IT has a big role to play in helping insurance companies meet the challenges they face as a result of changing business models within the industry.

Shifts in consumer behaviour, distribution patterns and preferences could provide significant growth opportunities for insurers prepared to embrace and leverage these emerging changes, according to the 2008 Capgemini World Insurance Report.
The report, which is an international study of more than 11 000 insurance customers and industry executives, was conducted with the support of the European Financial Management and Marketing Association (EFMA).
Michael Roussouw, vice-president of Gemini Consulting South Africa and the local representative for Capgemini, says: “The World Insurance Report proposes that the three main IT focus areas can help insurers overcome these challenges.
"First, enterprise data warehouse, analytics and customer intelligence can enhance customer knowledge and hone behavioural-driven customer segmentation.
"Second, technology integration and service-orientated architectures can help insurers to adapt and change their distribution capabilities to meet market dynamics.
"Lastly, next generation customer relationship management tools can help insurers and networks manage customers under a global enterprise-wide umbrella,” he adds.
The report reveals new patterns emerging where traditionally passive insurance customers are becoming more volatile in their buying and loyalty patterns. This is being fueled by increased competition, easy access to more information (via the Internet), facilitated customer mobility due to changes in regulation and innovative product choices from insurers (pay-as-you-drive auto insurance).
The World Insurance Report indicates that contract turnover is already on the rise in many mature markets. It also points out that insurers should expect these trends to spread to other mature markets, where customer volatility is already clearly evident.
“While customer volatility poses a threat to some insurers, others may find it offers growth opportunities by understanding, capturing and creating volatile customer clusters in their markets,” says Roussouw.
Although demographic information, such as age and income, is typically used to segment insurance customers, the report explores redefining those segments based on customer behaviours and perceptions. By profiling this behaviour to understand customer volatility, insurers can accurately align their distribution strategies with the prospective value of each customer cluster.
The report also notes that the level of volatility in the customer segments plays a pivotal role in the value equation. It identified four value/volatility clusters of customers, which offers insurers additional insights on customer strategy. The four are:
* Dependable-income (high-value/average volatility);
* At risk (average value/high-volatility);
* Stagnant (low-value/low-volatility); and
* Other (average-value/average volatility), have been identified.
Another key finding is the changes that lie ahead for distribution and Internet usage. While 28% of customers said they intend to buy their life-insurance policies online in three years, 34% said they would buy non-life policies online. The rise of the internet clearly puts some existing distribution networks at risk.
The report cites a clear trend toward specialization by networks that recognize the need to meet specific customer and product needs to thrive. This specialisation is forcing insurers to multi-distribute, to better address volatile customer clusters in order to retain access to all major segments of the existing and potential customer base, as well as to increase wallet share.