Whether firms have a strong online presence, are building a business case or are looking for ways to define direction and maximize planned investment in an online channel, there is much they can learn from customers, other financial markets firms and successful online players across industries.

1. IBM Global Business Services
White Paper
Insurance
The Online Insurance Imperative:
Driving Growth by Expanding Your
Online Presence

2. IBM Global Business Services

3. IBM Global Business Services
Page 1
Table of Contents In a 2008 study on the direction of spend in major US Insurance solution
areas, 39 percent of respondents said they would increase spend in the Internet
1 Game changers channel1. But toward what end? What do online customers really want? How can
2 Play to win Insurers ensure their investment in the Web channel drives value?
3 Process
4 People
Whether firms have a strong online presence, are building a business case or
5 Technology
are looking for ways to define direction and maximize planned investment in
6 Play it forward
6 Know the customer an online channel, there is much they can learn from customers, other financial
7 Easy does it markets firms and successful online players across industries. The online
7 Build for the future imperative will change business models across industries and customer segments
8 Are you positioned for success? – including the Insurance agency model and consumer base.
8 For more information
8 About the authors
Customers are becoming more price-sensitive and technologically savvy – many
9 Sources
young consumers now fully expect to do business from their laptops and mobile
devices. To date, there have been 1.4 million iPhones sold, and some Insurers are
seeing 60 to 70 percent of site logins coming from iPhone users. Baby-boomers
are getting increasingly comfortable with the technology as well, prompting
Insurers with ideas of maintaining and growing market share to move quickly
toward investments in Web-based revenue generation.
In the past, table stakes for the online channel included being able to find
Insurer contact information and locations. Now research shows that at a
minimum, Insurers must offer online quotes and the ability to research and
apply for products and track claims online. However, many of the industry’s top
competitors are already cornering the market with plays in these areas. To achieve
competitive parity, firms must consider more innovative ways to ramp up their
online presence and create value – that are ultimately linked to an overall online
channel strategy defined largely by their customers.
Game changers
Most Insurance companies recognize the need to invest in the online channel,
and many have plans to do so in the short-term. But there are a few trends
companies should consider as they decide how to spend in this area. Most
importantly, firms must understand the market imperative to develop more
interactive services to sell and support products online.

4. IBM Global Business Services
Page 2
Highlights In a 2007 study, IBM found that more than 50 percent of consumers would
purchase Insurance online from a company that they were already familiar with
and trust. Not surprisingly, the younger the customer, the greater the propensity
Studies show that online auto Insurance
to buy online. 29 percent of Generation X (aged 35-44) and 33 percent of
applicants are, on average, ten years
Generation Y individuals (aged 18-34) researched their last financial product
younger than offline applicants and
exclusively online. Studies show that online auto Insurance applicants are, on
are more likely to have a college or
average, ten years younger than offline applicants and are more likely to have
advanced degree.
a college or advanced degree. The average household income among online
auto Insurance applicants is $63,300 —about $3,000 more than the other auto
Insurance applicants.2 In addition, 94 percent of online applicants go on the
Internet at least once a month, and 68 percent have broadband access at home.3
These trends are not specific to auto Insurance, but rather reflect an upward
trend of online adoption visible across the board in every industry. Customers
are ready to interact meaningfully with companies online. The increasing safety,
speed and pervasiveness of online interaction is raising the stakes for companies
who have not yet fully invested in online as an acquisition and customer service
channel to grow and maintain their business.
Play to win
The online channel is a rare safe bet in today’s market– any thoughtful
investment to improve the channel will likely yield rewards. How can Insurers
design a system that is commerce ready – and positioned to deliver a commodity
based, yet highly personalized Insurance product?
Firms should begin by thinking about a commerce value chain focused on their
interactions with customers. Insurers must build a Web presence that attracts
customers, and guides them easily and swiftly through interaction, action and
reaction. These four main components demonstrate several elements that need to
be present to deliver quality products to customers.

5. IBM Global Business Services
Page 3
Figure 1: Components of a Web Commerce Value Chain
Attract Interact Act React
Advertising Sales Order Capture Customer
Marketing Content Payment Service
Fulfillment Order Tracking
User Focused, Fast, Reliable, Available, Secure with High Privacy
Modified from, “Designing Systems for Internet Commerce”–Treese & Stewart
Viewing an Insurance commerce site from this perspective helps to narrow
down the scope as well as begin to create components that can be reused across
multiple implementations. How Insurers accomplish this in practice will certainly
be different for different businesses and business models. But it is essential for
all to consider how processes, people and technology will need to be aligned to
support a valuable online channel.
Process
Insurers must examine how underlying business processes may need to change
in order to sell to the consumer online. All aspects of the Insurance value chain
should be considered.
Key questions firms will need to answer across the value chain range from
high-level strategy to logistical detail, including:
• Are there existing services and/or functions built across other channels that
can be leveraged in the online channel (such as a quoting service/process or
a payment processing service/process currently supporting the agency or call
center channels)?
• Can current underwriting systems handle a more real-time approach to
applying business risk?
• How will rate comparisons and product integrity be ensured across all
channels?
• If saving and retrieving a quote is part of the feature function set – what are
the rules related to external data orders (e.g. Motor Vehicle Report, Clue) and
product changes?
• How will year, make, model, sub-model and VIN be collected?

6. IBM Global Business Services
Page 4
A safe starting point is to develop a high level Use Case Diagram ensuring
consideration of the main components for a basic online system: Login, Create
Quote, Modify Quote, Compare Quote, Search for Quote, Enter Quote
Information, Purchase Policy and Make Payment.
Figure 2: High Level Use Case Diagram
Login Modify <<Include>> Search
Quote Quote
<<Include>>
Enter
Quote
<<Include>>
Info
Create Compare
Quote <<extend>>
Quote
Customer
Purchase
Policy
Make Policy Admin
Payment System
Consideration of a well-designed commerce site with many of the standard
functions necessary to obtain repeat visitors is key to the next evolution of a Use
Case Diagram. Maintaining accurate data and site currency is a large part of that
standard. Jacob Neilson’s ten things to consider for commerce websites provide
excellent guidelines in this area.4
People
The skill set and resources that are critical to build and support a more
interactive and valuable online channel – such as business intelligence and click
tracking – may not be available within Insurers’ current organizations. How will
skill gaps be filled? Will skills be developed in house, or is engaging a partner
that understands the B2C channel the better option?

7. IBM Global Business Services
Page 5
Highlights Furthermore, firms must clearly define organization, roles and responsibilities
necessary to ensure online channel success. Who will service web-based policies?
Will call center personnel or agents be compensated for web based policies sold?
Firms must know the customer, make
How will project delivery be handled, for instance, to balance speed to market
interaction and navigation as easy as
and state-by-state delivery roll-out (e.g. software factory5)?
possible, and build the online strategy
and channel to position firms for success
Technology
now and in the future.
Supporting valuable interaction online will require a 24x7 infrastructure, not only
in production but also in development and test environments. This is especially
true if Insurers adopt a “follow the sun” approach for delivery.6 Firms must
consider how to align technology to deliver speed, security and customer value
by answering key questions concerning a range of site performance and value
requirements – some of which seem deceptively simple, and are thus easy to
overlook and underestimate:
• What is the cross-browser and cross device (mobile, kiosk, etc.) development
and testing strategy?7
• How will integration to back-end systems and services be handled (e.g.
change management, up-time and enterprise release management)?8
• Will the site be developed by geographic state, or by a standard “vanilla”
state? What are the by-state and/or base state requirements? How will deltas
or complexities of each state be categorized and managed?
• How will dates be handled (leap year, timestamps across systems and servers,
geographic time zone conflicts, effective vs. written date, etc)?
• How will external data feeds be handled to present a consolidated, real time
view of customer risk profiles?
• What will be the security protocols to handle sensitive personal information
(SPI), encryption decryption, SSL, payment collection, and terms and
conditions?
• How will e-mail and documentation (e.g. Certificate of Insurance issuance)
be managed?

8. IBM Global Business Services
Page 6
Another important consideration is application performance. Back end
performance optimization has always been and will continue to be (to lower
hardware costs and power consumption), however front end optimization is equally
critical. According to recent work by Steve Sounders, 80 to 90 percent of the time
spent by users waiting for pages to load is spent on the front end, all the work that
needs to be done after the HTML document has arrived.9
Play it forward
However Insurers answer the above questions, all activities must be aligned to a
clear, pervasive online channel strategy that puts the customer in the center of the
room. To do this, firms must know the customer, make interaction and navigation
as easy as possible, and build the online strategy and channel to position firms for
success now and in the future.
Know the customer
Insurers must build comprehensive online distribution strategies, including
definitions of which products to distribute, how to integrate with other channels,
how to manage direct versus indirect product pricing and how to segregate
customers based on channel preference. To encourage online adoption, firms will
need to develop and market less expensive products, added incentives or products
tailored to the youth market online
In addition, firms must familiarize themselves with the benefits of Web 2.0 -
both from a marketing and relationship and product development perspective.10
Increasingly, customers want to benefit from product comparisons that include
customer ratings and opinions. Furthermore, an online channel that fails to
more effectively link agents to customers in social networks would be missing
a significant opportunity to enhance customer relationships, perceived value,
brand strength and as a result, sales opportunities. Companies across industries
are using online networking to benefit from customer interaction, real-time “use
cases” and customer suggestions – adopting a “customer as developer” view to
developing high value products, services and interfaces that effectively pinpoint
customer wants and needs.

9. IBM Global Business Services
Page 7
Highlights Easy does it
Consumers have increasingly limited time and patience for companies to explain
the value they provide. Hence, firms must make online interaction fast, easy and
When it comes to information, less is
convenient. Likely the most valuable thing today’s Insurance customers find in a
more – which means information must be
face to face interaction with their agent is that agent’s ability to explain products,
organized and presented in a way that
services and cost schedules in terms customers understand, quickly. Any
drives customer value and allows the
successful web presence must seek to do the same – but at the time and place of
ability to compare.
their customers’ choosing.
When it comes to information, less is more – which means information must be
organized and presented in a way that drives customer value. Customers must be
able to search for information and compare products one-to-one. When it comes
to selling online, firms must simplify the buying process, including making
terminology easier to understand, having self-help tools, and offering immediate
links to reach a customer service representative via interactive chat, shared
screens or live video streams. And it must be said that the online channel should
be linked seamlessly to agents and call centers – with each benefiting from a view
of the same customer history and policy data.
Build for the future
Insurers must not only invest in new technologies to support direct Insurance,
but focus on changing their corporate cultures to facilitate and foster change in
their organizations to support the transparency cross-channel strategy requires.
Architecture should leave the door open for the inclusion of new and future
technologies, especially those designed to enable collaboration across traditional
barriers (agent/consumer, agent/agent, consumer/consumer, consumer/firm).
Lastly, firms should plan for the future by building in measurement of the
success of the online channel. Aligning metrics that clearly demonstrate the
significance of online commerce in the organization is essential to understand
where future investments and initiatives are needed to make the most impact –
and maximize investment dollars. In addition, firms must put in place a process
for decision-making that supports continuous improvement of the online channel
as new market stakes emerge.

10. IBM Global Business Services
Page 8
Highlights Are you positioned for success?
Chances are, your firm is already well down the road toward making key changes
in the online channel. But are they the right changes to position your company
Those who have made strategic
for near term and future growth? Growing online and mobile adoption, advancing
investments to tap a larger customer
technology and the increasing crunch on consumer wallets will converge to
base through a well-conceived,
change the game in many industries – including Insurance. An industry valued
valuable, secure online channel
for its conservatism will be forced to adapt, and mitigate the risks inherent in
will corner the market.
innovation. Those who have made strategic investments to tap a larger customer
base through a well-conceived, valuable, secure online channel will corner the
market. What is your strategy for ensuring your firm a solid seat at the table?
For more information
For information on how IBM has helped companies in Insurance and other
industries navigate the online market imperative, contact Patricia M. Hamilton
at patricia.hamilton@us.ibm.com or Kent Arkes at kent.arkes@us.ibm.com. To
read more about how IBM is helping leading Insurers change their game, go to
www.ibm.com/insurance.
About the authors
Luke Kelleher is a Project Executive and Senior Managing Consultant with IBM’s
Global Business Services Insurance practice. His specialties include complex
systems integration, project management, data conversion and object-based project
methodologies. He can be reached at luke.kelleher@us.ibm.com
David Lipien, PMP is a Senior Managing Consultant with IBM’s Global Business
Services Insurance practice. His specialties include complex systems integration,
release management, internet-based technologies, wireless technologies and
object-based project methodologies. He can be reached at lipien@us.ibm.com
Contributions by
Bill Busby, Partner, Americas Insurance Leader, IBM Global Business Services
David Notestein, Executive, Insurance Industry, IBM Institute for Business Value

11. IBM Global Business Services
Page 9
Sources
1 Direction of Spend in Major US Insurance Report. Gartner, 2008.
2 Hutson, Kathy-Ann. U.S. Personal Auto Lines P&C Website Analysis. IBM, 2007.
3 Hutson, Kathy-Ann. U.S. Personal Auto Lines P&C Website Analysis. IBM, 2007.
4 Nielsen, Jakob. (1994b). Heuristic evaluation. In Nielsen, J., and Mack, R.L. (Eds.),
Usability Inspection Methods, John Wiley & Sons, New York, NY .
5 Kelly, J. and Lipien, D. How a Factory Development Model Can Help Insurers Gear up
For Success. IBM Global Business Services. 2007 .
6 www.cmcrossroads.com/content/view/9082/202/
7 www.computerworld.com.au/index.php/d;678159717;fp;4;fpid;535331
8 www.ibm.com/developerworks/rational/library/06/0925_lipien-haines-gan/
9 Souders, Steve. High Performance Web Sites: Essential Knowledge for Front-End Engineers.
http://stevesouders.com.
10 Souce The McKinsey Quarterly, “How Businesses are using Web 2.0,” 2007

12. © Copyright IBM Corporation 2008
IBM Global Services
Route 100
Somers, NY 10589
U.S.A.
Produced in the United States of America
12-08
All Rights Reserved
IBM, the IBM logo and ibm.com are trademarks
or registered trademarks of International
Business Machines Corporation in the United
States, other countries, or both. If these and
other IBM trademarked terms are marked
on their first occurrence in this information
with a trademark symbol (® or ™), these
symbols indicate U.S. registered or common
law trademarks owned by IBM at the time this
information was published. Such trademarks
may also be registered or common law
trademarks in other countries. A current list
of IBM trademarks is available on the Web at
“Copyright and trademark information” at ibm.
com/legal/copytrade.shtml
GBW03067-USEN-00