executive gasp: A young tattooed man in high-tops, sporting a nose ring and a dyed Mohawk haircut, wearing eye-shadow.
There's worse to come: This Millennial man's never touched a piece of paper. The closest he's come to a physical document is a Word file in Microsoft Office. For him pulp is fiction.
Out of his mouth comes the coup de grace: "Do you know how to sell to me?"
Scene 2: The End (of the carrier).
Luckily for carriers, there are still plenty of buyers who still prefer paper, who like to touch their contracts, who feel secure that a promise to repay exist in time and space, who value an ink signature on a line. When it comes to large commercial insurance contracts with millions of dollars or premium in play, paper isn't going away anytime soon.
But future buyers are going to force carriers to rethink the way they distribute a policy, small business owners policies (BOP) included, according to insurance IT experts. Traditional methods of reaching out like leaving peppy messages on Mr. Millennial's home phone are going to fall on deaf ears.
Pushing a policy indiscriminately into the marketplace is headed for obsolescence, if it's not already there and sending a direct mail piece to young "American Idol" runners-up like Adam Lambert doesn't work. Pinging the rock star on his iPhone with an offer for coverage may just earn the carrier a return e-mail.
"The carriers are not taking enough action to map the right distribution channel to the right target segment," said Sukirat Singh Kochar, vice president in the insurance practice of 3i Infotech Inc., an Edison, N.J.-based writer of insurance software applications.
Carriers face a problem: they don't have a central data repository and the next step, of mapping the proper distribution channel to the right target segment, is therefore impossible.
The data, mountains of it, is locked up in silos: a billing system, a policy administration system, a claims system, a document management system, the commercial policy server, the personal policy server.
Carriers spend millions of dollars to reach prospects at home to sell them a homeowners policy, only to find out later that 70 percent of this young, new market carriers are trying to reach use cell phones and that most of them might benefit instead from a BOP since they run their own businesses yet still don't own a home.
It's an issue, even with established buyers, said Kochar. "Farm Bureau buyers like the face-to-face connection, even if it means driving 10 miles." Yet, it's not unusual for a carrier to reach Farmer John through a direct mail campaign, bypassing the agent.
"Carriers need behavioral information and the transaction information," said Dharmesh Mistry, chief technology and operations officer of Edge IPK, a company that writes software for Web portals.
"Carriers still have a hard time with predictive analysis," said Karlyn Carnahan, research principal with the insurance consultancy Novarica. "They say, 'We don't have the data, or if we have it, we don't know what to do with it,' and if they sell through agents, there's channel conflict."
For carriers to be making assumptions about what new generations of buyers want, and how to reach them is a big faux pas.
"We make absolutely no assumptions," said Andrew MacDonald, vice president of CNA Insurance Co. "When you start making assumptions you're going down real fast."
August 1, 2009
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