Vertical Markets - Insurance: The Protection Racket
If there?s a market that?s crying out for IT, it?s insurance. But to succeed, dealers need to know their business and project the right image, writes Guy Clapperton
By the time this article reaches you, dear reader, you will be safe in the knowledge that PC Dealer has been completed and is ready to edify you once again as is its weekly wont. None of the writers actually died before completing their pieces (actually I?m writing this bit first so maybe I shouldn?t chance my arm), the editor didn?t explode when he examined them and no libels were committed ? at least none serious enough to bring about the closure of this august organ.
If any of the above had happened, it would not have been the end of the world. Writers can be replaced, freelancers can be found at short notice and any intelligent publisher takes out libel insurance to ensure any inadvertent inaccuracies can be settled rapidly without damaging the business.
Those providing the insurance rely on IT for their infrastructure more than ever before ? this will increase as EDI over the internet becomes more accessible.
As with any vertical or niche market, the first thing an interested reseller needs to do is to develop an understanding of the field they are approaching. Or do they? At a recent chat I had with a small distributor, one of the directors present pooh-poohed this idea. ?You don?t need to be a lawyer to sell a lawyer a PC ? they pay you to know about computers, not their business,? he said.
Well, yes, to an extent. But there?s no point in selling to a specialist market unless you know something about it, says corporate dealer Fraser Associates. Although the company supplies hardware into firms in the insurance sector, managing director Harry Thuillier denies specifically targeting that, or any other niche in particular. ?If one of our customers happens to be an insurance company, they go out to a Var ? a smaller business that will supply them with the software to put on our hardware. We are happy to co-exist with them: we can?t do what they do and they haven?t got the buying power or logistics that we have.?
Insurance is more of a niche than most. Like any niche, it has its own characteristics and peculiarities, one of which is that it has to transfer a lot of money to disparate geographical locations, and the other is that it frequently has to deal in large amounts of information. Both of these could be done faster and more efficiently with IT, but neither is yet done in that way on any major scale.
At the forefront of a number of developments in the field is the World Insurance Network (Win), which is due to take a small step towards a specification for internet trading in July this year. Mindy Daeschner, who edits the Win newsletter, Winscope, suggests the lack of communication is the biggest problem facing the brokers at the moment. ?The insurance industry is very computer-literate and one of the biggest investors in IT,? she says. ?But problems occur over the ability to have any type of commerce over the wires.?
The problem is the well-established bugbear of product A not talking to platform B properly. This is difficult in any industry, but when a service is based on transferring details of case histories around, it makes for a lot of work ? anyone who has ever tried sending an attachment to an email generated in, for example MSN, and sent it to, say, a CIX address will know that even simple transactions like that can go horribly wrong, horribly quickly.
Communications, then, is the organisation?s short-term goal, and Win will publish a specification for the integration of advanced messaging this summer.
?The next step will be electronic commerce, but before that can happen, we have to be able to communicate efficiently,? says Daeschner. You could add that the brokers who will form the user community will have to be able to accept that the technology will work, too.
This sounds fine until you ask the users ? some of whom have this strange idea about how their existing setup ought to be made to work before they go investing in any more. Their needs are a lot more basic than some people with vested interests might want to tell you.
Most of Guardian Royal Exchange?s (GRE) wish list includes getting something that holds a lot of data without troubling the user as to which application they are in, says a GRE representative, with a respectful nod to Windows for making a start in that direction. Portable PCS with better battery lives for their weight, and an built-in GSM telephone and modem for international use would be appreciated. ?And,? he adds, drifting off into fantasy, ?a PC that doesn?t crash and lose recent work.? Miracles we can do, but that?s a tricky one.
Adrian Brown, divisional manager for customer services at Sun Alliance, disputes whether even electronic commerce will be necessary in his sector ? Sun Alliance deals with the domestic insurance side of the business. ?We take Visa and Delta over the phone and that handles it,? he says.
Although he?d like to be able to video conference with his customers, Brown believes a lot of technology that is allegedly targeted at the insurer is oversold, like caller ID. ?Everything pops up on the screen as soon as someone calls in, which is great until you bear in mind that 60 per cent of people call us up from work, so it doesn?t do anything.?
One product which is aimed heavily at the insurance industry is voice control. The Speech Recognition Company markets Dragon Dictate, just one of the systems in the field, and maintains that its customers are highly responsive.
Interestingly, when PC Dealer did a round robin call of a few high-profile insurance companies, we had to prompt them before they thought of it ? the connectivity issue was uppermost in their minds, as well as ? pauses, waits for audience anticipation of old chestnut they knew was coming somewhere ? year 2000 compliance.
But vital though the latter is, it is far from unique to insurers and the debate surrounding it is therefore best left elsewhere. One company that did mention voice recognition was GRE, although it stressed that the technology needed to improve a great deal before it could be of any practical use.
Colin Howman, director of the Speech Recognition Company, knows full well that he has an uphill struggle on his hands, but believes firmly that whether the insurance sector knows it or not, it wants speech recognition. ?I?m not at all surprised you haven?t found anyone who said they wanted it. It?s early days yet, but if they?re not looking at it then they should be,? he says.
Howman?s methodology for finding a target market is simple: ask yourself whether the people in it generate a lot of text, ask yourself whether they have high levels of keyboard skills at manager level, and if you?ve scored a ?yes? and a ?no? in the right order, you have a potential customer. Given that the product can take voice macros and voiced emails, he may have a point.
If anyone doubts that something as large as the insurance industry could be that naive about one of its forthcoming requirements, let?s not forget that it was the same sector that produced the Lloyds Names ? the underwriters who were terribly shocked when their underwritings got called in. In fact, the word ?naive? sounds a bit inadequate when you think about it like that.
Once the internet has been accepted as safe, and the standards have been ironed out a bit, voice control could make a useful addendum ? although, come to think of it, it?ll throw up even more standards to be sorted out before it actually solves anything. Brown sounds distinctly lukewarm about the prospect, saying he?d rather have better data mining tools so he could work out who was about to go to another insurer.
The question that must be on every reseller?s lips is whether or not clients will buy other than direct. In many cases they will ? resellers wanting to sell standard kit with pre-loaded office automation software should have little trouble finding a customer who happens to work in insurance, as Thuillier has already pointed out.
But to specialise properly and sell a full-spec insurance solution is more difficult. Deciding the nature of any such solution gets back to the old adage of defining the problem ? only then does the word ?solution? have any real meaning. In defining the problem, we return to Daeschner?s communications trouble.
IBM is one of the organisations that is trying to sell something to answer most of the communications problems, and has worked alongside Win to achieve this. The trouble is that it has also had to work alongside Linnet, Rennet and probably High Barnet as well in order to talk to everyone ? not to mention Ivans in the US.
Globalisation has been a wonderful thing for businesses, but once they all have to hang off the same IT network ? which gets put in place after the business has grown, of course, just to make the task harder ? making the system work becomes a little problematic.
?The problem is that when a system gets old, it?s very hard to work with without rewriting it completely,? says Brown. ?People always promise to be able to deliver compatibility but in reality it?s never quite there.?
IBM?s answer has been to form an entire division devoted to its Insure/Commerce range of products and services. European marketing manager Philip Crompton explains that this is initially focused on producing systems based on intranets, at least until the internet looks stable enough for the insurance industry to risk as a backbone. ?It depends how far away you think we are from the internet becoming a robust platform,? he says. ?Most insurers don?t yet feel that way about it.?
Overall there is a nugget of truth in the notion that a reseller?s job is to sell computers and not to understand the customer?s business ? the insurers? demands in themselves could have come from any market including a retail customer ? but it is a bit of an over-simplification. Not to understand a customer?s exact requirements is tantamount to risking selling them an inappropriate solution, which is rarely a good idea.
This is never more the case than in large corporate sales ? insurance, banking ? the financial sphere in general is extremely sensitive to any potential waste of money. As Win?s newsletter has pointed out in the past, what might appear to be a small error can lead to millions of loss ? just you ask that Nick Leeson. This is why Win joins IBM in fighting shy of the internet as a means of achieving its objectives, and it is why resellers ought to have a better slice of the pie than they currently have.
Many companies of a certain size refuse point blank to deal with anyone except the manufacturer of their system. This is why a great many insurance companies are already stuck with mainframe, proprietary systems at the moment, and it probably follows that this is why they cannot communicate with each other.
So an independent voice, such as an integration specialist type of reseller, ought to be ideally placed to turn the problem into an opportunity. But often they can?t, because the perception of the dealer as a rough-and-ready bodger still persists in certain eccentrically conservative quarters ? such as the City of London.
This is a pity, and it is down to the reseller community to go on a marketing offensive to counter the belief that going to the manufacturer de facto is a good idea.
Sometimes it is. John Ayers, vice president of European consulting for insurance software supplier Solcorp, set up in the UK a year ago and does not foresee having anything to do with resellers simply because of the size of the sale involved. ?It?s huge, and it usually needs quite a high level of tailoring ? by high level I mean about 10 people on site for a couple of years. It?s not the sort of thing PC dealers would typically be interested in.?
The only circumstances under which the company does not sell direct are those areas in which it has no actual presence. None of this need mean that resellers can?t get involved ? only that they need to know the scale of the operation in which they are about to involve themselves.
In the meantime, resellers can only have their sales pitch muddied by the plethora of steering groups and shifting standards within the industry ? the impressive-sounding World Insurance Network, for example, comprised only six brokers when it started up. The roster has now reached four. Just get in and sell boxes without knowing what?s going on? You must be joking.